Special Events

What You Need to Know

What is a Special Event?

• Primary purpose is to raise funds other than contributions to finance an organization’s activities.

• Attendee / participant typically receives a direct benefit.

• Examples include dinners, dances, races, bingo, gaming activities, tournaments, and other events.

• Can be ongoing, major activities or peripheral / incidental to the organization’s central activities.

Why is the Accounting Important?

• There are different reporting requirements for financial statement and tax purposes.

Special Event Income

• Income from special events can be part “exchange transaction” and part contribution.

• Maintain detail of total gross income by event.

• Different requirements for Form 990 presentation.

Special Event Expenses

• Costs that are directly attributable to the benefit received by the event attendee or participant (i.e. food and drink, gift items).

• Costs associated with promoting and conducting the event.

• Separately detailing these costs may be important for functional expense reporting (program vs. fund-raising).

Financial Statement Requirements

• GAAP has different required presentations.• The presentation depends on whether the

special event is part of the organization’s central activities or not.

• If yes – then revenue and expenses must be reported at gross amounts on the Statement of Activities.

• If no – you have options.

Financial Statement Presentation

• Option 1:– Gross revenue of special events and

other fund-raising activities with cost of direct benefits to donors displayed as a line item deducted from the special event revenues.

Financial Statement Presentation

• Option 2:– Can consider revenue from special

events and other fund-raising activities as part exchange and part contribution and report the two parts separately.

Financial Statement Presentation

• Option 3:– Gross revenues of special events and

other fund-raising activities with the cost of direct benefits to donors displayed in the same section of the Statement of Activities as are other programs, management and general, or fund-raising expenses.

Examples

• See Attachment B for example financial statement presentations.

How Does Form 990 Differ?

• Income is calculated based on the retail value of the benefit received by the event attendee or participant - different than gross proceeds.

• Any amounts received in excess of the income (gross proceeds less income calculated) are considered contributions and should not be included in special events income.

• If the benefit received has a nominal or insubstantial value, then the entire amount received is considered a contribution.

2008 Form 990• Only need to complete detail if gross

revenue exceeds $15,000 from all events in that fiscal year.

• Direct expenses broken out:– Cash prizes– Non-cash prizes– Rent / facility costs– Other direct expenses

Bonus Material – AUCTIONS!• The nonprofit organization is responsible

for making a good faith estimate of the fair market value of goods or services (value that is within a typical range is acceptable).

• A deduction is available to the DONOR of an item, but it is limited to the donor’s tax basis in the property.

AUCTIONS! (con’t)

• Deduction is available only for the portion of the bid that exceeds the fair market value of goods or services received (PURCHASER).

• Form 990 reporting becomes complex when sales price is greater than fair

market value.

Government GrantsRecording on Form 990

Contribution vs. Program Service Revenue

• Contribution: primary purpose is to allow the organization to provide a direct benefit or service to the public.

• Program service revenue: income earned by providing a government with a service, facility, or product that directly benefits that government entity rather than the public as a whole.

Form 990

• Line 1e – Government contributions: primary purpose is to allow the organization to provide a direct benefit or service to the public.

• Line 2 – Program service revenue including government fees and contracts - income earned by providing a government with a service, facility, or product that directly benefits that government entity.

“The material contained in this presentation is for general information and should not be acted upon without prior professional consultation.”