Let’s be really honest – year-end giving wasn’t exactly what we hoped for. In a recent study conducted by the Barna Group, 57% of pastors surveyed said the economy had negatively impacted their church compared to last year. The good news is that only 8% of church leaders said the economic impact was “very negative,” and 9% actually described last year as financially positive. Even if your not one of the 57%, you’re probably not as comfortable going into 2010 as you’d like to be.

So what can churches do to weather this environment? Here’s a few suggestions: Read the rest of this entry »

Contrary to longstanding perceptions, regional trends and values have less of an impact on donor motivation than income and education, a new report from the Center on Philanthropy at Indiana University finds. Read the rest of this entry »

According to the Nonprofit Times, (11/2/09 article):

In this difficult economy, with cutbacks and retrenchments, it can be difficult for any nonprofit to survive, let alone flourish.

Despite the temptation to think in terms of mere survival as crisis management, Patrick M. Rooney, executive director of the Center on Philanthropy at Indiana University, argues that nonprofits should try to think positively, trying to act now rather than wait for good times that might be a long time coming.
Rooney offers several suggestions.

• Rather than simply look to shed every possible cost as a means of just staying afloat right now, organizations should evaluate costs strategically. It’s better to spend smart rather than just be as frugal as possible.
• It is important to look carefully at how a fundraising program is managed and evaluated. Difficult times might actually be a good time to reassess.
• Odd as it sounds, it might be better to spend more on certain aspects of an operation and infrastructure. For example, it is critical to continue to invest in fundraising as a long-term support issue.
• Adding or maintaining a business development specialist might be even more important in challenging times to grow existing sources of revenue and identify and develop new ones.

If budget cuts have to be made, it is important to evaluate what effect cuts will have on long-term goals and mission.

With unemployment nearing the double digits, there is a large population of professionals in the marketplace. You might have seen the news cast that played on NBC this Wednesday the 23rd (click here).

One thing to know is if you have any professionals donate services that you would normally have to pay for you should be recording that time as an “in-kind” contribution. FASB states that if the services donated (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation.

Examples to watch for are …. Read the rest of this entry »

As a former employee of a not-for-profit organization, we always got excited when we learned of a pledge (also known as a promise to give) from a generous donor. What can be difficult to understand is what you do with that information. There are two kinds of pledges and the treatment of each is different.

1. Unconditional promises to give are statements by a donor of their intent to make a contribution of some kind at a future period. (For example, the ABC Foundation informs you that they have voted at their last Board meeting to give your organization $10,000 in January.)
2. Conditional promises to give are pledges by a donor that are “conditioned” upon some other event (other than the passage of time) occurring. (Some examples are: 1). A donor states that he will give you $5,000 for your capital campaign if a contract with a builder has been signed. 2). A foundation will contribute $100,000 if a new program is implemented. 3). A corporation will donate $1,000 if other corporations in your community do the same.)

Remember: Conditional pledges require some other action to occur.

So what is the different accounting treatment?

Read the rest of this entry »

In this down-turned economy, all business entities are looking to enhance or supplement their current revenue sources, and not-for-profit organizations (NPO’s) are no exception.  Because a number of charitable organizations are exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code, the revenue generated by these organizations must be in accordance with its stated mission in order to be tax-exempt. Go back and review the organization’s Form 1023 and the IRS determination letter and verify “why” your organization is exempt from taxation. 

So what if an opportunity presents itself to increase your bottom line that may not fit your mission? Does that mean as a NPO you can not take advantage of this opportunity?  Not necessarily.  The income can be earned, but depending on its source, it may be considered unrelated business income. If the revenue is unrelated, then net income in excess of $1,000 is subject to the excise tax.

What types of property or transactions are specifically exempt or subject to being taxed? Continue reading…

Read the rest of this entry »

Special events are an effective way for a non-profit to both raise money and also raise awareness of the organization and its mission in the community. Special events that are well planned and consistent year to year are often very successful. An important aspect, however, is the tax deductibility of purchases or contributions made by the attendees. Often the organization and the attendees incorrectly assume that all purchases of tickets, tables, registrations, auction items, etc., are 100% tax deductible. 

The IRS clearly states that, “If a donor received something of value in return for the contribution, a common occurrence with fund-raising efforts, part or all of the contribution may not be deductible.” 

So what is deductible? The amount that is deductible is actually the amount given over and above the fair market value of the event or purchase. This is where the organization should step in and give some assistance to the attendees.  Read the rest of this entry »

Raffles are a great way to earn revenues in combination with special events. Donors will generally provide the raffle items as a donation to your organization, which allows your organization to raise funds without incurring substantial related costs. Along with this relatively easy revenue generator come some strict guidelines due to restrictions contained in the gambling/gaming laws of Texas and IRS requirements on the form 990. To be allowed to hold a raffle you must be performing the raffle in order to use the proceeds for a charitable purpose.

What is a raffle? According to www.dictionary.com, a raffle is a form of lottery in which a number of persons buy one or more chances to win a prize.

According to Texas state statutes, Chapter 2002 of the Occupations Code sets the rules for charitable raffles. Some of the notable provisions of the law include:

• No more than two raffles can be conducted per year.
• The two raffles cannot be conducted simultaneously.
• Organization must set a specific date to award the prize.
• Mass communication (via newspaper, radio or television) is not allowed.
• Individuals may not be compensated for conducting/promoting the raffle.
• The tickets must be sold by the organization and its representatives.
• The prize cannot be cash.
• The organization must have possession of the prize in your possession at the time of ticket offering.
• A $50,000 maximum prize value.

Due to these requirements, Organizations must act wisely when scheduling these events. The tickets must also have the following specific information on their face:

• Name and address of the organization
• Ticket price
• Description of prize(s)
• Date the prize will be awarded

How does gaming affect the redesigned Form 990? If you collect more than $15,000 from the gaming event, the information must be disclosed in Schedule G. Need help in determine what is a “game”? Call me.

Is your tax exempt organization planning an inventive, special event or a fundraising game? Texas lawmakers take a strict view on gambling/gaming laws, which can affect your organization. Consider the following when planning your special event:

• Is there a game of chance?
• Does the game involve cards, dice, or other gambling devices?
• Are the chances of winning equal for all players excluding the effects of skill?

There are certain common events that have been ruled against or could possibly constitute illegal gambling. These include:

• An entry fee to participate in a game of chance.
• A rubber duck race requiring an entry fee.
• A poker run where individuals pay for cards to see who gets the best hand to win a prize.
• Many more possible….

If your organization is still considering certain gaming activities, there are steps you can take to make the event fun and legal. Consider these options:

• No fee to enter or play, with the exception of a food charge (then we recommend you solicit a contribution for the food.)
• Each participant that comes must be in consideration for the prize offered.
• Charge an entry fee but award no prizes for winning or the prizes could be offered as door prizes with everyone having the possibility of winning (This will generally not substitute for casino nights, but may work with other games.) 

For annual gaming revenue that exceed $15,000 the new redesigned Form 990 requires additional disclosure of the event. Remember, this tax form is public record and assessable by state and local taxing authorities.

Illegal gaming for the participant is a Class C Misdemeanor. The host may be charged with a Class A Misdemeanor and face higher fines and possibility of jail time.

For more information on gaming and ramifications see Chapter 47 of the Texas Penal Code.

There are many fund-raising activities from which a nonprofit organization may choose to solicit funds.  Depending on the type of fund-raising activity chosen by the organization, the activity may include joint activities that incur costs that would otherwise be associated with program or supporting services.

For organizations that report functional classifications of costs, AICPA Statement of Position (SOP) 98-2 establishes financial accounting standards for accounting for costs of joint activities related to fund-raising in order to provide assurance to external users of financial statements that fund-raising and other functional classifications of costs are stated fairly. If the fund-raising activity is considered a joint activity meeting certain criteria outlined in SOP 98-2, the costs attributable to a particular function should be charged to that function and the remaining joint costs that cannot be attributed to a particular function should be allocated between functional classifications. If the activity does not meet these criteria, all of the costs of the joint activity should be reported as fund-raising, with the exception of costs incurred for exchange transactions. If the joint costs are allocated, the organization should allocate costs using a rational and systematic method that results in a reasonable allocation of costs, applied consistently.

SOP 98-2 also requires financial statement disclosures about the nature of the activities for which joint costs have been allocated and the amounts of joint costs.

See AICPA SOP 98-2, <em>Accounting for Costs of Activities of Not-for-Profit Organizations and State and Local Governmental Entities That Include Fund Raising</em> for more information and specific examples related to this topic.