It Can't Happen Here

When we are asked to speak about fraud at conferences, attendees will sometimes say

"that could never happen in our organization"

I wish that was true.   I wish I didn't pick up the local paper and see articles on embezzlements at local companies, nonprofits, churches, and youth sports organizations throughout the year.  I wish I didn't read the articles and realize that in most of the cases, the fraud could have been prevented.

This article here discusses the damage that a fraud can do to a nonprofits reputation and signs to look for in your organization.

For more about what you can do to deter fraud in your organization, contact us at cbergvall@bbco-cpa.com

Fundraising Q&A-What can a participant deduct for a special event?

QUESTION:  What can a participant deduct for a special event?

ANSWER:  The general rule for special events is that participants can take a charitable deduction for the part of the event fee that exceeds the benefit to the participant.  For example: if a dinner ticket to an event in $150 per person and the value of the dinner is determined to be $100, the attendee can take a $50 charitable deduction.  It is the responsibility of the nonprofit to notify the attendee of the value they received.  This is an IRS requirement when the value received by the participant is more than $75.

QUESTION:  How should the nonprofit notify the participant of the value of the special event?

ANSWER: There are several ways a nonprofit can do this.   The notice can be printed on the ticket to the event.    $50 of this ticket price represents a charitable contribution.      It can be part of the text of a follow up thank you note from the event.   Thank you so much for joining us as we celebrated 25 years of fighting poverty.  We raised over $30,000 at our event.   Please note that the FMV of the dinner was $100 and  $50 of the ticket price is a charitable contribution.

Fundraising Q & A-5K Fundraiser

 

QUESTION   How should a 5K fundraiser be handled?  Is the registration fee a tax deductible contribution for the donor? 
ANSWER   Typical registration fees for a for profit 5K range from $25 to $100 depending on the amenities available to the runner.   A run that just provides a T Shirt usually is $25.  A run that provides a T Shirt, water bottle, other give away items and food may be $100.  Given those parameters, a nonprofit can determine the value of their run to the participant.   Typically registration fees to run in a nonprofit fundraising run will not be tax deductible to the participant.  Usually a nonprofit fundraising run will involve participants raising money from sponsors.  Those funds raised will be deductible by the sponsors.  A participant who sponsors themselves will be able to deduct that sponsorship portion that is over and above the registration fee.

Ex-Jane Runner pays a $50 registration fee to run in the 5K to benefit Community Nonprofit.  Her friends contribute $500 through sponsorships.   She also adds another $150 to her sponsorship beyond the $50 registration fee.   Her friends will receive a $500 charitable contribution and Jane will receive a $150 charitable contribution.  Jane cannot take the $50 registration fee as a charitable contribution.

The nonprofit needs to carefully word their thank you notes so that it is clear that the registration fee is not a charitable contribution.

Fundraising Q&A-PANO Resources

Over the summer Liz and I presented the popular PANO session-Fundraising Practices: Track It Right! Book it Right! Report it Right!  at the beautiful historic site Pennsbury Manor, right on the Delaware River.   The audience was very engaging and had a number of great real life stories of transparency in fundraising.    Some good questions came out of the session and I’ll share them in the next few posts.   

The great part about teaching the session is that we talk to the group about best practices in fundraising and PANO has a treasure trove of resources to help nonprofits follow these best practices.   These resources are available free to members or for a small fee ($10 to $15) for nonmemebers  at the PANO website.   There are sample policies, guidelines, and procedures that will save you time and frustration.    You can order the materials here.   Select Educational Resource Packets.

Thank You (with a few IRS strings attached)

A timely thank you to your donors is a practice that let's your donors know how much you appreciate them.  The IRS has requirements that you need to follow if your donors want to deduct their contribution.

• Donations of more than $250 must be acknowledged in writing
• The phrase "no goods or services were received in exchange for this contribution" must be included with the letter (unless they did receive goods or services-see below)
• The letter needs to be sent prior to the due date of the donor's tax return.  Typically this would be by April 15 of the year following the year the donation was made.

If the donor did receive goods or services--for example, they purchased a ticket for a golf outing, then the value of the golf outing would reduce the contribution.  So if the event ticket is $150 and the value of the golf outing is $100, your thank you letter would note--for tax purposes, only $50 is tax deductible.  The fair market value of the food and the golf outing is $100.

NOTE:  if your donor does not receive a timely thank you letter OR the letter does not say ""no goods or services were received in exchange for this contribution" then they will not be able to take a tax dedcution for the donation.