Print Print

Common Issues in Fundraising Events

Common issues in fundraising

By Nicole Riley, CPA, CFE

We all know the spirit of holiday shopping is not complete until you hear the ringing of the bells … rather, the Salvation Army bell ringers. We can recognize the sight in an instant: Volunteers standing next to the proverbial red kettle, ringing a bell to encourage passersby to give however much they can in the spirit of the holiday season – a tradition that is, in fact, more than 100 years old.

With that custom solidly rooted in time and our hearts, many other not-for-profit organizations find themselves having to get a little more creative with their fundraising in order to set themselves apart, as they raise awareness and donations for their cause. While there is something to be said for attempting to be more innovative, there are a lot of bumps and hurdles to cross over for fundraising and gaming activities. Taking them into consideration can mean the difference between a legal success and failure.

A few common issues that we see in fundraising events stem from communication errors. For example, it is important to remember to notify donors of the value they are receiving for their contribution if the ticket price for the event is greater than $75. Neglecting to properly record, and track, non-cash donations is easy to overlook because donations are often provided throughout the event planning; many times, there is no paper trail that goes through the accounting department.

One particular donation to take into account is media time, considered a donated good in financial-reporting terms; as a result, “time spent” as such should be recorded. Non-cash contributions more than $500 require that the donor file “Form 8283 – Noncash Charitable Contributions” to be in appropriate legal standing. A portion of this form is completed by the organization.

Raffling is also a popular way to raise recognition and funds. However, be mindful that there are a few legal roadblocks to navigate, and violations can be significant. Raffle ticket purchases are not considered donations and are governed under state gaming laws. Gaming can be considered illegal in some jurisdictions, or require a specific license in another. As raffles are susceptible to specific state and local gaming rules, be aware of state registration requirements in the jurisdiction where the raffle is performed.

Depending on the jurisdiction, there can be regulations on how many times an organization can conduct raffles in a given year, limits on the types of prizes and their maximum value, who specifically can sell tickets, and what can/must legally be printed on the ticket. The organization must also follow certain reporting requirements, and winners of raffles are subject to income tax withholdings rules. As some gaming rules seem muddled and overwhelming, we recommend consulting an attorney prior to commencing a new event. In many states, the attorney general’s website also has frequently asked questions that can be helpful.

While we recognize and admire the renowned fundraising campaigns of The Salvation Army or Susan G. Komen, we tend to overlook how much legal work and effort goes into them. With a little proper planning and the right consultants in your corner, your fundraising event can be legal and successful.

Nicole Riley, CPA, CFE, is an audit senior manager with PKF Texas. Contact her at nriley@pkftexas.com.