Wednesday, May 19, 2010

Special Events Reporting

Wednesday, May 19, 2010
Many non-profit organizations conduct fundraising activities which are considered “special events”. Special event revenues and expenses have specific financial reporting requirements, which are defined by professional accounting standards. So what is a “special event” and what are the specific reporting requirements?

Special events, as defined by accounting standards, are generally fundraising events where attendees usually receive a direct benefit such as a meal, entertainment, a “parting” gift, etc. Examples of special events are: fundraising dinners, auctions, theater parties, golf outings, races, raffles, etc.

Professional accounting standards require revenues and expenses from special events which are ongoing “major and central” activities to be reported gross (revenues and expenses are separately reported). These standards permit (but do not require) receipts and related costs from special events, which are “peripheral or incidental” activities, to be reported net (expenses are netted against revenue). (AICPA A&A Guide, “Not-for-Profit Organizations”, para. 13.21)

So how do I know if my event is “major and central” or “peripheral or incidental”? The standards provide us with some guidance. There are two factors to consider when determining if an event is “major and central” or “peripheral or incidental” – 1) frequency of the events, and 2) significance of the gross revenue and expenses.
Events are ongoing major and central activities if -

1) they are normally part of an organization’s strategic plan and the organization normally carries on such activities (e.g. an annual art auction), or
2) the event’s gross revenues or expenses are significant in relation to the organization’s annual budget (e.g. Budget $500,000, event gross receipts $50,000, event gross expenses $30,000)

Events are peripheral or incidental activities if –

1) they are not an integral part of the organization’s usual activities, or
2) their gross revenues or expenses are not significant in relation to the organization’s annual budget.

If you’ve determined your event is “major and central”, the special event revenue should be reported as a separate line item in the revenue section of the Statement of Activities. The cost of the direct benefit to the donors can be reported as either –
• a line item deducted from the special event revenue in the revenue section, or
• as a specific expense in the expense section of the Statement of Activities
Other expenses associated with this “major and central event” will be reported with your other fundraising expenses.
In addition to financial reporting requirements, there are also specific reporting requirements for special events on the Federal Form 990. These requirements will be addressed in a future “blog”.

The discussion above is a very general description of the financial accounting and reporting requirements for special events. For more information or guidance on accounting for and reporting on special events, please contact Elko & Associates Ltd. See you at the next “Special Event”!



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