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Planning a Fundraising Event? 5 Steps to Avoid Pitfalls

Fashion showIn the summertime, many of us who work with not-for-profits and their philanthropy efforts are gearing up for our fall fundraisers. Thanksgiving and holiday giving season is an ideal time to hold special events to raise money and recruit supporters for our causes, but the planning starts now.

Before joining the AICPA, I worked at a community foundation that carried out a variety of events, including golf tournaments, festivals and charity balls, across my home state of North Carolina. Our most successful event attracted hundreds of people for beachfront food and wine tastings and cooking competitions. Today, I serve on the board of a volunteer center that holds an annual fashion show featuring couture gowns by local designers that are inspired by the work of not-for-profits in the area.

While fundraisers like these are fun and have the potential to raise a lot of money for your cause, it’s important to be aware of the regulatory and financial concerns. As you plan your fundraisers this summer, here are some steps you can take to avoid pitfalls:

  1. Understand compliance requirements. As controller of the community foundation, I worked with our fundraising team during the planning process to ensure compliance with state and federal requirements. In most states, charities must register with a state agency to solicit donations. Raffles and casino games raise a lot of money, but it’s important to be aware of which activities may be considered gambling in your state and to ensure you’re following state and local gambling regulations. Failure to comply with state and local laws can result in severe fines and penalties. In addition, there are numerous federal tax compliance issues. For example, some activities could result in tax liability for unrelated business income taxes. Also, when organizations collect money for events, only a portion of the amounts may be deductible as a charitable contribution. For more information on compliance issues around special events, check out the AICPA Not-for-Profit Section’s article.
  2. Check your insurance needs. Potential liability can be a significant issue at fundraising events, and insurance can cover a variety of risks. Organizations should consider adding an endorsement to their general liability policy or obtaining a special event policy. It’s generally advisable to have insurance coverage for all sporting events, as participants may get injured. We purchased volunteer accident insurance for our fashion show this year because we had volunteer models teetering along in high heels on a runway that was six feet off the ground. Talk to your insurance agent prior to an event.
  3. Create a budget. It’s important to start out with a realistic sense of the expected revenues and expenses. To reduce costs, ask local businesses to donate or offer discounts on an event space, catering or gift bags. Once you have estimated the revenue and expenses, take time to decide if the expected net proceeds justify the event. Charity events generate a great deal of excitement, but they can also be very time consuming, so consider whether the event is worth your staff and volunteers’ time, especially if the net proceeds are very small. 
  4. Supervise your volunteers. Many events such as golf tournaments and 5Ks require lots of volunteers, so be prepared to provide them with the necessary training. I have found that it is best to require those who are handling cash to work in pairs, to keep a detailed log of what they collect, and to separate raffle proceeds from ticket sales or other cash collected to ensure proper recordkeeping and accurate financial reporting.  
  5. Schedule a post mortem. The last step in event-based fundraising is to review how well you did, whether your budget was realistic, and what you would repeat or change for the next event. Invite your leadership team to join in the discussion. Any event, no matter how well planned, will have a glitch or two.

As a CPA, bringing the financial perspective to fundraising efforts always makes me feel like I am adding real value by helping to raise awareness about potential risks, avoiding costly compliance problems, and ultimately maximizing the proceeds raised to help my organization achieve its vital mission.

If you would like to learn more about financial issues affecting an organization you care about, turn to the AICPA Not-for-Profit Section. It’s a one-stop resource to help members better understand and address the challenges not-for-profit organizations face. Section members can find information on many of these issues in the resource library, including state charitable registration requirements, unrelated business income taxes, accounting for contributions and more.

Sandi Matthews, CPA, is Technical Manager- Not-for-Profit Content Development, American Institute of CPAs.

Photo courtesy of Chris Florio


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