Accounting and Presentation Issues for Fundraising and Special Events

Ensuring accurate and transparent financial reporting for nonprofit special events

Many nonprofits rely on income generated from special events to fulfill their mission and support operations. However, there are unique accounting and presentation guidelines for these events under generally accepted accounting principles. Understanding the options and decision points is crucial to accurate and transparent financial reporting.

Accounting for nonprofit special events

Special events often incorporate a variety of revenue sources – ticket sales, registrations, sponsorships, auctions, raffles, contributions should each individually be evaluated for treatment. For each revenue stream:

Step 1

Determine whether the resource provider receives commensurate value in return.

• If yes, it is an exchange transaction and the revenue should be recognized in accordance with ASC Topic 606. Example: Paying a market price for a registration for a 5K run.
• If no, it is a nonreciprocal transaction. Apply contribution guidance (proceed to step 2). Example: Donation of real estate for an auction.
• Transactions can be part exchange and part non-exchange. The amount received should be bifurcated and accounted for in accordance with applicable guidance. Example: Two tickets to a concert received for sponsorship paid in excess of market value.

Step 2

If the revenue is considered a contribution, determine whether conditions or restrictions apply.

• Consider whether there is a barrier to receiving and a right of return/right of release
  • If yes, it is conditional. Recognize revenue when the condition is met. Example: Government grant for event paid on reimbursement basis.
  • If no, it is unconditional. Consider whether restrictions are present that limit the purpose or timing.
    1. If yes, it is restricted. Recognize contribution with donor restriction. Example: Cash donation made in advance to be spent on purchase of food for event.
    2. If no, it is unrestricted. Recognize contribution without donor restriction. Example: Cash donation at the event.

Presentation of special events on a nonprofit organization’s financial statements

Presentation of special events on financial statements depends on the nature of the transaction (above), the organization’s accounting policies, and whether the event is considered an ongoing and major activity.

Step 1

Determine whether the event is ongoing and major.

• Events are ongoing major and central activities if they are normally part of a not-for-profit’s strategy and it normally carried on such activities or if the event’s gross revenues or expenses are significant in relate to the not-for-profit’s annual budget.

Step 2

Apply appropriate presentation guidance:

• If the event is considered peripheral or incidental (non-major), special events may be reported net.
• If the event is considered ongoing and major, amounts must be reported gross.

1. 1. Contributions of non-financial assets should be separately reported
   2. Direct expenses should offset special event revenue
   3. Indirect expenses should be reported as expenses and allocated by natural and functional classification

The most important takeaway is that every event and every transaction is unique. Each organization should adopt a policy for consistent treatment. Consult your Keiter Advisor for questions over accounting or presentation of special events.

Additional Fundraising and Special Event Accounting Insights

• Nonprofit Accounting: Fundraising Reminders
• Nonprofit Accounting FAQs: Fundraising Events
• Nonprofit Fundraising Event IRS Reporting Checklist