Many organizations host special events to raise money to support their mission, but is your organization reporting these events properly?

There are different reporting requirements for financial statement purposes, for tax reporting purposes (Form 990, Schedule G), and to the donor (quid pro quo contributions). We will be doing a series on each of these topics to help ensure you are meeting these requirements.

We will start the series with reporting special events in the financial statements and follow up with donor/quid pro quo contributions then tax reporting requirements.

There are multiple components related to special events.

The most common revenue components are ticket sales, contributions and sponsorships. The components related to expenses are fundraising costs and costs of direct benefits to donors.

What costs are considered direct benefit to donors?

The direct benefit to donors are the actual costs (not the fair value required by the IRS to be reported to donors) of the items and services provided to the attendees as enticements to attend the special event. They are costs such as meals, facility rental costs, decorations, entertainment, refreshments, and raffle prizes.

What costs are considered fundraising costs?

The organization would report any costs such as printing tickets, mailings or posters, fund raising consultants, fees for public relations, and allocable costs for employee time as fundraising expenses on the statement of functional expenses.

How do I report special events in the financial statements?

Reporting revenue and expenses for ongoing major activities must be reported gross. Incidental and peripheral events can be presented net. Based on this criteria, if the special event is a significant (material) part of the organization’s normal activities, the event revenue and expenses must be presented gross if not it can be reported net.

There are three options for reporting special event revenue and direct benefit to donors:

1. Present the costs of direct benefits to donors as a line item deducted from special event gross revenues on the Statement of Activities.
2. Present special event gross revenues in the revenue section of the Statement of Activities and the direct donor benefit costs in the Statement of Functional Expenses with other programs and supporting services.
3. Present the contribution portion as contribution revenue and the exchange portion as special event revenue. The direct donor benefit costs are deducted from the exchange portion of the gross revenue.

If there is no charge to attend the event, all the event’s expenses are recorded in fund-raising expenses.

Questions on the reporting special event activity in the financial statements? Reach out to the KLR Not-for-Profit Team.