Nonprofit Event Revenue Reporting: Form 990 vs. GAAP
If you’re a nonprofit that hosts events, do you know how to report the revenue accurately? Whether an auction, marathon, ball, golf event or gala, accounting for each is tricky. That’s especially true when reconciling between GAAP financial statements and Form 990. And since there are different requirements for tax purposes, we’re sharing how to determine the reporting for each accurately.
First, let’s look at the different revenue types related to special events. These may include contributions, ticket sales, sponsorships, donated auction items, donated raffle items, and the revenue generated from the auction and raffle. We’ll break each one down to determine between proper reporting for GAAP and Form 990.
This one is relatively straightforward. Contributions should be presented as contribution income for both GAAP financial statements and the Form 990.
Reporting: Ticket sales and sponsorships
Ticket sales and sponsorships should be shown as part of the special event income line item for GAAP. But for Form 990, ticket revenue is shown as the fair value reported to the attendees for each ticket received. To calculate, determine the difference between the actual ticket price and the fair value reported to the attendees. That’s what you show on Form 990 as a contribution. It works similarly for sponsorships. If a sponsor receives twenty tickets as part of their sponsorship, consider the fair value reported for those twenty tickets.
Reporting: Donated raffle items and raffle revenue
Raffle items that are donated should be recorded at fair market value (FMV) as in-kind contributions. The same recording goes for both GAAP and Form 990. Raffle revenue is recorded as special event income for both GAAP and Form 990.
Reporting: Donated auction items and auction revenue
Things get a little more challenging for donated auction items and revenue. First, let’s talk about GAAP. For that, donated auction items should be recorded as an asset at their FMV when it’s received. Then, when those donated items are auctioned off at the event, you should adjust the income amount to the cash amount received. However, if donations of auction items occur in the same fiscal year as the event, it’s easier to simply record the cash auction income. The total cash auction income is recorded for GAAP purposes only. But, even if the donation and sale occur in the same fiscal year, you must still keep track of the FMV of every donated item not only for your own records but also for Schedule G of Form 990. For that, have a list of all donated items along with their FMV, the total amount each one sold for, and any supporting documentation.
Also, for Form 990, your nonprofit must account for both the total amount of the FMV of the auction items received and the total cash amount when the item is auctioned off. The donated items should be shown as in-kind contributions (in this case, a non-monetary contribution), with the corresponding expense amount hitting the direct donor benefit. The cash amount should be reported as special event income in the same way it would for GAAP financials.
If your nonprofit is struggling to determine how and when special event transactions should be recorded or reported, we can help. We’re already working with many nonprofits just like yours, and we’d be happy to work with yours too. So go ahead and schedule a quick call to talk to our nonprofit accounting experts at a time that’s convenient for you. You’ll be glad you did.
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