For those non-profits that have had special events this can be one of the more difficult areas, specifically when it comes to reconciling between the financial statements and the Form 990. Before we start detailing the differences, it will help to outline the different revenue types related to special events. The different revenue types include ticket sales, contributions, sponsorships, donated live or silent auction items, donated raffle items, as well as the revenue generated from the auction and/or raffle. Here’s how to determine between GAAP or Form 990.
The first revenue type we will look at is contributions. Contributions are fairly straight forward and should be presented as contribution income for both GAAP and Form 990, purposes. The next revenue source is ticket sales and sponsorships. For GAAP, ticket sales and sponsorships are shown as part of the line item called special event income. For the Form 990, ticket revenue is shown at the fair value reported to the attendees for each ticket received. The difference between the fair value reported to the attendees and the actual ticket price is shown on the Form 990 as a contribution. This is the same for a sponsorship where the sponsor might receive ten tickets as part of their sponsorship. You would have to consider the fair value reported for those ten tickets.
The next revenue type is donated raffle items and raffle revenue. Raffle revenue is recorded in the same manner for GAAP and the Form 990 (as special event income). Donated raffle items are recorded at fair value as in-kind contributions, also the same presentation for both GAAP and the Form 990. Things get a little trickier when it comes to recording donated auction items and auction revenue.
For GAAP purposes, donated auction items should technically be recorded at their fair value when received (as an asset). When those items are auctioned off at the event, the organization adjusts the income amount to the cash amount received. This means if an organization receives tickets to a sports game with a fair value of $400, they record the donation at fair value when received. Now, let’s say the tickets are auctioned for $500, the organization would then book an additional $100 in revenue, and conversely, if they are sold for $300, the organization would have to reduce the revenue amount by $100. If donation of auction items occurs in the same fiscal year as when the event occurs, it is generally easier to just record the cash auction income. Only the total of cash auction income is recorded for GAAP purposes; income should not be “doubled up” by also recording the value of donated items. However, for the Form 990, the organization will recognize both the full amount of the fair value of the auction items received as well as the full cash amount when the item is auctioned off. The donated items will show as in-kind contributions (also consider Schedule M) with the corresponding expense hitting direct donor benefit. The cash portion will be shown as special event income just as it would for GAAP.
If you have any questions, please contact your Henry+Horne advisor.