Donated Advertising

A reader emailed me a question about donated advertising. They wanted to know how to book the advertising, they are a small group and the value of the donated advertising was over three times their annual budget.

The way it is supposed to work is that if you are the recipient of any kind of donated advertising you must book it as a contribution and then as an offsetting expense as well.

But the value of the donated advertising must be equivalent to what someone would normally pay for that advertising. For example say your organization gets donated PSAs every night at 3:00 am for a week on a local radio station. The value of that donation should be based on the advertising rates at 3:00 am, not for prime time advertising rates which would be higher.

Email scams and security

Two interesting pieces from PC Magazine's security e-newsletter. Both deal with $$ scams so I think they fit in this blog, so spread the word.

1. Ransomeware - what is it? Read the article and find out.
2. The Nigerian Prisoner - Do you know someone held in a Nigerian Jail? Maybe, maybe not. One has to think that if anybody hears the phrase "Nigerian" and "email" in the same sentence they would be wary, but I guess enough people still fall for them.

8-7-07 Boot Camp Questions

From the August 7 Boot Camp in Eureka:

Q: How many years do we keep donation records?
A: I have not found any official record keeping guidelines but looking at samples of other organizations in seem to range from 5 years to permanently, the latter for donated works of art, etc. My guess is that as long as you maintain a donor database of any kind you will want to maintain a record of anything that person has given you.

Q: Are the administrative charges from a fiscal sponsor an admin expense or program?
A: From what I have been able to find it is an admin expense. Lots of great info on fiscal sponsorships can be found here.

Q: Are donations to churches subject to the $250.00 threshold?
A: Yes. If a person donated $250.00 or more to a church, or any nonprofit for that matter, they must get proof of that donation from the church or charity. But Separate contributions are not aggregated for purposes of measuring the $250 threshold. For more information on churches, religious organizations and the IRS download this nice document. For others get the donation publication from the IRS is this blogs resources section.

Q: Should we list the building a nonprofit owns at its assessed value or its market value?
A: From what I can find out now and what I remember from my accounting classes you would use the assessed value as it is documented and verifiable.

Anybody have different answers to these questions? Post them in the comments below. Did I forget anyones questions? Post them below too.

Boot Camp Questions - Donations

Question: For a dinner-dance type fundraiser ticket, what is the portion of the ticket price is a donation?

Answer: Everything beyond what is a direct benefit to the donor. Those items are the actual cost of the items and services furnished to the attendees as inducements to attend the event: The food and beverages, the ballroom, the band, the decor.

Question: When do you value donations of stock?

Answer: The date the shares are transferred to your organization, the date of the gift. If a donor wishes to give your organization a gift of stock and take advantage of any tax deductions for tax year 200X they must make sure the transfer takes place before December 31 200X.

If they ask their broker to make the transaction in December but the broker doesn’t post the transfer until January 2nd, then the donation will have in fact taken place in January, not December.

Recognizing Contributed Services

Contributed services are professional services that have been donated by someone outside of your organization with specialized skills — such as those provided by doctors, nurses, lawyers or accountants. A rule of thumb I like to apply is that if the person has letters after their name (CPA, JD, etc.) or requires some kind of licensing to do their job (architect, etc.) they can probably provide you contributed services that you (and they) can recognize.

The service:

• Must create or enhance a non-financial asset. For example, the organization acquires a graphic designer to create collateral materials to describe fund-raising and development programs. Although the services are provided on a pro bono basis, certain technical expertise is necessary to produce the materials, which would otherwise have been purchased.
  

Or the service:

• Must require specialized skills. General volunteer services, such as working a booth at a fundraising event, are typically not recognized as contributed services
• Must be provided by persons possessing those specialized skills, and
• Is of the type that typically would be purchased by the nonprofit organization if the service or skills were not donated.

An example of a recognized service would be a lawyer providing necessary legal advice. What would not be recognized is:

• A non-lawyer providing legal advice.
• A lawyer providing un-asked for legal advice.
• That same lawyer stuffing envelopes for a fundraiser.
  

Assuming the criteria above have been met, the nonprofit would record contribution revenue for the fair market value (based and invoice from the service provider) of the donated services and also as an expense in the appropriate category.

What would you ask the IRS?

On August 9th there will be a call hosted by the National Council of Nonprofit Associations to bring together statewide nonprofit agencies and their constituents with a representative from the IRS to discuss the new draft form 990.

NCNA has called for questions in advance that they can give to the IRS in advance so we can make the most of our time on the call. If you would like to pose a question about the form please email it to astrand @ CAnonprofits.org by 1:30 pm on Friday August 3rd. Sorry this is such a tight turn around but NCNA wants some time to organize the questions before submitting them.

If you are going to be on the call or not, please do feel free to pose your questions. The conversation will be recorded and I will post questions raised and answers given.

Here is a question posed by some of us working on advisory committees: Should the threshold for filing the 990 be raised? Currently you need to file if you have $25,000.00 in gross receipts. You can file a simplified 990EZ if gross receipts during the year are less than $100,000 and its total assets at the end of the year are less than $250,000. Proposals include:

• Eliminate the 990EZ (there is no proposal to change this form by the way, just the 990), raise the filing level to $50,000.00 and have organizations that don’t hit that mark file the new 990N
• $50,000 or less - new 990N, $50,000-$100,000 – Form 990EZ, $100,000 and over – New Form 990
• Keeping things as they are

What do you think?

More on Nonprofit Accounting Software

Thanks again to a CAN Board Member for sharing this with me. The AICPA's Journal of Accountancy recently had an article comparing different nonprofit accounting software packages. It is not a complete list but it is one of the broadest evaluations of current offerings I have seen in some time.