Accounting Boot Camp Questions

Below are some questions and answers from recent nonprofit accounting trainings I've led.

• Is there a minimum dollar threshold for registering our nonprofit's raffle with the state of California?
  No but click here for more.
  
• Does the charity report the raffle winners to the state?
  No it does not.
  
• Can a nonprofit accept a donation of the use of a donor's timeshare?
  Yes, but the donor will not get a tax deduction for the donation of the use of the time share. See Publication 526, all about contributions to nonprofits.
  
• Where can I find more information on the new 990?
  At the IRS website stayexempt.org the have a series of mini-courses on various topics including several on the new 990, walking you through the whole form. They are 20 to 30 minutes each and free.

Contact me if you asked a question and I didn't get to it.

More Boot Camp Questions & Answers

Q: Where do I find out about raffles and raffle registration in California?

A: The California Attorney General's Office is where you get the forms and the CAN website has a nice FAQ section on raffles.

Q: Our organization collects funds and items from donors to give to another organization. How do we handle these transactions in our accounting system?
A: It sounds like these might be considered pass-through transactions and subject to SFAS 136 rules. For a clear description of these rules and how to handle them check out this link for more information and here to buy the book.

Q: How do we prove that the board has reviewed our 990 before we submit it?
A: [The new form 990 has a yes or no question as to weather or not the the governing body of the nonprofit has reviewed the form 990 prior to submission. Can you guess what answer they want to see here?]
From the Independent Sector's guide to the new 990:

The organization must explain (in Schedule O) the process, if any, it follows to have officers, board members, committees, or management review the prepared Form 990, when that review happened, and the extent of the review. The instructions clearly say “If no review was conducted, state ‘No review was conducted.’ ” The IRS does not require or recommend any particular procedure for reviewing the Form, but most organizations will want to ensure that their senior staff managers and/or the board committee responsible for overseeing financial policies and procedures have a chance to review the Form before filing.

Raffles

More Questions form the boot camps: Is there a $ limit registering your raffle with the state of CA?

All raffles must be registered with the state attroney generals office unless your are not charging or soliciting donations for the tickets. Click on the title link to this post to see all the FAQ's about raffles in CA.

Donation Transactions

There were some questions at the latest boot camp on the specific journal entries for donations to be auctioned off or re-sold. From the great PPC Guides, I recommend them to any nonprofit finance professional, an excerpt:

"Organizations may receive contributions of gifts-in-kind to be used for fund-raising purposes. A common example is where an organization receives tickets, gift certificates, or merchandise from donors to be sold to others during an auction. An organization should recognize the donated item to be used for fund-raising purposes as a contribution and record it at its estimated fair value. When the item is subsequently sold (such as at auction), any difference between the item'’s initially estimated fair value and the amount ultimately received should be recognized as an adjustment to the original contribution amount.

For all practical purposes, the initial estimation may not be that important - the eventual contribution amount that is recognized will be what someone was willing to pay for the donated item. Organizations should use their best estimates when initially valuing the donated items and adjust the amounts later when the actual auction takes place. As a practical matter, the time period between the donation of items for an auction and the actual auction may be short. Accordingly, some organizations may wait to record the items until they are actually sold. That would not be appropriate, however, if the items were received before year-end and the auction was held after year-end.

Example: An organization is given a piece of jewelry valued at $3,000 to be auctioned off to the highest bidder at the organization's annual fund-raiser. The journal entry to record the initial gift-in-kind contribution is as follows:
Debit - Asset $ 3,000
Credit - Contribution revenue $ 3,000

At the fund-raiser, an individual purchases the jewelry for $5,000. The journal entry to adjust for the sale is as follows:
Debit - Cash $ 5,000
Credit - Asset $ 3,000
Credit - Contribution revenue $2,000

If the jewelry sold at auction for only $1,000, the journal entry to record the sale would then be as follows:
Debit - Cash $ 1,000
Debit - Contribution revenue $2,000
Credit - Asset $ 3,000"

Hope that helps! And you should check out PPC's guide to Expenses as well.