A very important component of generating revenue is tracking everything appropriately for IRS and reporting purposes. As a non-profit organization, Friends is required to report different kinds of revenue in different ways.
Cash Donations
Revenue generated through donations is the simplest to track. Donations coming from any source are simply recorded as donation revenue and there are no special requirements for donations below $5,000. For donations above that amount, the donor’s name and address must be recorded for reporting to the IRS. While lower amounts are exempt from this requirement, it is generally a good principle to record any major cash donation with at least the donor’s name and to keep a copy of the letter sent to the donor acknowledging the donation.
Cash donations can come from many sources. Donation boxes, pass-the-hat donations and any other source of donations from around your site, all count as standard cash donations and should be recorded as such. Most of these require no special reporting or record-keeping. However, it is good practice for the chapter to record the source of donations to be able to measure the effectiveness of donation strategies.
Tracking the source of donations into categories can help you measure and evaluate the success of your donation strategies.
For example, if donations from the box near the cash register are lumped in with donations from a pass-the-hat effort, you will not be able to look back to see how well the donation box at the cash register is performing. Keeping these donations recorded separately can help you refine your overall fundraising strategies.
Revenues from Fundraising
Tracking income from fundraisers is slightly more involved than recording simple donations but it need not be complicated. There are essentially two types of fundraisers in which guests pay for a product, service or event. The funds from each type are tracked somewhat differently.
Donation based fundraisers are those that involve a fee charged to participants that is significantly over and above the value of the product or service received. For example, a chapter may choose to host a fundraising dinner. The cost of the meal being provided is valued at approximately $25. However, the tickets to the event cost $100. In this example, the chapter would record $75 as a “Donation as part of a fundraising event fee” and the other $25 would be recorded as a revenue from “Special events and activities.” In addition, the cost of this event would be recorded separately from other types of costs. See the section on Tracking Expenses for more details.
Revenue from donation based fundraisers contains an amount that must be recorded as a donation. The donation amount is also considered tax-deductible for the donor.
The second primary type of fundraiser is referred to as a Customary fee or an Event Based fundraiser. Most chapter fundraisers will be customary fee fundraisers. In this type, a fee is charged for a product or service that is customary and reasonable. For example, a chapter holds a Fall Festival and charges an admission fee of $6. The fee itself is reasonable and appropriate to the amount of value received by the guest. In this case, there is no donation component to the fee as it is considered a fair trade for the value received. Revenues from a customary fee fundraiser do not have to be broken down and are recorded as simple revenue from special events and activities. Costs for a customary fee fundraiser are recorded with the associated revenues (see Tracking Expenses for more details).
With Site Manager approval, chapters may charge for special events they sponsor and may keep the revenue provided an approved Friends Event Application is in place.
Special Events
Chapters may host, sponsor and financially benefit from special events at the site. For Friends hosted events where the chapter will financially benefit from the event, a “Friends Event Application” must be completed and approved by the site management approval chain. The application is a simple, one page form that ensures all events are approved and documented. The Friends Event Application can be found in the appendices of this handbook.
ParkPass fees and admission fees must be charged and cannot be diverted to a chapter for any special events. Exceptions for after-hours events or free days in the park may be made with Division approval.
Revenues from Sales
Revenues generated from the sale of merchandise or the sale of assets must also be recorded separately from other types of revenue. If a chapter owns an asset such as a computer and decides to sell it, the revenue from the sale must be recorded as such and not mixed with other types of revenue.
Revenue from the sale of merchandise must also be recorded separately from other types of revenue. In addition, the cost of the merchandise must also be recorded as cost of goods sold.