Contributions may be the most gracious form of expression that a donor can provide a Ministry to aid in its Vision. Yet, with gracious offerings can come many challenges when attempting to account for the funds. The following example is a scenario that most any Ministry will encounter:
A donor purchased an event ticket in advance with the understanding (clearly printed on the ticket) that a portion of the ticket price was a charitable contribution to the church, and the remaining portion of the ticket price was for value received, a meal (therefore not tax-deductible). The ticket price was $125 — $100 charitable gift, $25 value of event. ($25 per person was the church's cost to hold the event.)
In post #1 of this series, we asked the question: Is this a $125, $100, or $90 contribution?
This real “church issue” creates numerous individual challenges, providing a great example of how a simple transaction can turn into an advanced course in not-for-profit accounting.
We will deal with these issues individually, so that we can explore the elements in the equation.
First off, the issue to be analyzed in dealing with donor contributions is the understanding of the donor’s interpretation and intent when giving. How and why did the donor give? What did they intend?
Giving is an intimate aspect of being a Christian, and it’s the Church’s fiduciary responsibility to fulfill the donor’s wishes as long as the purpose is in alignment with the organizations “mission” and “exempt purpose”.
In the scenario described previously, the Church is holding a fundraising event where a donor can prepay for a ticket to an event. The donor’s intent was to make both a charitable contribution of $75 and receive a meal valued at $25. Remember, this was indicated on the ticket the donor purchased. So the first part of the equation is easy, the donor intended to contribute $75 so the Church should record a $75 contribution upon receipt, but what about the $25 purchased meal?
Considering the donor could not attend, does this become an additional $25 contribution? Events subsequent to the contribution (donor’s inability to attend the event) do not affect the donor’s intent at the time of the contribution; therefore no further considerations need to be made.
However, how should the $25 be treated by the Church or non-profit organization? See post #3.
Posted by Floyd Langley
