Fund raising is really on my heart right now. Most of our group operational expenses are covered by membership fees and activity fees, right now. Probably the biggest need is for families who can’t afford class tuition or activity fees.
We want to be able to reduce the expenses overall, but also help these homeschooling families who are on very tight budgets. I would like to have fund raisers during the year that families can participate in and know that if they work very hard the funds they raise can be applied to their own fees.
My sister used fund raisers through her high school band program to raise money for her own trip to an out-of-state band conference. Some parents just wrote a check and their kids didn’t have to work the fund raiser, while others (like my sister) needed the help and worked hard for it. How can this idea apply to our fund raisers?
Our treasurer is concerned about crossing the line and breaking the rules about fund raising with the IRS. We don’t want to do that. I just don’t want money to be a barrier for some great kids.
I usually discourage the use of individual accounts as you described, because the IRS considers the practice a violation of tax exempt status. (called inurement or using tax exempt funds for the benefit of a individual instead of the group)
Read this blog post where I share what an attorney says about Individual Fundraising Accounts (IFAs).
I know that the Boy Scouts, Girl Scouts, bands, etc have IFAs and the practice is quite widespread. That doesn’t mean the IRS is OK with it; it just means that the IRS has bigger tax cheats they are chasing down.
To help families who are in a financial pinch, your board could establish a benevolent fund. Your group could raise money for the benevolent fund. Your board can decide to offer discounts to eligible families with the cash surplus from the fundraising. The difference between an IFA and a benevolent fund is that the board makes a decision on who benefits and there is no inurement or violation of the tax exempt status.
I conducted a webinar on fundraisers. You can listen to it here (there’s a handout too):
I hope that helps.
Carol Topp, CPA