Homeschool groups and fundraisers. Do you know what your state requires?

Michelle asked a question about fund raisers in a homeschool group:

Hi Carol,
We have had fund raisers in the past (Butterbraids, a frozen pastry) and have made approx. $1,500 doing that fund raiser. We had a cooking class that prepared hot lunches and the co-op made money on those. We will have less than $100 left in the check book. We have a Fed ID #. What do we do? What about next year? Is fund raising not a good idea for us as you say in your website? We thought about charging more for membership (we charge $35/ yr now) and if people wanted to do individual fund raisers that would be up to each family. What do you think? Thank you so much for your help to the homeschool community and for whatever answers you can give us.
Sincerely,
Michelle P

Dear Michelle,

Did I say fund raising is not a good idea? I didn’t mean to. Hopefully, I just warned groups that fund raising can be a lot of work.

Charitable Solicitation filings 
If you hold fundraisers by selling products to the public (outside your own membership) you may need to report your “solicitation” to your state, typically the Attorney General’s office.

In my home state of Ohio, nonprofits have to file a Charity Registration form if they do fund raising to the public. One year my homeschool co-op sold candles door to door and had to file a seven-page financial report with Ohio’s Attorney General Office. That report was such a nuisance (and the fund raiser was so much work) that the co-op no longer does sales to the public.

Investigate what your state requires from groups doing fund raisers. These websites have information on nonprofit reporting requirements by state:

http://www.hurwitasociates.com/

https://www.harborcompliance.com/fundraising-registration

In general I encourage groups to get most of their income from membership fees and not depend too much on fund raising. Fund raising can be very successful or turn out very poorly. It is also a lot of work with sometimes only a few people doing all the work.

Individual fundraisers

I’m not sure what you mean by “individual fund raisers.” I do know that it is not proper to “award” a family for raising more money than another family, nor is it proper to set up individual accounts. It’s not right because it is not in keeping with the nonprofit motive or with the idea of a group benefit. In short, individuals are not supposed to benefit; the group is supposed to benefit.

 

My book Money Management in a Homeschool Organization covers fundraising and offers some ideas for easy fundraisers.

 

Are you up to date on your state filing requirements for your homeschool nonprofit organization? Do you even know that your state may require annual reports?

Most states require some reporting from nonprofit organizations on an annual basis. My webinar on IRS and State Filings for Homeschool Nonprofits will explain the state reports and help you research your state’s requirements.

 

 

Carol Topp, CPA

HomeschoolCPA.com

Raising money for your own kid is not charity!

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Fellow CPA Peter Reilly, a journalist at Forbes.com, emailed me about a recent court case involving individual fundraising accounts (IFAs).

IFAs are when you share or distribute your fundraising proceeds among the families who raised the money.

IFAs are illegal and a gymnastics booster club recently lost a Tax Court case and their tax exempt status for using IFAs.

Read Peter’s blog post on the court case. It’s a very good summary (I read the entire court case!)

Parent Booster Clubs – Raising Money For Your Own Kid Is Not Charity

Here’s the bottom line:

Do NOT set up individual fundraising accounts.

If you have them now, STOP!

If you conduct fundraising, do not record how much each family brought in.

Do not have a system where tuition or dues are reduced by the amount of fundraising a family conducts.

 

All fundraising proceeds should go into your general fund to be used for the common expenses of the group.

We’re all in this together folks!
Carol Topp, CPA

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