Is my homeschool graduation fundraiser breaking the law?

Hi Carol,
The past 3 years we have held a graduation. The graduate families have been doing the fundraising, with the amount earned going into our checking account and then paid out for speakers, food, programs, and etc. I am concerned after reading your book Money Management in a Homeschool Organization: A Guide For Treasurers that we have been doing this all wrong!
 Are we instead supposed to fund raise as a whole group, and have graduation as a budgeted item in place of creating the graduation fund in our checking account?
Thank you so much for all your help!

Heidi,

 

Heidi,

The fundraising to pay for the graduation expenses is fine. The fundraiser proceeds are going to an event that your homeschool organization operates, not to individual families.

What is prohibited by the IRS is private inurement which is when an organization earmarks fundraiser proceeds as belonging to specific families to defray their specific and particular expenses. That’s a no-no. The purpose of those fundraising monies to to further your exempt purpose (homeschooling), not to give a financial break to specific, individual families.

There was a homeschool group that showed me their spreadsheet of about 10 fundraisers(!) and the 20 families that participated and how each dollar of profit from the fundraiser was divvied up to each family. Yikes! It was a record-keeping marvel, but prohibited by the IRS! I warned them to cease and desist immediately.

I think the graduation event should be included in your budget with both the revenues (parents paying money and the fundraisers proceeds) and the expenses (speakers, food, programs, etc) recorded.

 I hope that helps,
Carol Topp, CPA

 

 Learn more about managing money and IRS tax exempt status for your homeschool organization

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