“Hey Carol! I have a question for you. Discussing fundraising on your website you say, “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.”
But a few weeks ago I asked in the Facebook group about a “Give or Get” option, where members could opt to pay $X per year or fundraise $X per year, and you said it’s fine, even siting how some private schools do the same thing. Our co-op would still offer some opportunities for those wanting to fundraise, like a plant sale. Whatever the total fundraised amount from that would be divided up evenly among participants. The funds from the “Give or Get” option go to our general expenses, I.e. teaching supplies, enrichment, etc. So individuals aren’t benefitting from fundraising, but the group as a whole is.
I just want to clarify that that option is okay? Our co-op had this option the first year, but changed it because they said they heard from you that we cannot track individual family fundraising totals and apply them toward a fundraising goal (they called it a Family Fee), as any funds raised from product sales by the co-op belong to the co-op and cannot be applied toward any individual dues, including family fees, tuition, etc.” Sorry for the long question! Just looking for clarification! I couldn’t find anything from our state (MN) that addresses this.”
Kim V in MN
It’s tricky isn’t it? The divvying up of fundraising monies that belong to the co-op to each family based on their efforts is what is called inurement and forbidden. Inurement means “to flow down to” or “to benefit an individual,” especially an “insider” (a member or leader)”.
If instead you say to a family, “You participated in Give or Get. Great! We’ll check you off as participating so you won’t have to make a donation” and DO NOT set up a dollar-for-dollar discount on their fees, you’re OK. 🙂
Look at how the cash flows. If the cash comes into the co-op, then it belongs to the co-op. You cannot then distribute it (on paper or by discounts or in cash) to each family.
Sounds like when you were tracking the family fundraising goals you were NOT distributing the funds to each family. You were just seeing if they did enough to check off their Give or Get goal. That’s tracking to see if they met a goal, but not distributing the funds to them.
If you track fundraising proceeds and apply a dollar-for-dollar discount on fees, etc, you stepped over the line. The cash flowed down to benefit an individual. That’s inurement.
Hope that helps.
Carol Topp, CPA
HomeschoolCPA.com
