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Marketing services to not-for-profits.

Many not-for-profits are turning to their CPAs for assistance beyond auditing, financial accounting and filing form 990, providing CPA firms with great client service opportunities.

NPOs need CPAs' expertise when accounting for fund-raising and compliance with new substantiation rules, consulting potential donors on planned giving opportunities; complying with Financial Accounting Standards Board Statement no. 116, Accounting for Contributions Received and Contributions Made, and no. 117, Financial Statements of Not-for-Profit Organizations; and planning employee benefit programs, just to name a few.

Barbacane, Thornton & Co., a CPA firm in Wilmington, Delaware, decided to pick the hottest issues facing the not-for-profit sector and sponsor a series of seminars to answer the questions of both current and prospective clients. A local not-for-profit umbrella association combined the firm's not-for-profit organization (NPO) client base with its own list and mailed the announcements. A local bank helped defray costs by underwriting a portion of the seminars. The firm spent around $500 to put on its seminars; all professional and administrative costs where incorporated into its marketing budget.

The results were exceptional. Attendance for the first two seminars averaged 50 people, and attendance for the seminar on FASB Statement nos. 116 and 117 was over 90 people (the total mailing list was less than 500). As a result, not only is the firm committed to continuing its series of NPO seminars, but it has other banks and businesses asking to be future co-sponsors.

Below is a summary of seminar results and how accountants can provide valuable services to NPOs.

FASB 116 AND 117

By far this was the most popular seminar. The firm invited representatives of the NPOs and local bankers, because banks are major users of financial statements. The seminar included an overview of the changes required as a result of the new pronouncements as well as a nuts-and-bolts session on how entries would have to be recorded in financial statements.

As a result of the seminar, several NPOs with less than $5 million in revenues opted for early implementation in order to get a head start on the new requirements and to show outside agencies and sources of support that they were fiscally responsible and well informed. Surprisingly, the firm found that several of the local branches of major funding agencies were not up-to-date with Statement nos. 116 and 117.

The firm received considerable exposure from the seminar, and the word was passed that Barbacane, Thornton & Co. could help NPOs comply with the requirements of the FASB statements. Subsequently, the firm received other invitations to speak before groups of NPOs to bring them up to date on the new FASB rules.


The Revenue Reconciliation Act of 1993 made two major changes that affect NPOs. First, it requires donors to obtain a written acknowledgment for contributions of $250 or more. Second, it requires that solicitation of quid-pro-quo contributions of at least $75 be accompanied by a statement that only the excess of the amount contributed over the fair market value of goods and services provided by the organization be deductible as a charitable contribution. The organization also must provide a good-faith fair market value of the goods or services provided to the donor in consideration for the contribution.

Our firm helped NPOs choose the proper wording for their written acknowledgments, but it was harder for us to formulate a statement for the quid-pro-quo contributions because each organization uses a variety of fund-raising events during the year. In several cases, the firm sat down with an NPO director to review its list of planned fund-raising events to determine if changes were necessary as a result of the new law.

Some of the events reviewed included

* Auctions.

* Contributory membership drives.

* Benefit dinners.

* 5/10K runs.

* Golf outings.

* Luncheons with celebrities.

Auctions pose the most difficult problems. For example, at issue in most cases was whether the winning bid creates the fair market value for the item (possibly resulting in no quid pro quo since the entire amount paid would then be considered an exchange for goods or services) or whether the excess of the amount bid over the fair market value of the item is considered a contribution (a quid-pro-quo transaction). If no quid-pro-quo situation exists, the organization does not have to make the required disclosure in connection with the event. Failure to make the disclosure when it is required, however, could result in a penalty of up to $5,000.

Because of a lack of definitive guidance from the IRS, NPOs have to decide which course to take. Those that opt to claim that a portion of the winning bid represents a contribution to the organization are advised to obtain a good-faith (third-party) fair market value for each item. Different types of auctions, such as silent auctions or auctions by fax, also add to the difficulties.

Although golf outings and dinners are not as complicated, our firm needs to assist the NPOs in determining the fair market value of the dinner, cocktails, golf carts, greens fees and giveaways. The required disclosure can be complicated if, for example, a patron has the choice of attending the whole affair or just a portion (for example, attending the dinner but not playing golf). In such cases, each aspect of the fund-raiser needs to be stated separately. Certain promotional items that were given out in the past have been dropped because of the disclosure requirement. Some organizations feel they might lose donors if they have to make any disclosure about the nondeductibility of otherwise small items.


Many small NPOs do not have sophisticated development programs or the resources to maintain one. The firm's seminars were geared towards educating executive directors and board members about marketing endowments and the different options donors have, such as charitable remainder and lead trusts, pooled income funds and charitable gift annuities.

Many CPAs sit on boards of NPOs and are involved in their fund-raising activities. Additionally, many CPAs have the technical knowledge to advise individuals on the tax aspects of charitable giving. Our firm combines these attributes with its market niche in NPOs. This creates a perfect situation for us, after the seminar, to speak one-on-one with the boards of directors of different organizations. We take the opportunity to educate board members about the different vehicles for structuring charitable requests, already introduced in the seminar. Firm members even make themselves available to go with a member of the NPO to meet with potential donors.


Employee compensation and benefits is another major concern facing NPOs as a result of ongoing fiscal constraints. This and other issues affecting the not-for-profit sector will be among the topics of the firm's future seminars.

Interacting with local NPOs allows the firm's staff members to get involved with the organization, which in many cases leads to new clients. The not-for-profit sector is one of the fastest-growing business sectors in the country. CPA firms that proactively work with NPOs to discover their specific needs will undoubtedly strengthen their client bases as well as gain opportunities to provide new client services and generate new sources of revenue.


* NOT-FOR-PROFIT ORGANIZATIONS (NPOs) are turning to their CPAs for fundraising and compliance with new substantiation rules, consulting on planned giving opportunities, complying with Financial Accounting Standards Board Statement nos. 116 and 117 and planning employee benefit programs.

* ONE CPA FIRM IN WILMINGTON, Delaware, sponsored a series of seminars to find out the hottest issues facing their current and prospective NPO clients, to answer their questions and to discover what services they should be providing.

* CPA FIRMS CAN ASSIST NPOs in preparing written acknowledgments for contributions of $250 or more as well as help formulate statements for quid-pro-quo contributions. This is particularly helpful to NPO clients involved in fund-raising events such as auctions, golf outings and dinners.

* CPAs ARE INVOLVED ON THE BOARDS OF NPOs and can advise board members on the tax aspects of charitable giving and accompany members of NPOs when meeting with potential donors.

* PROACTIVE WORK WITH NPOs to help them get a head start on new requirements and to show outside agencies and sources of support that they are fiscally responsible and well informed will strengthen a CPA firm's client base and generate new sources of revenue.

RELATED ARTICLE: Not-for-profit boards and fundraising

* NPO boards with a policy requiring board members to make annual personal contributions 29%

* The median minimum annual gift required by NPOs with a requirement policy $150

Source: National Center for Nonprofit Boards
COPYRIGHT 1995 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1995, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Author:Rosen, Jordan
Publication:Journal of Accountancy
Date:Sep 1, 1995
Previous Article:The endowment goose and its golden eggs.
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