Planning your next fundraising event? Now it’s the time to consider pesky financial issues that can derail your best efforts. Many fundraisers, focused on the tasks to make the event a success, end up forgetting some crucial activities and costs, such as the items discussed next.
1- Create a Budget for the Event
Be sure to create a budget with all costs way before the event takes place. I have seen an event budget for a gala where the cost of drinks was forgotten. So, it’s easy to miss important items and underestimate the event expenses. A way to avoid this problem is to have someone from accounting or finance department look at the budget numbers. Another way to prevent this issue is for development people to use a template budget form that contains common line items. Not every event is the same, but they usually have many expenses in common.
2- Consider Insurance Issues
Oftentimes events involve certain activities, such as a petting zoo that may require an insurance rider to be sure the event is covered. These riders are usually not expensive, but they are part of the overall costs of an event. Nonprofits can also ask insurance documents from the third-party to be sure all is covered and a rider is not necessary. Be sure to have this cost as part of the template budget form.
3- Look out for Sales Taxes
Many states, such as California, tax specific items within a fundraising event, such as certain auction items. Check your state and other government agencies to verify what is taxed in your jurisdiction. Tax rates may vary by state, county and city, so double-check this issue and consider it in your budget because it can take an unexpected bite of your proceedings. In California, the sales tax rate can be as high as 9.00% +of gross sales. This tax may change, so double check with your state to make sure you’re OK. Ask about sales tax waivers, if available.
4- Don’t Forget Overhead
Overhead costs are those that are not directly associated with the event. For example, an event carried on at the premises may involve rent or mortgage, fire insurance, maintenance, utilities and other administrative costs. These expenses are easily ignored because the event organizers don’t have to pay for those; they are often considered to be costs of the organization in general. To account for this “hidden: cost, some nonprofits charge a fee as rent to the event, while others charge a percentage of direct costs. The point is to note all costs associated with the fund-raising event.
5- Don’t Leave Wages out
Wages paid, including any overtime, to employees involved with the event should be part of the event budget, especially when dealing with large events where a lot of time is spent on planning and organizing. For instance, if someone is paid $30K in wages and works three months on an event, about $7,500 ($30,000 x 3/12) should be considered an event cost. Usually, a percentage, such as 20% is added to the gross wages to account for payroll taxes and benefits.
Check out the book “Nonprofit Finance: A Practical Guide” –– Nominated for the McAdam Book Award