Reporting Revenue and Expenses for Your Special Event

By Cindy McGiffin, CPA, LSWG Audit Supervisor, and Billy Harper, LSWG Staff Accountant II

A special event is a function or event which aims to generate money for the nonprofit (NFP) that organizes it.

There are many different types of special events–each with their own level of suitability for different sized organizations. Some popular types of special events include, but are not limited to:  dinners, galas, auctions, and walk-a-thons.

For accounting purposes, special events are categorized into two groups: Major or Peripheral/Incidental. The difference in these special event categories depends on two things: frequency of the event and the significance of revenue and expense.

Events are considered major and central activities if they are normally a part of the NFP’s strategy and the NFP normally carries on such activities, or if the event’s gross revenues or expenses are significant in relation to the annual budget. Events are peripheral or incidental if they are not an integral part of the NFP’s usual activities or if their gross revenues or expenses are not significant in relation to the NFP’s annual budget.

If an event is peripheral or incidental, the NFP may report the net amount of revenue and expenses for the special event, and only the direct costs related to the event can be netted against the receipts.

If the special event is major, the NFP would report the gross revenues and expenses and the accounting is a bit more involved.  For a major special event, the NFP is required to track the following information:

  1. Gross price paid by the donor
  2. Fair value of benefits received by the donor (if any)–e.g., fair value of a dinner or round of golf
  3. Contribution revenue (the difference between the gross price and the fair value of benefits)
  4. Cost of direct benefits to the NFP–e.g., the price the NFP paid for the dinner or round of golf  (Note:  These costs should be considered as program and supporting services; they are not fundraising expenses.)
  5. Other costs of the event–e.g., facilities rent, decorations, advertising, payroll  (Note:  These costs should always be considered as fundraising expenses)

If the special event is major, there are three ways revenue and expenses may be presented on the financial statements:

  • Present the gross revenue (item 1, above) in the revenue section as special event revenue and the cost of direct benefits (4) in the functional expense section as program and/or supporting expenses
  • Present the gross revenue (1) in the revenue section as special event revenue and the cost of direct benefits (4) as a separate line item deducted from special event revenue
  • Present the contribution portion (3) as contribution revenue and the fair value of benefits (2) as special events revenue. The cost of direct benefits (4) would then be a separate line item deducted from special event revenue.

Other costs of the event (5) are always reported as fundraising expenses. Note that if there is no charge to the donor to attend the special event, all expenses would be recorded as fundraising.

Cindy McGiffin, CPAis an audit supervisor in LSWG’s Frederick office and has over 25 years of accounting experience–working both as a public accountant and in private industry.  You can reach Cindy at 301.662.9200, or by email at cmcgiffin@LSWG.cpa.

Billy Harper joined LSWG in 2017 and is a staff accountant II in our Frederick office. You can reach Billy at 301.662.9200, or by email at bharper@LSWG.cpa.

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