If your organization files a Form 990, or 990-EZ, there are a few things you’ll have to report about your fundraising expenses. If you prepare ahead of a new fiscal year and have a way of tracking these expenses as they happen, it will be easier to pull the information together when you’re preparing the 990 at the end of the year.

The most obvious example is on the Statement of Functional Expenses, where you breakout expenses in 3 categories – program expenses, fundraising expenses, and management and general expenses. The IRS defines fundraising expenses as those “incurred in soliciting cash and noncash contributions, gifts, and grants…all expenses, including allocable overhead expenses, incurred in (a) publicizing and conducting fundraising campaigns and (b) soliciting bequests and grants from individuals, foundations, other organizations, or government units” (page 42). This includes fundraising campaigns, preparing and distributing fundraising manuals and materials, and soliciting and receiving contributions.

Some expenses are purely fundraising, such as the salaries of a director of development and related staff, or mailing out appeals for donations. Other expenses will cross multiple categories on the SFE and need to be allocated reasonably between them. Examples include the salary of an executive director who spends some time on program work, some time doing fundraising, and some time on management duties, or a publication that includes some educational material (a program expense) and some fundraising material. Salaries should be allocated based on how much time the staff member spends on each type of work. Other expenses, such as rent or utilities for a building used for multiple purposes, can be allocated based on the salaries of the people who work there.

If you pay $5,000 or more to any professional fundraisers to solicit funds for your organization, that needs to be reported on Schedule G of the Form 990. Note that you report not only how much you paid the fundraisers, but how much money was raised as a result of their efforts, i.e. grants received for which they wrote proposals, or otherwise increased donations.

Also reported on Schedule G are fundraising events, if you raise $15,000 or more of gross income and contributions at these events. Report individually the 2 highest-grossing events individually, and report the rest grouped together in one total. You only need to include events with gross receipts greater than $5,000. Schedule G calls for both the revenue raised at the events, and a breakdown of the related expenses.

Most accounting systems have ways of coding expenses based on function as you pay them so you can pull reports easily at the end of the year. If you’re able to track all the necessary details as they happen, you’ll save a lot of time and frustration at year-end as you prepare financial statements and your 990.