Auction Fundraising Finances: Keep the Records Straight
Let’s face it, auction fundraising is all about the money! A basic working knowledge of a typical household budget is great but let’s broaden your financial acumen. Once you start handling monies for an organization, more stringent procedures are in order. Don’t worry-- you don’t need to be an accounting aficionado but you do need to have in place checks & balances to keep the budget accurate. The fundraising chairperson is responsible for establishing, reporting and managing the fundraising budget. This happens in collaboration with the entire board to determine overall goals, then the fundraising committee can get to work.
Don’t get kept up at night worrying about finances, use bylaws and sound financial procedures to stay safe!
Start with a nice chat with the Treasurer. Most likely there are already financial protocols in place for receiving and recording monetary transactions. Understanding the processes from the start will help prevent any ‘learning on the job’ experiences. At a minimum there should be a budget and alignment of expectations in duties and responsibilities.
The Treasurer should have in place standard forms and policies to manage the day-to-day transactions. As the Fundraising Chair responsibilities will relate only to the fundraising budget and activities.
To make the learning curve shorter when beginning a fundraiser, retrieve records and documents from the prior year to help make decisions that keep the good stuff going and improve upon areas of opportunities. In addition, ask the prior year’s chairperson for their overall opinion on the fundraising event. This gives you a good understanding of do’s and don’ts and allows you to develop a rapport with the previous chairperson. You never know when you may need to call upon them for advice.
Do keep accurate records on planning and spending for fundraising activities. It’s ok to invest some money to make money but do so with a strategy in place. Do the math, will X dollars yield Y% back? What is the point of diminishing returns? The answer may not be so clear with the first fundraiser, or the first year but record and learn from each event.
Understand how the organization handles and records financial transactions. There should be standard forms to transfer cash, count cash, request checks and disbursements. Always try to have two people to double check cash and receivables. Standardize financial transactions such as:
- Receiving cash
- Recording cash
- Depositing cash
- Receiving credit card payment
- Reimbursement for expenses
- Document preservation requirements (ie receipts, vendor agreements, emails)
Security of monies is greatly enhanced when there is a chain of custody and consistent procedures in place.
Banking- It is best to have at least 3 officers responsible for banking, this helps with checks and balances. The Treasurer is responsible for the overall recording and reporting of finances. Incoming checks- need restrictive endorsement (i.e “For Deposit Only”) and should be deposited within a week with no cash back. Outgoing checks- must be supported by an approved invoice, receipt, or a voucher prepared by the volunteer if a receipt or invoice isn't available. Checks should require two signatures and not be signed in advance.
Auction Fundraiser Financials
Streamline all financials to the least amount of systems possible. Record everything in a timely fashion so as to not lose track of expenses. With Auctria streamline all income by utilizing credit card integration. Use Auctria for all transactions related to the auction:
- Selling event tickets
- Selling sponsorships
- Selling raffles
- Auction checkout
We are aware that some bidders and supporters will want to handle their transactions in cash or check. To keep the financials in order record those in the auction system you are using. With Auctria you can process credit cards or record payment method as ‘Other’. Other would be used for check, or cash or any alternate payment processor handled outside of Auctria.
Auctria streamlines the reporting process with a full suite of auction reports that can be run during and after the auction fundraiser. Keep track of in progress items, donors, bidders, sales and bidding during the auction. Post auction review the financials and expenses. There are many report form templates yet each can be modified for more exact needs.
Cash collections deserve special treatment due. It is a best practice to keep cash under lock & key, minimize the number of people who handle cash and use a consistent money counting procedure. To help a paper trail of cash collections provide below is a Money Counting Worksheet. Each time cash is counted have two people count and document the totals.
Sample Money Counting Worksheet
It is imperative that all fundraising activities and flow of funds is recorded and transparent. Communication is the key to any healthy relationship. This is never more true when money and finances are involved. Accurate accounting and reporting to the board serves as further communication and clarity. Ongoing status checks and updates keeps everyone on the same page. Regular reporting provides an opportunity to review and adjust plans as needed.
Q. Do you have a copy of the bylaws?
If you do not have a copy of the by laws ask for one. Understand the bylaws as it relates to fundraising and finances. This will always serve as the roadmap and guidance. Who is responsible or permitted to sign vendor agreements and contracts?
Q. What is the fundraising teams responsibility for handling monies?
Will the fundraising team be responsible or is the treasurer going to handle this? What is the protocol for cash collection? It is important to establish checks and balances when dealing with cash especially since there is no paper trail.
Q. What is expected in terms of budgeting?
Consider timeframes for fundraising and spending for the entire fiscal year. How much money came in last year, what changes did or will the organization incur? This can be in terms of people contributing, fundraising programs changing or overall climate and needs. For instance: if the fundraising efforts are for a school, are there any large donors that are outgoing or incoming from the institution? Fundraising for a sports team or club, are there any participants moving to the next level and leaving the potential donation stream?
Q. Personally, how are you protected should a problem occur? Is an insurance policy in place and what and whom is covered?
Board members could be held personally liable for the actions of the organization. Review your exposure to determine if insurance policy is necessary to protect your organization’s mission and board members.
Tip: Secure and READ the organization bylaws before touching a penny.
External Obligations Sharing goals and successes outside the board to the general membership and stakeholders. They too deserve to know goals and purposes of fundraising. Sharing success stories and coming full circle should also be part of the communication plan.
Fiduciary responsibility & reporting is not just internal. Income of any sort does need to be documented. Every organization has external obligations, depending on the location and tax status obligations may include Federal, State, and sales tax. Review the synopsis paragraphs below but refer to the direct links for more details and the most up-to date information.
NOTE: Auctria is providing links and information as a convenience, not as financial consultancy or a tax professional. Please seek the advice of a licensed individual in your state for qualified guidance.
IRS provide an online training available at the IRS microsite StayExempt.irs.gov for tax-exempt status.
“An organization may qualify for exemption from federal income tax if it is organized and operated exclusively for one or more of the following purposes. religious, charitable, scientific, testing for public safety, literary, educational, fostering national or international amateur sports competition (but only if none of its activities involve providing athletic facilities or equipment, prevention of cruelty to children or animals.”
“According to the IRS to qualify, the organization must be a corporation, community chest, fund, articles of association, or foundation. A trust is a fund or foundation and will qualify. However, an individual or a partnership won't qualify.”
Financials for auction fundraising don’t have to be complicated, just accurate. Designate a secure location to record and keep all records. A paper folder is good, an online record is better, a shared online record is the most effective for teams. Keep the records current to stay on track of your budget. Report any major variances in a timely manner. Report final records shortly after the auction closes.