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Auction - Finance vs Advancement

  • 1.  Auction - Finance vs Advancement

    Posted 12 days ago
    First post in a VERY long time. I know this is an old topic to bring up but my question is slightly different. We had an online auction done last month with the usual process - donors donated items for the auction, the items were then listed online for bids, the winning bidders got the items that were listed. So far so good. Until Finance just sends me this when I tell them we are getting ready to process them in our system:

    From the AICPA Audit and Accounting Guide (5.148 2020):

    'Since this auction has happened within the same fiscal year (when the items were donated vs actual auction), we would book the contribution amount based on amount received for an item and the donor is the original individual/company that donated the item. The individual who receives this item does not have a contribution with AU.'

    Now I know, that the individuals who donated their items can be recognized as donors but has anyone come across this where it needs to be two separate fiscal years for the the winning bidders to be recognized as donors (assuming the bid is above FMV).

    Syed Bashir
    Director of Gift Administration
    American University

  • 2.  RE: Auction - Finance vs Advancement

    Posted 12 days ago
    You honestly do not need to worry about the finance side of things.  In fact, I am willing to suggest that 90% of us do not even bother with telling Finance about items that were donated for an auction.  Somewhat related to the quote you reference, these "ins and outs" are more of a bother to Finance.  Issac mentioned earlier in another post that finance offices don't want to be bothered with most in-kind donations in the main.

    In fact, at Duke University and NC State, we excluded all GIKs from our GL feed.  Only when a donated item exceeded $5,000 (potentially tripping the 8283/8282 flag) did we manually share donation information.

    For charitable purposes and your advancement CRM, you should continue to record the value of donated auction items at their FMV.  Those donors deserve a GIK receipt (assuming you do not return the item if it didn't sell).  Donors who bid above that FMV should have their gifts treated much like QPQ donations.  Their receipt reflects the total amount paid, a value and a description of what they received in return, and a statement indicating their deduction is limited to the difference between them.

    For donors who bid at or below FMV, nothing typically is entered in your advancement CRM.  The cash is deposited as "other income" or something similar.

    John H. Taylor
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987

  • 3.  RE: Auction - Finance vs Advancement

    Posted 12 days ago
    Hi Syed, 

    There is an accounting issue regarding selling goods. Do you present a sale of good as gross or net? In other words, do you record the cost of goods when you acquire them and also record the goods a an asset, and then, on selling, remove the asset from your books and record the gain in cash?  OR, do you simply show the overall net gain/loss from the whole set of transactions? The rule is that if you're generally in the business of buying and selling, you record in gross, but otherwise you do net. 

    What the looks like, on an accounting level, is to value the contribution of the auction item on receipt, and then make an adjustment to the value based on the amount collected at sale. If it's all in the same fiscal year, from an accounting perspective, the person making the contribution can be disregarded, and the overall GIK is reported on a net basis. If it's over two fiscal years, you have to go back to gross, b/c you need to report something at the end of the year, and you don't know what the net will be.

    However, that's accounting. That does not control what a donation is, what receipting is required, etc. The winning bidder is a donor, so long as the normal rules apply (they knew how much the item was worth, they knew it was a charity auction, and they paid more than it was worth, etc.) You should continue tracking as you normally do in your donor management system so you can continue to keep up your obligations to the IRS and the donors.

    Thank you,
    Isaac Shalev
    CRM Expert
    Sage70, Inc.
    (917) 859-0151

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