Capital Campaign Cost Accounting

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    A reader indicated that she was, “trying to find accounting literature that defines whether we can capitalize the cost of a capital campaign consultant and the project management time provided by development staff who worked on the campaign,” and she asked, are “these costs usually capitalized with the new building or building expansion as project costs?”

    1. The technical/accounting answer comes from Christine L. Manor, CPA
    ( clm@clmanor.com, who wrote “QuickBooks for Not-for-Profit Organizations”) referencing Financial Accounting Standards Board (FASB) guidelines:

    In terms of accounting for fundraising costs, refer your accountant to 13.08 Per FASB ASC 958-720-25-4, costs of fundraising, including the costs of special fundraising events, should be expensed as incurred, and costs are considered to be incurred when the item or service has been received.

    Fundraising costs incurred in one period, such as those made to obtain capital campaign counsel, compile a list of prospective campaign donors, or actually solicit commitments to a campaign, may result in contributions that will be received in future periods. These costs should be expensed as incurred.

    Christine emphasized that, “even though you may lump all the planning and construction costs into a capital campaign asset account, you can’t put the fundraising costs there. Fundraising costs must be charged directly to a fundraising expense account.”

    113.43 Per the FASB ASC glossary, fundraising activities are activities undertaken to (prepare to) induce potential donors to contribute money, securities, services, material, other assets, or time…

    2. Even though the question seemed to focus on accounting practices, regulations and requirements, let me add that my experience has been that most nonprofits build campaign costs into their overall campaign goals.

    So, even though the actual costs of a campaign have to be “accounted for” in the period in which they were accrued, those costs can be recouped by adding the anticipated total amount of the expenses to the campaign goal.

    But, caution, those costs must be listed as such in any campaign budget or literature that includes a breakdown of what the campaign is designed to accomplish. Anything else would be unethical.

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    Have a comment or a question about starting, evaluating or expanding your fundraising program? Email me at AskHank@Major-Capital-Giving.com. With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, we’ll likely be able to answer your questions.