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Petitioner’s Allocation of Expenses Between Fundraising
and Public Education
On its financial statements for 1985 through 1988,
petitioner concluded that substantially all of its direct mail
campaign expenses were “joint expenses” allocable to public
education and fundraising. Its 1985 through 1988 financial
statements reflected that petitioner received total annual
contributions, and incurred joint expenses that it allocated to
public education and fundraising, as shown in table 10.
Table 10
1985 1986 1987 1988
Contributions $5,087,453 $7,869,015 $10,740,045 $3,883,352
Joint Expenses--
Education 2,301,260 3,843,907 4,306,377 1,463,432
Fundraising 2,647,470 3,390,012 5,399,344 1,693,333
Petitioner’s certified public accounting firm advised it of
certain factors to be considered in allocating its direct mail
campaign expenses between public education and fundraising. The
Accounting Standards Division of the American Institute of
Certified Public Accountants issued two Statements of Position
(hereinafter sometimes referred to as SOP), SOP 78-10 and SOP 87-
2, concerning the appropriateness of allocating fundraising
appeal expenses to a charitable organization’s exempt purpose
function. SOP 87-219 amended the earlier-issued SOP 78-10,
19 SOP 87-2, states in pertinent part, as follows:
(continued...)
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