Business Leadership Symposium 2019 FUNDRAISING ON CAMPUS 4/22/2019

Presenters Jaqueline Anderson, Urbana Purchasing Christy Devocelle, University Illinois Foundation Roger Fredenhagen, University Accounting & Financial Reporting John Laroe, University Accounting & Financial Reporting Brenda Sutherland, Tax Compliance & Analysis Julie Townsend, Contract Services Office 4/22/2019

Agenda Overview University Event vs. External Event Sponsorships Raffles & Auctions Financial Support 4/22/2019

Overview Julie Townsend Contract Service Office 4/22/2019

Fundraising: Overview Various types of events occur on campus throughout the year. Some of these events may involve fundraising for a University department or Registered Student Organization (RSO) This fundraising can come from a variety of sources, and each funding source has different implications that are important to keep in mind. 4/22/2019

University Event vs. External Event Roger Fredenhagen University Accounting and Financial Reporting 4/22/2019

University Event vs. External Event Many revenue-generating events occur on campus, such as conferences, banquets, fundraising events, student/alumni events, etc. Proper accounting guidelines vary depending on whether the event is an official University event or external event or has an advancement related purpose. 4/22/2019

University Event Characteristics of a University event include: Owned and operated by the University of Illinois System; Publicized and organized as a University of Illinois System event; All event revenues belong to the University of Illinois System; All event expenses are the responsibility of the University of Illinois System; and The University of Illinois System assumes the risks of operating the event (including the responsibility for any loss or profit). 4/22/2019

University Event If the revenue-generating event is a university event unrelated to any sponsored project funding, then it should be accounted for in a self-supporting fund (e.g., to collect registration fees and the related expenses). If the event has a advancement related purpose it should be processed through the Foundation. A gift fund may also be needed (e.g., if you receive any qualified sponsorships and/or donations for the event). 4/22/2019

External Event Characteristics of an external event include: Owned and operated by the external party; Publicized and organized on behalf of the external party; All event revenues belong to the external party; All event expenses are the responsibility of the external party; and The external party assumes the risks of sponsoring the event (including responsibility for any loss or profit). 4/22/2019

External Event If the revenue-generating event is an external event that your unit is simply hosting or coordinating, then it should be accounted for in an agency fund. 4/22/2019

Sponsorships Christine Devocelle University of Illinois Foundation 4/22/2019

Sponsorship: Qualified Sponsorships Section 11.13 Sponsorships Gifts of the OBFS Policies and Procedures Per the IRS, a qualified sponsorship is any payment made by a person engaged in a trade or business and for which the person will receive no substantial benefit other than the use or acknowledgment of the business name, logo, or product lines in connection with the organization’s activities. In contrast to non-qualified sponsorships, these may be processed as gifts and should be directed to the Foundation. We commonly receive sponsorships in the form of hosting a booth at an event, listing the company/donor name in a brochure, etc. 4/22/2019

Sponsorship: Qualified Sponsorships How to process qualified sponsorships Qualified sponsorships should be processed through the Foundation If a qualified sponsorship is received, the campus unit/department should record it as a gift or gift-in-kind, less any goods or services provided to the donor, in accordance with 11.3 Campus Processing of Gifts using the gift transmittal. The fair market value (FMV) of any benefits provided in return for the sponsorship must be identified as non-gift on the gift transmittal. Sponsors should be informed of the benefits received prior to their gift should they prefer to decline those benefits. 4/22/2019

Sponsorship: Qualified Sponsorships Other items to consider: Resources Square, CVENT Quid Pro Quo/Benefits – if you need assistance in determining the value of benefits please contact UIF Gift Administration at giftadmin@uif.uillinois.edu or refer to IRS Publication 1771 https://www.irs.gov/pub/irs-pdf/p1771.pdf All receipts indicate “no goods or services were provided”; any benefits or quid pro quo reduces the value of the gift and is identified on their receipt 4/22/2019

Sponsorships: Non-Qualified Sponsorships Non-qualified sponsorships occur when the sponsor receives substantial benefit approximately equal to the value of what they paid for their sponsorship. They do not have charitable intent and are typically arm’s length transactions where both parties are acting in their own self-interest. These should be processed through self-supporting funds using revenue account code 303590. For example, the sponsor may receive advertisements with a fair market value approximately equal to the amount they paid for the sponsorship. 4/22/2019

Sponsorship Agreements Julie Townsend Contract Services Office 4/22/2019

Sponsorship: Event(s) that Sponsor supports Corporation that is listed as the “Sponsor” of the Event or Events Levels of support provided by sponsor Acknowledgement or benefit(s) provided to sponsor in exchange for sponsorship Logo usage 4/22/2019

Non-Monetary Exchanges John Laroe University Accounting & Financial Reporting 4/22/2019

Sponsorships: Non-Monetary Exchanges Non-monetary exchanges may occur independently or may occur as a secondary aspect within other types of transactions, such as: Sponsorships Gifts-in-kind Reduced cost agreements Trade agreements Non-monetary exchange transactions must be properly valued and reported to University Accounting and Financial Reporting (UAFR). 4/22/2019

Sponsorships: Non-Monetary Exchanges Non-monetary exchange transactions are recorded at the estimated fair market value of the goods and/or services provided by the system. However, if that fair market value cannot be determined, then the non-monetary exchange transaction is recorded at the estimated fair market value of the goods/services received by the system. See Non-Monetary Exchanges for further details. 4/22/2019

Unrelated Business Income Tax (ubit) Implications Brenda Sutherland Tax Compliance & Analysis 4/22/2019

Sponsorships: UBIT Qualified Sponsorship Payment (QSP) not UBIT Any payment (money, property, or services) from a person engaged in a trade of business No arrangement or expectation of substantial return benefit other than the use or acknowledgement of the business name or logo 4/22/2019

Sponsorships: UBIT Implications Substantial Return Benefits Any benefit received by the sponsor other than: Use or acknowledgement, or Goods, services, or other benefits of insubstantial value (i.e. aggregate FMV of all benefits is <2% of amount received) Examples include: Advertising Exclusive providers arrangements Goods, facilities, services or other privileges (rent, appearances, etc.) Right to use intangible assets (marks, mailing lists, etc.) Complimentary tickets Discounts 4/22/2019

Sponsorships: UBIT Implications Acknowledgement: logos and slogans that do not contain qualitative or comparative descriptions of the sponsor’s products or services Examples: Value-neutral descriptions Sponsor’s information Display or distribution of products Exclusive provider 4/22/2019

Sponsorships: UBIT Implications Advertising: messages containing qualitative or comparative language Examples: Price information Endorsement Inducement to purchase or sell Messages with both advertising and acknowledgements are advertising for UBI purposes 4/22/2019

Raffles On University Premises Julie Townsend Contract Services Office 4/22/2019

Raffles: Who Can Conduct Raffles on University Premises? Only University Departments and Registered Student Organizations See Campus Administrative Manual Policy APR-18: Raffles on University Premises and at University Facilities 4/22/2019

Raffles: Requirements for Raffles on Campus Must apply and receive a license from the City of Champaign and/or City of Urbana. Be in existence for 5 years continuously before applying for a license Individuals under the age of 18 may not participate in conducting raffles or chances. Individuals under the age of 18 may not participate in the raffle itself as a participant. 4/22/2019

What Can Be Raffled? John Laroe University Accounting and Financial Reporting 4/22/2019

What Can Be Raffled at a University Event? Typically, it is recommended to only raffle off items at a University event which have been donated to the University as a gift-in-kind.  The University has an exemption from CMS which allows us to sell items which have been donated retaining proceeds in the related gift fund.     However, if you must purchase an item for the purpose of a raffle, then keep in mind that these purchases should be limited to items that could be considered consumable supplies which have a useful life of less than one year and which typically have a unit value of less than $100 and which are not considered to be any type of moveable equipment or tagged University property.  Examples of common items which could safely be purchased and subsequently raffled off are t-shirts, water bottles, calendars, small figurines, etc.    4/22/2019

What Can Be Raffled at an External Event? If any raffles are being conducted at an external event which the University is simply hosting/coordinating, then the best business practice to follow is to have the external party provide the item that will be raffled off. It is best to avoid using the agency fund for any purchase of an item that will be raffled off. If this is not possible, contact UAFR Property Accounting for further guidance. 4/22/2019

Tax Implications Brenda Sutherland Tax Compliance & Analysis 4/22/2019

Raffles: Tax Implications Cash winnings: tax withholding may be required to be withheld from proceeds Non-cash winnings: winner may be required to pay system the amount of tax withholdings Fair Market Value (FMV) is a good faith estimate 4/22/2019

Raffles: Tax Implications Federal Reporting Requirements U.S. citizens/residents for tax purposes Form W-2G, Certain Gambling Winnings, if winnings are over $5,000 and/or if tax withholding Form 1099-MISC, Miscellaneous Income if winnings are between $600-$4,999 Collect Form 5754, Statement by Person(s) Receiving Gambling Winnings, if applicable Request Vendor Information Form Foreign nationals Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, for any amount, unless exempt per tax treaty Collect Form W-8BEN, Certificate of Foreign Status of beneficial Owner for United States Tax Withholding and Reporting (Individuals) 4/22/2019

Raffles: Tax Implications Federal Withholding Requirements U.S. citizens/residents for tax purposes FMV of raffle winnings less recipient’s wager if $5,000 or more Rate: 24% Foreign nationals FMV of raffle winnings less recipient’s wager Rate: 30% 4/22/2019

Raffles: Tax Implications State of Illinois Reporting Requirements U.S. citizens/residents for tax purposes Form W-2G, Certain Gambling Winnings if any tax withholding Collection of IDOR Form IL-5754, Statement by Person Receiving Gambling Winnings, if winnings are over $1,000 Foreign nationals Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding 4/22/2019

Raffles: Tax Implications State of Illinois Withholding Requirements U.S. citizens/residents for tax purposes FMV of raffle winnings less recipient’s wager is $1,000 or more and Illinois resident Illinois rate: 4.95% Foreign nationals FMV of raffle winnings less recipient’s wager 4/22/2019

Raffle Proceeds – Gift Processing Christine Devocelle University of Illinois Foundation 4/22/2019

Raffles: Gift Processing How to Process Raffle Proceeds All Raffle proceeds for fundraising events should be processed through the Foundation as a non-gift. Non-gift is the non-deductible portion of a gift. The proceeds should be transmitted to UIF using the Gift Transmittal located at https://online.uif.uillinois.edu/Transmittal/ Cash should be hand-delivered to your GPSSO office or directly to the Foundation. Transaction will be posted to the Various Donors constituent in our donor database (TED) 4/22/2019

Raffles: Gift Processing Other items to consider: Raffle proceeds are non-deductible per IRS publication 526 (www.irs.gov) See also OBFS Policy 18.11 regarding handling raffle winnings If you do not have a non-gift fund, please contact UIF Gift Administration for assistance – newaccounts@uif.uillinois.edu Raffle proceeds without any charitable purpose should be handled according to guidelines provided in Section 10 - Cash Handling of the Business and Financial Policies and Procedures Manual. 4/22/2019

Depositing Receipts From the Raffle Sales All proceeds received from the sale of raffle tickets at an external event which the University is simply hosting/coordinating should be deposited directly to a revenue account code on the applicable agency fund.    4/22/2019

RSO Raffle & Fundraising Requirements Julie Townsend Contract Services Office 4/22/2019

RSO Raffle Requirements All registered organizations that wish to hold raffles, drawings, etc., on University premises and at University facilities must first receive event approval from the director of registered organizations and the unit responsible for scheduling the requested facility. The Office of Registered Organizations can be contacted at (217) 244-2357 or iurso@Illinois.edu RSOs must complete an Event Budget Form (https://union.illinois.edu/~/media/Sites/Union/Files/Event%20Services/ Office%20of%20Registered%20Organizations/Event%20Budget%20Fo rm.ashx) along with a space request to be approved for a raffle. 4/22/2019

RSO Fundraising Requirements Can RSOs have fundraising activities on campus? RSOs may sponsor events on campus where revenue is generated through donations, ticket sales, food/clothing sales, admission charges etc. 4/22/2019

Auctions Christine Devocelle University of Illinois Foundation 4/22/2019

Auctions: Gift Processing How to Process Auction Gifts-in-Kind (GIK) and Proceeds All Auction GIKs and proceeds for fundraising events should be processed through the Foundation. A GIK is a gift of an item that is tangible or intangible – e.g. items for auction, speaker fees, catering, venue. There are two transactions involved with every auction item: The item donated to auction (GIK = Gift-in-Kind) The sale of the donated item (Gift and Non-Gift) Use the auction transmittal form This is available from UIF and allows you to enter all the information needed to process the GIKs (items donated for auction) and the proceeds of the sale of these items – donor names, addresses, sale amount, fair market value, etc. 4/22/2019

Financial Support Jacqueline Anderson Urbana Purchasing Office 4/22/2019

Financial Support: What Is It? Section 8.1.5 of the OBFS Policy Financial support payments are those made to a non- University entity to support initiatives that promote or advance one or more of the University of Illinois System’s missions.  Payments to a Recipient cannot be used to: carry on propaganda or otherwise attempt to influence legislation; influence the outcome of any public election; carry on, directly or indirectly, any voter registration drive; or, conduct illegal activity. 4/22/2019

Financial Support: What Is Allowed? Allowable Example (supply): Payment can be made to a Recipient for the purchase of lanyards to be given out at their annual meeting if the Recipient’s annual meeting promotes or advances one or more of the University of Illinois System’s missions. Allowable Example (service): Payment can be made to a Recipient to pay for catering services at their annual meeting if the Recipient’s annual meeting promotes or advances one or more of the University of Illinois System’s missions. 4/22/2019

Financial Support: What Is Allowed? Allowable Example (with consideration): A payment may be made to sponsor a Recipient’s annual conference if the conference promotes or advances one or more of the University of Illinois System’s missions. It is acceptable to obtain consideration: such as advertising in the annual conference’s brochure as a sponsor; or, in the form of conference registrations. 4/22/2019

Financial Support: What Is NOT Allowed? Unallowable Example (supply): If the University of Illinois System is directing that the financial support payment must be used to purchase 100 green, 100 red and 100 blue nametag- lanyards from Office Depot to be provided to attendees Unallowable Example (service): If the University of Illinois System is directing that the financial support payment must be used to pay $500 to a specific catering company to cater the Recipient’s annual meeting. 4/22/2019

Financial Support: What Is NOT Allowed? Unallowable Example (with consideration): A payment cannot be made to solely: purchase conference registrations; obtain access to a vendor booth at the Recipient’s conference; or pay for an individual’s dues to an organization. These activities would be considered a purchase regardless whether or not the conference promotes or advances one or more of the University of Illinois System’s missions. 4/22/2019

Financial Support: Process under $5,000 Unit determines eligibility, obtains assurances from recipient, and completes payment form and submits to Unit Head. Unit Head approves payment by completing signature process of payment form. Unit submits payment request in Travel and Expense Management (TEM) and attaches supporting documentation Payables reviews request and processes payment 4/22/2019

Financial Support: Process over $5,000 -- Contract Required Unit determines eligibility, obtains and completes payment form then submits to Unit Head. Unit Head approves payment by completing signature process of payment form. Unit submits all documentation to Purchasing for review and contract creation and execution Once Contract is fully executed, recipient and unit receive a copy Unit submits payment request in TEM and attaches supporting documentation referencing the contract number. Payables reviews request and processes payment. 4/22/2019

Financial Support: Payment Recipient must have a Banner Vendor ID Payments may only be funded from institutional funds, gift or endowment income funds, or self-supporting funds and use account code 186550 If payment(s) exceed $600.00 over a calendar year University System is required to report as taxable income on IRS Form 1099- MISC 4/22/2019

QUESTIONS? 4/22/2019