Club funds and foundation funds

A large number of clubs operate two entities: the club, and a separate charitable foundation established to receive tax-deductible gifts. They have different boards, different bank accounts, different purposes and different tax treatment — and in practice a lot of members could not say which one a given fundraiser feeds.

That is tolerable for a pancake breakfast. It is not tolerable for an auction where your bidders are business owners who will file an acknowledgement and may ask an accountant about it.

What to establish before the auction page goes live

• Which entity is running the auction and receiving the funds
• That entity's exempt status, from its own determination letter rather than from memory
• What a bidder may claim, and what the acknowledgement will say
• What a donating business may claim, and what their acknowledgement will say
• How funds move between the two entities if one raises and the other spends
• Who signs the acknowledgements, and from which entity's letterhead

None of this is difficult. All of it is much harder to sort out after money has been received into the wrong account.

The fair market value disclosure

Where the receiving entity is a qualifying charity, a bidder may generally deduct only the amount paid above an item's fair market value, and you are required to disclose that value at the time of the transaction. Put it on every item page.

It also helps the auction: a stated value gives bidders a reference point to bid past.

Moving money between club and foundation

If the foundation raises and the club spends, or the reverse, that transfer is a board decision recorded in minutes, and it may carry considerations given the two entities' purposes and statuses. Agree the mechanism in advance rather than at the point somebody wants to write a cheque.

Designated projects

If the auction is named after a project, treat that as binding. Say in advance where a surplus goes — the same project next year, the foundation's general fund, a grant match — and then report that you did it. Your donors are members' contacts and members' customers, and they will hear about it either way.

Grants and matching

If the funds are intended to support a grant application or a match, check the requirements before the auction rather than after: some programmes have conditions about the source of matching funds and about the timing of when they were raised.

General information, not tax or legal advice for your club. Club structures and Rotary International guidance vary and change — check your own club and foundation documents and your district before acting on anything here.