Question: Is it legal and ethical to use donated items as prizes.

Our annual Bingo night is coming up and it has been the boards responsibility to go out and ask our community business partners for donations to use as prizes. As a business owner myself I like to know what the donation is being used for and a "Bingo Prize" just doesnt sound right. I also question how the IRS views this type of donation as a deduction?? This is a free event for our families to simply come win some really great prizes, but are we doing something wrong? Any advice?

Asked by astarlimo

Answers:

Advice from PTO Today

Craig writes:
You're not doing anything wrong. The one thing that you could maybe do better is explain to businesses the purpose of your bingo night. Getting parents connected to the school and involved in their children's education is probably the most important thing a group can do to benefit the students and the school. When parents get involved, grades go up, test scores go up, discipline problems go down, and the school as a whole performs better. Family events like your bingo night are a key first step in making that connection. If you want to make your bingo night seem more weighty, you could make it vocabulary bingo or math bingo (using 5+2, for example, instead of the number seven in a square). As far as deductibility, my understanding is the donations are deductible if your group is a 501(c)(3) charity. If your group isn't a registered tax-exempt charity, the donation needs to be made directly to the school rather than the PTO to be tax deductible. By the way, kudos to your group for making the family night free. These events are important, and its great that you're making sure everyone can participate.