Chapter by chapter slides based on "Fundamentals of Destination Management and Marketing," provided by Destination Marketing Association International in cooperation with American Hotel & Lodging Association Education Institute.

1. © 2005, Educational Institute
Chapter 10
Financial Management
Fundamentals of Destination Management and Marketing
(323TXT)

2. © 2005, Educational Institute
Four Critical Areas
• Nondistribution of earnings
• IRS classifications
• Disclosure of information issues
• IRS filing requirements and forms

3. © 2005, Educational Institute
Nondistribution of Earnings
• Commercial organizations typically distribute
earnings to investors.
• Not-for-profits can operate profitably, but must
not share earnings with board members or other
influential parties.
• Profits should be put in reserves to strengthen
future operations.
• Staff members may receive incentives, bonuses,
and/or compensation increases.

4. © 2005, Educational Institute
IRS Classification of CVBs
• 501(c)(6)
o No restrictions on lobbying
o Contributions made by the CVB may be deductible as
business expenses
o Donors cannot deduct contributions to the CVB
o Less favorable postal rates
o Fewer state advantages
o Often ineligible for grants
• 501(c)(3)
o Donor tax deductions
o Favorable postal rates
o Exemption from the Federal Unemployment Tax Act
o Possible exemption from state sales tax and other local taxes
o Increased eligibility for grants
o Lobbying restrictions

5. © 2005, Educational Institute
Disclosure of Information
• CVBs are required to make certain documents available for
public inspection because of their tax-exempt status.
o Forms 990 and 990-EZ
o Form 1023
o All correspondence related to Forms 990, 990-EZ, and
1023
• CVBs are not required to disclose tax returns (Forms 990-T or
1120-POL) or the names and addresses of their contributors.
• Requested documents must be produced on the day of request
or on the next day if extenuating circumstances exist.
o Written requests must be fulfilled within 30 days.
o Documents may be made available on the Internet.
• Organizations can be fined for noncompliance.

6. © 2005, Educational Institute
IRS Filing Requirements and Forms
• Forms 990 and 990-EZ
o Information return
o Open for public inspection
o Required if an organization’s gross receipts are
normally more than $25,000
o Due on the fifteenth day of the fifth month after
the close of the fiscal or calendar year
o $10 per day late filing penalty
(continued)

7. © 2005, Educational Institute
IRS Filing Requirements and Forms
(continued)
• Form 990-T
o Tax return for unrelated business income
o Income from a regularly carried on trade or
business not substantially related to carrying
out the organization’s purpose
o Proprietary; no disclosure requirement
o Taxed at prevailing corporate rates
o Required estimated tax payments

8. © 2005, Educational Institute
IRS Filing Requirements and Forms
Revenue excluded from tax
• Dues
• Dividends or interest
• Annuities
• Royalties
• Contributions
• Income from activity involving volunteers
• Sale of donated items

9. © 2005, Educational Institute
Cost Allocation Procedures
• Natural reporting: allows CVBs to present
revenues and expenses as consolidated figures on
financial statements
• Functional reporting: breaks down revenues and
expenses by department
• Direct costs: costs associated directly with an
organization’s purpose

10. © 2005, Educational Institute
CVB Financial Statements
• Internal financial statements
o Can be designed to meet an individual
bureau’s needs
o Should use industry standards and
terminology
• Audited financial statements
o Can be prepared only by licensed CPAs
o Must follow standards set by the Financial
Accounting Standards Board