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Auction Guidelines

Support Group Operations Required Elements in Support Group's Bylaws

The purpose of this document is to state:

  1. How donations of goods and services of items given to UCSD that are to be auctioned off are to be treated and processed by UCSD departments or support groups.
  2. How departments are to determine a fair market value for the items (goods or services) that are donated for auction.
  3. How fund raising auctions are to be conducted and the necessary controls and accountings that need to take place.
  4. How the successful bidder for an auction item is to be receipted, and how those funds are to be processed.
  5. How the State of California Non-profit Integrity Act (SB 1262) affects us.

Various campus departments and support groups at UCSD conduct auctions at their fundraising events held from time-to-time. The proceeds from these auctions are to be processed through UCSD Gift Processing, as proceeds to either the UC San Diego Foundation, or the UC Regents.

At most fundraising auctions, a variety of merchandise and services are bid upon by those attending the event. Some of this merchandise is contributed by businesses from their inventory, and the remaining property is given by individuals. Services are contributed by both businesses and individuals. Some of the items auctioned could be readily purchased from retail merchants or companies for fixed or suggested retail prices, and thus their market value is easily determinable. Other goods and services to be auctioned, such as works of art, autographed memorabilia, and lunches with dignitaries and other honorees, are more difficult to value.

Processing and Handling Requirements

  1. Every item that is DONATED to be auctioned off should be reported to UCSD Gift Processing as a gift in kind. The required information is the name of the donor, and the item donated and its fair market value (see below). Not all of these items will qualify for a charitable donation receipt to be sent to the donor of the item. Donations of services by individual's ore businesses will not get a receipt, as that represents lost income to the donor. Donations of tangible goods will qualify. Gift processing will make the determination for receipts.
  2. IRS regulations require that a written good faith estimate of the fair market value of each item to be auctioned at a charity event be disclosed to potential auction purchasers prior to, or at the time of bidding for the item. University procedures require that such disclosures be printed in all materials. This is to ensure that all potential purchasers have had adequate disclosure of the value of the items being auctioned. FOR EVERY ITEM TO BE AUCTIONED OFF: the department must determine and publish its fair market value in the auction brochure or bidding list (FMV is defined as what a person would have to pay for it on the open market). FMV may be determined by using retail value, making calls to determine reasonable estimates, or any process that would stand up an inquiry as to whether reasonable efforts were made to determine FMV. This is critical. Despite the fact that the proceeds to UCSD are all gift income...the PURCHASER will only receive a charitable donation receipt for the amount paid at auction that is over and above the FMV. For example, if a dinner for two at Rainwaters is auctioned off with a FMV of $100, but it is purchased at an auction for $75, there is no gift. The purchaser "got what they paid for" in the eyes of the IRS. If it is purchased for $125, a gift has been made only to the extent of the $25 paid over the value.
  3. Departments must provide gift processing with:
    1. All the proceeds (checks, cash, or credit card info)
    2. A detailed schedule of every item auctioned, along with its FMV, the amount the purchaser paid for it, and purchaser information (name, address, etc)
    3. Gift processing works with accounting to handle all the proceeds, but in accordance with IRS requirements, will only provide a charitable receipt to donors that paid amounts OVER the FMV. In addition, sales tax will be deducted from the amount paid for tangible goods and will be remitted to the State of California.

How Auctions Are Conducted?

Auctions are usually conducted in one of two ways: silent or open.

A silent auction is one in which a card or sign up sheet is placed next to each item (or a description of each item) that can be purchased. The card or sign up sheet should note the minimum bid for the item, as well as the fair market value of the item. Bidders are given numbers, and they put their number on the card or sheet along with the amount they are willing to bid for the item. The person with the highest bid is the successful bidder, who then pays for the item.

An open auction is one in which bidding is conducted under the supervision of an auctioneer, who is sometimes a hired professional, and sometimes a volunteer. The items to be auctioned are generally published in a brochure with a description, minimum bid, and fair market value. The auctioneer typically begins the bidding at the minimum bid. Once again, the highest bidder is the successful bidder and then pays for the item.

How Does the Non-Profit Integrity Act Affect an Auction?

If the auction is being conducted completely by UCSD personnel and volunteers, all proceeds are handled by UCSD directly, and all the requirements above are followed, there is no impact on the conducting of an auction by the Act.

However, if a "commercial fund raiser" as defined by the Act is to be employed, the Assistant Vice Chancellor, External Relations, IT&FS/CFO of the UCSD Foundation (534-1032) needs to be contacted immediately. The Asst VC/CFO will work with departments to ensure that any vendor to be used to conduct the auction can meet the requirements of the Act and will work with UCSD Purchasing for a contract for such services and the reporting requirements. As a matter of practice, the use of commercial fund raisers by UCSD is undesirable.