The revenue of not-for-profit entities may be derived from a variety of sources including: cash donations from members of the public, donated materials, restricted and unrestricted grants from government. Fundraising revenue may be obtained from street, door-to-door or postal collections, special events or other methods of fundraising. Revenue from fundraising activities can be geographically dispersed, and may be directed to a not-for-profit entity from professional third parties or voluntary fundraisers. However, unlike revenue of a for-profit business entity, the collection of such revenue may not be supported by invoices or equivalent documentation, or subject to internal controls commonly found in a for-profit business entity. Consequently, from an audit perspective the control systems usually found in a for-profit business environment may not be present for some sources of fundraising revenue.

It can sometimes be difficult to accurately estimate the level of fundraising revenue from cash donations, contributions or grants. This is generally because:

1. donors’ patterns of giving may change, due for example, to economic hardship or competing demands on limited resources; and
2. some contributions, such as grants to undertake particular activities, being dependent on a tendering process. Such funding decisions are usually based on considerations by third parties over whom the not-for-profit entity has little influence. Receipt of these funds can be for a specific purpose, with their use and recognition subject to compliance with specific conditions.

It may be difficult to establish a relationship between cash donations and other amounts in the financial report, as expenditure levels may not have any direct relationship with such fundraising revenue.