What expense category is Offering Envelopes and Giving Supplies?

For a church or religious organization, facilitating tithes and offerings is a fundamental administrative and spiritual practice. The costs associated with this process—from printing custom offering envelopes to providing supplies for donation tracking—are a necessary and routine part of operations.

For church administrators and treasurers, it is essential to categorize these expenses correctly. They are not a program expense but rather a cost of raising the funds that support the ministry. This guide will clarify how to classify these costs according to standard accounting principles to ensure your church's financial reporting is accurate and transparent.

Offering Envelopes and Giving Supplies Category

The costs you incur for offering envelopes and other giving-related supplies are an ordinary and necessary operating expense. For financial and tax reporting purposes (on the Form 990), these costs are generally categorized as a fundraising expense.

This classification is based on the principle that these materials are used for the specific purpose of soliciting and collecting contributions. 

While the provided IRS documents for for-profit businesses discuss general supplies, for a nonprofit, the function of the supply is key. Because these items are directly tied to the act of fundraising, they are allocated to that functional category.

Important Considerations While Classifying Offering Envelopes and Giving Supplies

The most critical factor is distinguishing between supplies used for fundraising and those used for general administrative tasks.

Fundraising vs. Administrative Supplies

• Fundraising Supplies: This includes items whose primary purpose is to facilitate the collection of donations. Examples include tithe and offering envelopes, donation tracking sheets for counters, and materials for special offering campaigns.
• Administrative Supplies: This includes general office supplies used to run the church office, such as paper for internal reports, pens, and toner. These are classified as management and general (administrative) expenses.

Cost Allocation

If a supply is used for multiple purposes (e.g., a ream of paper used to print both internal memos and donation slips), its cost should be reasonably allocated between administrative and fundraising functions. However, for items like offering envelopes that have a single, clear purpose, the cost is 100% a fundraising expense.

Tax Implications and Recordkeeping

Properly accounting for these supplies is essential for your church's financial statements and its annual IRS reporting.

How to Report the Expense

For organizations that file a Form 990, the cost of offering envelopes and giving supplies is reported in Part IX (Statement of Functional Expenses). 

These costs are included on a line such as Line 24, Other expenses, and must be allocated to Column (D), Fundraising expenses. This accurate reporting is crucial for calculating your organization's fundraising efficiency ratio.

What Records to Keep

You must have documentary evidence to substantiate these expenses. Your records should include:

• Invoices from the company that prints your offering envelopes.
• Receipts for any other giving-related supplies purchased.
• Proof of payment for all items.

How Fyle Can Automate Expense Tracking for Giving Supplies

Fyle helps your administrative staff capture and organize all your fundraising-related supply costs, ensuring every expense is documented and allocated correctly.

• Centralize Vendor Invoices: Forward or attach your envelope printer and other suppliers' invoices directly to Fyle for automatic data capture.
• Capture All Purchases: Instantly capture receipts for any giving-related supplies purchased in-store using the Fyle mobile app.
• Create a Clear Audit Trail: Fyle maintains a time-stamped, unalterable record of all purchases and invoices for easy substantiation.
• Automate Your Accounting: Sync the categorized fundraising expense directly to the correct GL account in QuickBooks, Xero, NetSuite, or Sage Intacct.