Fundraising compliance is one of a nonprofit’s essential best practices for maintaining good standing with state regulators and promoting transparency and accountability in its operations. Charitable solicitation registration also opens the door to expanded fundraising strategies, donor support, and partnership opportunities.
Embracing fundraising compliance as a badge of honor can strengthen charitable credibility and help an organization stand out from the crowd. Today, potential donors are inundated with giving opportunities, and trust matters. In a recent study by Fidelity Charitable, 8 out of 10 donors reported that nonprofit transparency and trustworthiness are primary factors influencing their giving decisions.
Here are a few basics on the fundraising registration process and related benefits for your charity to get you started on the path to compliance.
You can also learn more about filing procedures, licensing for special fundraising activities, and the positive impacts of compliance in resources such as this free educational Fundraising Compliance Guide.
Types of Charitable Solicitation
Charitable solicitation is the act of asking for donations for a charitable cause. In most states, soliciting is what triggers registration requirements, not necessarily the receipt of funds. Solicitation can include mailing letters, making phone calls, sending emails, applying for grants, and placing a “Donate” button on a charity’s website. Since online donation appeals, emails, and social media campaigns can reach citizens in every state, these actions may subject a charity to nationwide fundraising registration requirements. It is essential for charities to understand the requirements of a given state before soliciting contributions from its residents.
The Fundraising Registration Process
Managed by state charity offices, fundraising registration requirements help safeguard donors from fraudulent solicitations and protect the nonprofit community from related negative publicity. Forty-one states require charities to register to solicit funds from their residents, and 25 states require certain disclosures to be included in promotional fundraising materials. An organization’s requirements may vary based on its charitable organization type, solicitation methods, and revenue levels.
Nonprofits must typically submit the registration application for each state along with any other required supporting documentation and filing fees. A few states also require charities to register with the secretary of state and appoint a registered agent prior to applying for fundraising registration.
Where required, state fundraising registrations must typically be renewed annually. Due dates vary by state and are frequently based on the charity’s fiscal year-end. Tracking due dates is essential to avoid registration lapses. In addition to fulfilling legal requirements, maintaining fundraising compliance can yield many other benefits for your organization.
Reinforcing Nonprofit Accountability
Transparency and accountability are essential factors in whether a charity will garner public trust, and both are highly valued aims within the charitable community. From the National Council of Nonprofits to Charity Navigator, many online forums for the nonprofit sector recognize financial transparency and fundraising practices as key considerations in operational accountability.
Several charitable accreditation programs also place value on fundraising best practices. Better Business Bureau Accredited Charities, for example, must adhere to a variety of fundraising compliance standards, including guidelines on website and cause marketing disclosures, donor information safeguards, fundraising tracking, and charitable reporting.
Demonstrating your commitment to compliance and responsible governance can help your nonprofit solidify your status as a well-run organization with a mission worthy of support.
Inspiring Donor Confidence
As illustrated by the Fidelity Charitable study, donors are increasingly concerned with nonprofits’ operating standards–and they frequently do their homework before making giving decisions. Charity Navigator, GuideStar, CharityWatch, the Federal Trade Commission, the Better Business Bureau Wise Giving Alliance, and other organizations recommend consumers go through a careful research process when evaluating which charities they will support with donations.
Most states with solicitation regulations also have searchable websites that catalogue a nonprofit’s registration status, making it easier for savvy donors to conduct their research. Public records of infractions can quickly degrade donor support.
You can differentiate your organization and build your credibility by broadcasting that you are fully registered and compliant. This can include featuring your registration status on your website and handouts and proudly displaying your charitable disclosures on promotional materials, rather than confining them to the fine print.
Expanding Partnership and Funding Opportunities
Fundraising partnerships can expand opportunities for generating support. These may include corporate sponsorships or working with a fundraising professional to increase the impact of your fundraising campaigns. Just remember, you don’t want to miss out on the rewards of these opportunities by overlooking the necessary registrations.
Like solicitation, partnering with professional solicitors and fundraising consultants to aid in your campaigns requires registration in many states. Cause marketing partnerships between for-profit entities and charities also carry specific state licensing and reporting requirements. Engaging in partnerships founded on a strong compliance plan and informed agreements will help partners reach new audiences and increase the impact of fundraising campaigns.
Fundraising registration can also expand your eligibility for grants. Many charities don’t realize that requesting grant funds falls under the definitions of charitable solicitation in many states. It’s a good idea to investigate state charity laws before applying for grants in states where your nonprofit isn’t registered for charitable solicitation for guidance on any steps you need to take.
Fundraising compliance can strengthen your nonprofit’s accountability standards, reinforce public trust, attract donor support, and facilitate partnerships. By proactively researching and taking the proper steps to fulfill requirements for fundraising activities and collaborations, your nonprofit can be prepared to take advantage of the fundraising opportunities that come your way.
Harbor Compliance is not an accounting or law firm and does not provide tax, financial, or legal advice.