Look around your nonprofit. Is your team busy? Multitasking? Struggling to balance the everyday challenges of work, family, and the other passions that they want to make time for? They want to change the world, but along the way they also need to stop for gas and pick up the milk, right? Just like everybody else in our culture.
If the popularity of cause marketing and crowdfunding tell us anything, it’s that donors are eager to support good causes, and they’re open to creative ways of doing it on the fly. Add some change at the register, great. Click “donate” to help that family on Facebook rebuild, sure. One thing they want to know before they press that button is that their donations will really make a difference.
When you’re ready to hire a fundraising professional, you’re in a similar position. You’re busy providing programs and fulfilling your mission, yet you need to keep the donations coming to support that work. If your development team is stretched, or if you want to bring new expertise and methods to the mix, a fundraising professional can help you achieve your goals. But like your donors, you want to make sure your dollars are well spent. You want to be sure every dollar will make a difference for your nonprofit.
The solution, for donors and nonprofits alike, is transparency. The more transparent you can be about your operations, the more donations you’ll bring in. And the more transparency you have when choosing a fundraising professional, the better the outcomes.
As you know, for nonprofits, transparency is far more than telling your story and sharing photos of the good work you’re doing. Transparency is hard work. It means publishing detailed financial statements and carefully tracking donations. It means filing annual reports and registering your charity to meet state requirements.
While the paperwork required to do all of those things for your organization can be draining, it is far from pointless. Charitable solicitation registration brings transparency to your nonprofit and to the sector. And that encourages supporters to hit that “donate” button.
Professional fundraisers face similar requirements, with good reason. Unwary charities and the public can fall prey to predatory contracts and poor performance with little recourse once the damage is done. To prevent such abuses, professional fundraisers are subject to registration and financial reporting requirements of their own. Understanding those requirements can help you ensure that your fundraising partnerships are founded on a sustainable, transparent, compliant foundation.
Fundraising professionals are generally outside, independent contractors who are paid to support your campaigns. They don’t include your own employees, board members, or volunteers. These are individuals or firms paid to help you plan and execute your campaigns.
Fundraising professionals fall into two categories. Professional solicitors, also called professional fundraisers, are firms or individuals who actively solicit donations on behalf of your nonprofit. They may or may not collect funds, but they are actively involved in the act of asking for donations.
Fundraising counsel are consultants who help you develop campaign strategy, create the messaging and materials, and direct the campaign. This can include anyone from grant writers to marketing companies that set up an email campaign. Generally, they do not actively solicit donations for you. They merely advise, facilitate, or provide services related to fundraising.
More than a dozen states require individual solicitors to register or apply for a license, and a majority of states require professional fundraising firms to be licensed. This may include registering with the secretary of state to do business as an out-of-state or “foreign” firm. Some states require professional fundraising firms to obtain surety bonds.
In addition to licensing, professional fundraisers are often required to file fundraising contracts before the start of a campaign and submit financial reports after its conclusion. These reports generally include registration information about the nonprofit and the professional fundraiser.
Fundraising counsel must also register in 30 states, yet they generally face less stringent requirements concerning bonding, submission of contracts, and financial reporting.
For both types of fundraising professionals, licenses and registrations must usually be renewed periodically. Failing to register or submit required reports may lead to substantial penalties. For example, South Carolina law provides for fines of up to $2,000 per each violation of the state’s charitable solicitation act.
In 41 states, nonprofits must register for charitable solicitation before soliciting residents. Twenty-five states also require specific information to be disclosed on solicitation materials. Engaging a fundraising professional often requires additional filings, including disclosing the engagement on charitable solicitation registration forms and submitting copies of fundraising agreements.
When seeking outside fundraising assistance, nonprofits should:
It takes work to complete state fundraising registration requirements. And when you’re already working through mountains of paperwork, adding to the pile can be discouraging. Yet ensuring that your nonprofit and your fundraising partners are properly registered for your fundraising activities benefits both parties in the following ways:
All of these benefits ultimately accrue to your donors by serving your common goal: making every dollar count toward your mission.
If you would like help managing charitable solicitation registrations and other state requirements, we provide dedicated compliance software and services that cut the task down to size. Give us a call, 1-888-995-5895, or get in touch today. We’re glad to help.
Harbor Compliance is not an accounting or law firm and does not provide tax, financial, or legal advice.
James Gilmer is a Compliance Specialist at Harbor Compliance, a leading provider of compliance solutions for companies of all types and sizes. Founded by a team of government licensing specialists and technology trailblazers, Harbor Compliance has helped more than 10,000 organizations apply for, secure, and maintain licensing across all industries. James is also a co-founder of Berks Sinfonietta, Inc., a 501(c)(3) nonprofit chamber orchestra in Reading, Pennsylvania.