Fundraising Compliance: 5 Reasons Your Directors Need to Get on Board

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Updated December 2020

If your nonprofit raises funds, charitable solicitation registration is central to your success, opening the door to grant and outreach opportunities and publicly demonstrating your commitment to good stewardship. In addition, meeting fundraising requirements is a primary duty of directors and officers under state and federal laws. For all these reasons, your board should play an active role in managing your nonprofit’s charitable solicitation compliance.

1. Fundraising Registration Is Required by Law

Forty-one states require nonprofits to register before soliciting for donations, and 25 require special disclosure statements on fundraising appeals. Failing to meet the requirements can lead to citations and penalties. Including fundraising compliance in your board’s strategic planning helps reduce their legal liability.

2. Registration Is a Chief Duty of Nonprofit Leaders

According to Internal Revenue Service (IRS) regulations, a nonprofit governing board should be “informed and active in overseeing a charity’s operations and finances.” In addition, most state charity regulators impose fiduciary duties of care and obedience on nonprofit boards. Complying with state fundraising requirements is a core component of these duties. Keeping your board informed will help them demonstrate good faith compliance under the law.

Your board’s duty to ensure fundraising compliance extends to donors, employees, and volunteers. At the most basic level, being fully compliant ensures that fundraising efforts by your employees and volunteers are conducted legally. In addition, fundraising registration sets them up for success by letting them demonstrate your nonprofit’s compliance to potential donors.

3. Compliance Is the Engine of Fundraising

Your board members should be the champions of your fundraising efforts, and compliance is a key prerequisite. Many federal agencies and consumer advocates encourage donors to investigate charities before making a contribution, including checking whether they are registered with the state. Many states publish this data online, making it easy for potential donors to identify which nonprofits are complying. By being fully registered wherever you are soliciting, you encourage support from informed donors.

4. Compliance Protects the Reputation of Your Charity—and Your Board

Many states publish lists of fraudulent and delinquent charities on their websites. If your board is unaware of state requirements, you put them at risk. By including directors and officers in your compliance strategy, you set the standard for your organization. Your good name is important to your directors, who are ambassadors for your brand in their communities.

5. There’s Value in Strategic Compliance

Your board is your strategy team, and compliance is central to your strategy, fueling growth, eliminating risk, and establishing transparency and good faith operations. Compliance reinforces responsible governance and allows you to plan and budget for necessary expenses.

Many nonprofits register in all 41 states to eliminate uncertainty and allow their board, employees, and volunteers to cast as wide a net as possible when fundraising. The cost is nominal compared to the opportunities nationwide registration opens up. 

Interested in learning more about charitable solicitation compliance, including what it might cost to register your nonprofit nationwide? Download our free white paper, written in partnership with the National Council of Nonprofits, for an in-depth look at requirements, registration processes, state-by-state filing fees, and more.

For a more concise look at charitable solicitation requirements, download our Executive Brief to share with your organization’s leadership.

Copyright ©2020 Harbor Compliance, All rights reserved. Harbor Compliance is not an accounting or law firm and does not provide tax, financial, or legal advice.