Maintaining Nonprofit Compliance With Fundraising Software

This guide explores how nonprofits can maintain compliance by using the right fundraising software to manage their next auction.

As a nonprofit leader, you know the impact of successful fundraising events on your organization’s work.

If you’ve invested in software to simplify auction management, you’re already taking the right steps to maximize your fundraising event’s success!

Although increasing revenue to fund your mission is an important goal, you’ll eventually find yourself sorting through donation records and event recaps to craft financial statements and file
the necessary paperwork to maintain your nonprofit’s compliance with the IRS. In this guide, we’ll review three ways your fundraising software can help your nonprofit maintain compliance:

  • Activity data
  • Donation tracking
  • Volunteer tools

Fundraising events of all types require careful data tracking, but donations made at an auction are especially complex to manage and record. Let’s explore how your digital tools can simplify this part of the fundraising process so you can focus on what matters most: fundraising!

Activity data

As a tax-exempt organization, you technically won’t have to file a tax return. However, the IRS needs information about your nonprofit’s operations to ensure it maintains its eligibility for tax-exempt status. To prove this, you’ll have to know how to file Form 990, which requires nonprofits to provide:

  • Descriptions of your organization’s charitable programs. You’ll need to provide details about the work that your auction is raising money to support. For example, an animal shelter’s welfare program will need funding to provide medical services to adoptable animals. The shelter must describe this program in detail and explain how the program serves their organization’s charitable purpose.
  • All financial data, from expenditures to revenue and assets. Every donation and expense used for your auction must be reported, as well as your incoming and outgoing funds throughout the rest of the year.
  • Your accomplishments from the previous year. Use concrete data from the previous year to report the accomplishments of your work. Using the animal shelter example from above, your organization might report the number of animals rescued and given medical treatment.
  • Staff information, like names and salaries. The salaries of your nonprofit’s staff members should be transparently reported, from the time they worked at your auction to their overall yearly pay. Compensation must meet the state’s minimum wage requirements, but also be reasonable and not excessive.

The right fundraising software will track your auction’s essential information for Form 990. For example, the event’s cause will be explained to participants in the software’s event description, especially for supporters participating virtually using mobile bidding features. Volunteer and staff hours can be logged in the software, as well as monetary donations when the platform processes a winning bidder’s payment.

Data is not only important for Form 990 filing. You should already be tracking fundraising activities to strategize your budgets and increase the quality of your programs, according to NPOInfo’s guide to data collection. At the end of your auction, you’ll be able to recap your fundraiser progress and combine it with your organization’s overall financial information for further insight into your goals and potential improvements.

Donation tracking for nonprofit compliance

An essential part of nonprofit compliance is thorough and accurate financial reporting. Your nonprofit must track and report all types of contributions made during your auction and any other fundraising events throughout the year. Auctions are particularly beneficial because of their potential for high revenue, but they collect various types of donations that make reporting complex, including:

  • In-kind: These non-monetary donations include any items or services donated to your nonprofit. For your auction, this could include the auction items themselves, as well as donations of catering services or venue use.
  • Monetary: Any donations made by giving cash, writing a check, or paying with a card can be considered a monetary donation. This is typically the money paid for a winning bid, but other donors might give monetary donations at the event without paying for an auction item.
  • Volunteer time: When supporters volunteer to manage your event, they’re donating their time to your nonprofit.

You must understand different donation types to know what information to report, such as determinations for tax-deductible eligibility. Unlike monetary donations in other fundraisers, only the amount paid above the fair market value for an auction item is tax-deductible. For example, if a notebook worth $5 was auctioned off for $7, the winning bidder would pay $7, but their tax-deductible donation would be $2.

To ensure you don’t leave anything out, pair your fundraising software’s donation tracking with an expert’s services. For example, Foundation Group’s bookkeeping services include recording and analyzing your nonprofit’s financial transactions to reconcile your bank statements and produce financial statements.

Volunteer tools

Nonprofit volunteer recruitment typically has few stipulations; you’re looking for the manpower to manage your fundraiser and supporters are looking for opportunities to donate their time. Although these volunteers may come to your nonprofit with no experience in nonprofit compliance or data security, their jobs at your event may require them to:

  • Find donor registration information for event check-in.
  • Accept payments for auction items.
  • Access donor contact information for communications.

While it’s crucial you communicate the importance of data security to your volunteers, fundraising software ensures you maintain compliance with privacy laws by automatically employing security measures to protect your donors’ data. Contact information and payment details are securely stored in your fundraising software so that your volunteers with no data security experience can confidently use donor information to complete event tasks.

Ease-of-use not only protects volunteers from mishandling donor information but also boosts event revenue by streamlining tasks to efficiently manage the auction. For example, your less tech-savvy volunteers will easily be able to access participant contact information to send engaging marketing messages that encourage them to donate.

Evaluate your fundraising software’s features to manage nonprofit compliance

To leverage your fundraising software so that it helps you maintain compliance, you first must understand the software’s capabilities and decide how you’ll use them to maintain compliance. Make a list of what you need and evaluate your software today. If you haven’t chosen a fundraising software solution yet, use your list of compliance requirements to guide your search and choose the software with the right tools to make it happen!

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