Maintaining Nonprofit Compliance With Fundraising Software

Boosting revenue is critical for sustaining your nonprofit’s operations. However, fundraising isn’t as simple as it seems—numerous compliance considerations come along with soliciting funds
and maintaining your organization’s tax-exempt status.

Robust fundraising software streamlines much more than fundraiser-specific tasks like item procurement for an auction or event ticketing for a gala. In this guide, we’ll explore three ways
these tools can help your nonprofit maintain compliance while fundraising so you can focus on what matters most: your mission.

Tracking Activity Data

Nonprofit leaders who know how to file Form 990 are familiar with its 16 schedules and the myriad details they request. While your nonprofit should have a reliable bookkeeping system in place to organize relevant data for this filing, you can also find some of this information by going straight to the source: your fundraising solutions.

As Double the Donation’s nonprofit data management guide explains, donation tools automatically collect and store essential gift information, including the donation amount, date, and payment method. These details are vital for summarizing fundraising data in easily accessible reports.

After compiling this data, you can use it in the following Form 990 schedules:

• Schedule A asks for data to calculate your nonprofit’s public support percentage. Fundraising software stores donation records and event revenue information to help you calculate public support.
• Schedule B inquires about donors contributing cash or non-cash gifts valued at $5,000 or more (or greater than 2% of your revenue.) This data can be sourced directly from your donation tools, which were likely responsible for processing the gifts.
• Schedule D requires nonprofits to provide information on donor-advised funds, conservation easements, escrow accounts, and other similar funds. Reports generated by fundraising solutions such as crowdfunding software should include the necessary information.
• Schedule G requests supplemental information about any gaming activities related to fundraising, such as a raffle or a bingo night. Relevant data, such as revenue and expenses, can be drawn from your event management and donation platforms.

Keep in mind that these schedules are included in the standard Form 990. Your nonprofit may file a different version of Form 990, depending on its annual gross receipts:

• Form 990-N: Filed by small tax-exempt organizations with average annual gross receipts of $50,000 or less
• Form 990-EZ: Filed by mid-sized tax-exempt organizations with annual gross receipts under $200,000 and total assets under $500,000
• Form 990: Filed by large tax-exempt organizations with annual gross receipts of at least $200,000 or total assets of $500,000 or more
• Form 990-PF: Filed by private foundations, regardless of financial status

In addition to completing Form 990, data from your fundraising software can also guide ongoing compliance efforts. For instance, a donor might select a specific fund they’d like their gift to support when contributing through your online donation page. The solution powering that page and accepting the gift should flag the donor’s restriction, which can help your team ensure those funds are used for their intended purpose.

Monitoring Non-Cash Gifts

According to Foundation Group, your recordkeeping should be as detailed as possible to accurately prepare financial statements and report your financial information to the IRS. This means recording every transaction, including non-cash ones. Not to mention, these transactions involve a lot more than simply receiving a contribution from a donor.

For example, let’s say a generous donor contributes a high-yield auction item to your event. You’ll have to record that item as both a debit and a credit at its fair market value (FMV) in your books because the item results in a net zero gain in cash for the organization.

Next, you’ll choose a starting price for the item (usually 30-45% of its FMV) and let auction participants bid for it, with each bid raising the item’s price incrementally more. In the rare event that the winning bid exceeds the item’s FMV, only the amount paid over the item’s FMV is tax deductible.

Your fundraising software can keep track of these essential details, especially when the platform is custom-built for the type of fundraiser you’re hosting. For example, mobile bidding software will be best equipped to record auction item transactions, while event management tools can manage the value of services rendered, like catering or supply rentals.

Managing Volunteerism

The value of the volunteer hour is $33.49, which simply estimates the monetary value of a volunteer’s time. This doesn’t account for the additional contributions volunteers bring to your organization, like corporate grants or cause advocacy.

Volunteer management software can help your nonprofit track important details about their involvement, including:

• The number of hours worked by each volunteer
• The total monetary value of their contributions
• Additional data that signals expertise or interest in a specific role

While volunteer contributions don’t have to be reported to the IRS, some grants require nonprofits to report volunteer hours as part of their funding agreements. Additionally, any corporate support provided as a result of volunteer hours must be included in your Form 990.

Next Steps: Prioritize Nonprofit Compliance Today

When it comes to recordkeeping, including the highest level of detail is always best. Your nonprofit can use data about donor, volunteer, and corporate sponsor contributions not only to comply with legal requirements, but also to learn from its successes and improve upon its fundraising strategies. For example, did a corporate sponsor donate as a result of your marketing appeals or because their employee participated in a volunteer grant program?

While fundraising software is a powerful tool, working with a professional bookkeeper is the best approach your nonprofit can take to maintain compliance. Nonprofit bookkeepers are well-versed in the many unique compliance requirements for tax-exempt organizations, and they can manage your recordkeeping accordingly.

Consult a nonprofit bookkeeping professional about how they can equip your team to meet relevant compliance requirements. This way, you can tap into their expertise when sourcing valuable data from your fundraising tools and putting that data to good use.