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Whether you’re a new board member or a seasoned officer, part of your board’s collective duty is to ensure your nonprofit’s legal compliance. If you are reading this, you’re probably far enough in your nonprofit journey to understand your board’s obligation to ensure your organization completes and files a Form 990 and regularly withholds and pays employment taxes. But did you know that if your nonprofit solicits funds, your board must also ensure your nonprofit’s compliance with applicable state-specific laws regarding fundraising licensing and reporting?
Nonprofits are obligated to be compliant in each state in which they fundraise. Forty-one states require nonprofits to register before soliciting for donations, and 25 states require nonprofits to include special disclosure statements on fundraising appeals. Nonprofits that hire fundraising professionals, engage in charitable gaming, offer charitable gift annuities, or enter into cause marketing co-ventures have additional registration obligations in some states. And there are ongoing reporting obligations for many of these state-specific fundraising licenses.
Failing to meet these requirements may lead to citations and penalties that can expose not just your nonprofit, but you and other board members to real risks — from reputation damage to personal liability. Many states publish lists of fraudulent and delinquent charities on their websites. If your board doesn’t understand and monitor compliance with state fundraising and reporting requirements, both your nonprofit’s reputation and your own are put at risk.
These regulatory obligations also offer opportunities for nonprofits. Board members, staff, and volunteers all fuel your nonprofit's success and tell its story in the community, but your nonprofit's fundraising compliance tells a story too — one that can demonstrate transparency, accountability, and commitment to responsible governance.
It is increasingly common for donors, corporations, and foundations to actively research nonprofits to identify which are worthy of their trust — and dollars. And those state websites that publish lists of delinquent charities also make the status of compliant nonprofits available to potential supporters. Make sure your nonprofit is listed among them.
Read the full article about fundraising compliance by Sharon Cody at BoardSource.