Maintaining Nonprofit Compliance with Fundraising Software

As a nonprofit, it is essential to understand the compliance standards that apply to your operation and why they are in place. Ignoring these rules can be detrimental to your organization and how outsiders perceive it.

With the help of a high-quality fundraising software solution, your nonprofit can stay organized and ensure every important need is met to continue growing and serving your mission.

We are breaking down compliance considerations for nonprofit organizations and the ways fundraising software can help streamline compliance management.

Why Nonprofits Must Understand Compliance

All nonprofits must obey all applicable laws and adhere to the commitments necessary to keep their operation running legally. Certain rules and standards help organizations like yours maximize the financial benefits available to them through things like tax exemptions and access to grants. 

Your location will directly impact the regulations and requirements that your organization must comply with. Failing to meet these standards could result in the following consequences:

• Fines 
• Internal Revenue Service (IRS) audits
• Negative reputation and potential donor distrust
• Reduced funding 
• Loss of tax-exempt status

Without proper management and monitoring, your nonprofit could struggle to meet the necessary standards to continue reaching your goals and serving your community.

Nonprofit Compliance Standards to Consider

The following are key compliance standards that nonprofit organizations must consider and abide by to keep their operations in order and fully legal.

Board of directors

All nonprofits must appoint a board of directors. These individuals are responsible for monitoring everything from the organization’s finances to its protocols to ensure operations are running smoothly and all compliance standards are being met. 

Having a dedicated board of directors is essential for other tasks relating to compliance, such as:

• Applying for a bank account.
• Filing your nonprofit’s annual financial reports.
• Making major purchases for your organization.

Regular board meetings will help your nonprofit manage its processes and stay in compliance with all essential regulations.

Legal entity compliance

Nonprofit organizations must take steps to become legal entities in order to operate legally and receive all the possible financial benefits. One way your organization can do this is to obtain an employer identification number (EIN) from the federal government. This number allows you to:

• Open a separate bank account.
• Get insurance policies.
• Process your payroll.
• Make your tax payments.
• Become eligible for certain funding opportunities.

Being a legal entity is essential for proper financial record-keeping, auditing, and reporting. Your nonprofit must submit annual returns and reports to the federal government for ongoing compliance and to keep its tax-exempt status.

Financial compliance

As a nonprofit organization, it’s vital to stay on top of financial compliance. Ignoring money-related responsibilities, like keeping accurate and organized financial statements, could jeopardize your income tax-exemption status. 

You must keep your financial information orderly and up-to-date and file the proper paperwork, such as Form 990, to the IRS annually to remain within compliance. Having tools to streamline document management can make financial compliance simple. 

Licensing compliance

Nonprofits must also maintain proper licenses and permits. Keeping these things updated is a great way to ensure your organization is operating legally and your fundraising activities are good to go.

You’ll need to be sure that any paid vendors or professionals are registered with the state and have updated contracts. In most states, your organization will also need to register on an annual or biannual basis for charitable solicitation to continue asking for donations.

State compliance

Depending on your nonprofit’s location, you will have to meet different state compliance standards. It is important to explore the unique regulations of your specific state and the filing requirements you must abide by. 

Some states will require you to renew your nonprofit status beyond your initial application for recognition of tax exemption more frequently in order to maintain your benefits and eligibility. 

How Technology Can Help Nonprofits Stay Compliant

Today’s tech tools make it simple for nonprofits to closely monitor their daily operations and financial status. Explore the following ways your organization can use technology, such as fundraising management software, to meet compliance standards:

Stored and organized documents

Managing your documents is among the most significant ways nonprofits can use fundraising software to their advantage. Keeping your most important information secure and safely stored in a digital management system will help your business stay extremely well-organized. 

You can retrieve documentation, such as tax forms or campaign reports, more efficiently when your paperwork is stored digitally — no need to go rifling through crowded filing cabinets or stacks of papers. 

Accounting tools

Having access to high-quality accounting software is an excellent way for organizations to keep their financial information accurate and up to date. These tools make it easy for your board of directors to track all your financial records and reports. 

Accounting software also streamlines tax preparation with all the necessary documentation in one place. They also make creating financial reports simple. Keeping track of all financial records is a key part of ensuring your nonprofit is complying with all applicable money-related regulations. 

Compliance tracking

Another way technology can help nonprofit organizations meet compliance standards is access to helpful tools that make it easy to track things like upcoming tax deadlines and documentation. 

When you have all of your compliance needs organized in one platform, your nonprofit can stay highly organized and efficient. You can avoid late fees or other penalties by setting notifications and alerts to remind your team about all of its compliance needs as they arise. 

Fundraising management

Fundraising is the lifeblood of many nonprofits. With the help of fundraising management tools, your organization can take your mission to the next level. Having software that tracks where all of your money is going to and coming from will make it significantly easier to ensure you are meeting the fundraising regulations. 

Having a detailed account of your donor history and being able to manage your finances with digital tools will help your nonprofit by offering greater transparency into the legality of your fundraising efforts. 

Request a demo of nonprofit software from GiveSmart today

If your nonprofit is looking to streamline its operations and ensure you are meeting all the necessary compliance standards, turn to GiveSmart. Our fully-featured donor management and fundraising software allows organizations of any size to meet their goals and keep operations highly organized in one platform. 

With GiveSmart’s industry-leading solutions, your nonprofit has access to manage everything from event organization and mobile bidding to peer-to-peer fundraising. Our platforms are built to scale with your nonprofit organization and help you grow. 

Interested in learning more about fundraising software for nonprofits? Request a demo to get started today!