Nonprofit fundraising compliance: Navigating the regulations

Picture this: Your nonprofit has just launched an inspiring campaign to support community health initiatives, leveraging online platforms to reach a broader audience. Donations start pouring in, but then, unexpectedly, your fundraising account is suspended due to compliance issues. This sudden halt not only affects your campaign’s momentum but also undermines donor trust.

Navigating the complexities of fundraising compliance is crucial to ensure your nonprofit’s efforts remain uninterrupted and successful. Nonprofit organization leaders need to be aware of the laws affecting their operations and how to remain in compliance.

Fundraising is the lifeblood of many nonprofit organizations, whether the funds come from public donations, grants, or program service revenue. However, the regulatory environment governing these activities is increasingly complex and requires diligent attention from nonprofit leaders. 

Regulatory scrutiny

State charity regulators are intensifying their enforcement efforts to ensure compliance with charitable solicitation laws. In 2023 alone, state attorneys general conducted more than 45 active investigations into fundraising practices. These investigations highlight the importance of understanding and adhering to state-specific regulations, which can vary widely and include registration and annual filing requirements. 

Like other many aspects of state law, Texas has a light touch in regard to nonprofit fundraising regulations. Texas does not generally require nonprofits to register with the state solely for the purpose of charitable solicitation. However, certain law enforcement-related organizations, public safety organizations, veteran’s organizations and their respective fundraisers must register with the Texas Secretary of State’s office or the Office of the Attorney General.

Outside of registration with state authorities, nonprofit leaders looking to raise money need to be aware of regulatory issues relating to these common fundraising practices:

Online fundraising platforms: The rise of online charitable solicitation platforms has introduced new layers of compliance. Many of these platforms now employ technology to scan for compliance with state registration and filing requirements. Nonprofits found delinquent in their filings can face suspension from these platforms, severely affecting their fundraising. Timely and accurate compliance with state regulations is essential to maintain access to these vital fundraising tools. 

Engaging third parties: Nonprofits often partner with professional fundraisers or other third parties to enhance their fundraising efforts. However, these partnerships must comply with applicable regulatory requirements. Contracts with professional fundraisers should be carefully structured to meet state laws, and any third-party engagements must be transparently managed to avoid regulatory pitfalls. 

Cause-related marketing: Collaborations with for-profit businesses for cause-related marketing campaigns can come with regulatory challenges. Make sure that such agreements comply with relevant laws and that all necessary registrations or filings are completed. Properly structured agreements help protect the nonprofit’s reputation and ensure that the partnership operates within legal boundaries. 

Grants and public donations: Soliciting grant funds and public donations requires careful management to remain compliant. Nonprofits should regularly review and update their registration status, complete necessary filings, and maintain transparency in their solicitation practices. This vigilance helps build donor trust and continued support for the organization’s mission. 

Next steps

We know that nonprofit leaders have heavy workloads. However, taking the proactive steps to safeguard fundraising efforts is time invested in the organization’s future. Start by conducting a thorough review of your current fundraising practices and ensure compliance with all state and federal regulations. Talk to legal counsel and financial advisers to gain insights to how you can navigate the complexities of charitable solicitation laws and find innovative strategies to enhance your fundraising operations. 

Leverage technology to streamline compliance tracking and filing processes. Be confident that your engagements with third parties are legally sound and transparent. Embrace cause-related marketing opportunities, but do so with a keen eye on regulatory compliance. By maintaining rigorous compliance, you not only protect your organization from legal issues but also strengthen donor trust and support. 

Your mission is too important to be derailed by avoidable compliance issues. Stay informed and stay compliant. And call us at Our Community Law for help when needed. Together, we can ensure that your nonprofit thrives and makes a lasting impact on the communities you serve.