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Imagine your nonprofit hosts a seasonal fundraiser with a high turnout. Donors attended the event and enjoyed its activities. Your nonprofit, on the other hand, worked diligently behind the scenes to host the fundraiser. Perhaps this included registering for charitable solicitations or tracking the amount spent on and raised by the event.
For everything your nonprofit does, it must comply with federal and state regulations, but donors don’t often see this side of your operations. However, we think it’s important for donors to get insight into nonprofit compliance.
Transparency is the key to gaining donor trust, especially when it comes to compliance. Only 52% of Americans trust nonprofits to do the right thing, and that number is steadily decreasing. To prove that your organization is fulfilling its charitable mission (and is held accountable to do so by reliable sources), you must help donors understand nonprofit compliance. Let’s explore three ways your nonprofit can do just that.
Share educational content.
Your nonprofit leverages various channels to spread information about its mission and ways to get involved. Use these channels to also explain nonprofit compliance and show donors the safeguards in place to hold your organization accountable.
Create educational content that explains nonprofit compliance on a variety of channels. This way, your content will reach the largest audience possible, whether viewers prefer scrolling through social media or receiving a direct text message. Just be sure to tailor your content to each channel. For example, you might post information on:
Your website’s blog: By nature, blogs are perfect for long-form content, and often appeal to audience members who are looking for it. Create in-depth explainers that introduce readers to nonprofit compliance, such as by defining 501(c)(3) status and explaining how your nonprofit obtained it.
Email newsletters: Those who subscribe to your nonprofit’s email blasts are likely invested supporters, making email an effective platform for targeting those who actively give to your organization. For example, you might explain how your nonprofit uses each donation, from reporting it to the IRS to budgeting it properly.
Social media: Because social media is meant for quick scrolling, educational content on these channels must be eye-catching and concise to capture attention. For example, the first slide on an Instagram post could read, “DID YOU KNOW?”, and then viewers could swipe to subsequent photos for quick facts about your nonprofit’s budget and how you monitor it.
Keep in mind that this educational content isn’t just for existing donors, but for anyone who would get involved with the right push. These messages may even convert prospective donors or re-engage lapsed supporters!
For this reason, your communications should always inspire action, even if you’re sharing educational content. Include calls to action in your blog posts, emails, and social media content to remind donors to act on the information you’ve just shared.
Make Form 990 publicly accessible.
The IRS gets a front-row seat to all your nonprofit’s operations through required filings, such as Form 990. In fact, Foundation Group’s filing guide calls Form 990 “a window into your nonprofit,” since it examines your nonprofit’s activities in full over the year.
What most donors don’t know is that they can look through this window, too! Sharing important documents, like Form 990, reassures donors that your nonprofit is held accountable by the IRS and that you truly accomplished what was listed in your impact report. Most importantly, it proves your nonprofit is willing to be transparent about its funding sources and spending habits, which can instill confidence in donors that your organization is trustworthy.
To help donors understand your nonprofit’s budgetary compliance, share relevant details from Form 990 such as:
Employee benefits: Highlight the highest employee salaries, including how that compensation is determined and what’s required according to state and federal laws. You can also explain any nontraditional compensation, such as holiday bonuses or gift cards given as part of your board member appreciation initiative.
Revenue sources: While donors’ generosity is undeniably important to funding your nonprofit’s work, your supporters should also know about the grants and other sources of revenue you receive. Break down these sources to provide a comprehensive view of your nonprofit’s support.
Overhead expenses: Demonstrate your nonprofit’s commitment to fiscal responsibility by explaining the use of your nonprofit’s annual fund. For example, remind donors that your organization must pay rent for the use of its facilities or cover the cost of gas for its vehicles. You can also include any information about your nonprofit’s efforts to lower these overhead costs so that as much revenue as possible can be dedicated to your mission.
Aside from highlighting important details from Form 990, you can also make the form itself available on the GuideStar website, which shares information about nonprofits to help donors decide which organizations to support. Consider claiming your nonprofit’s GuideStar page or providing an archive of Form 990s on your own website to make this information easily accessible.
Explain fundraising strategies.
When donors give to your nonprofit’s campaigns, they don’t see the strategy behind your fundraising approach. Behind the scenes, you go to impressive lengths to ensure your fundraisers are both compliant and effective in fulfilling your nonprofit’s purpose.
When promoting fundraisers, be as transparent as possible about the steps you’ve taken to launch the campaign. Tell your fundraiser’s compliance story from beginning to end, including the following details:
Charitable solicitations registration: At the very beginning of your fundraising ventures (and likely at the start of your organization as a whole), your nonprofit may have registered for charitable solicitations with its home state. If so, explain why your state required this registration, the steps your nonprofit took to register, and how you’ll maintain this registration going forward (if annual renewal is required).
Relevance of fundraising activities: Using an explanation of your nonprofit’s charitable purpose, explain how a fundraising activity supports your mission. To get even more specific, Double the Donation’s list of donor development tactics recommends providing impact reports that illustrate exactly what was supported by your fundraising revenue.
Revenue reporting: Remind donors that every dollar of your nonprofit’s revenue is reported to and monitored by the IRS. Provide a brief recap of your fundraiser’s performance, including a way to view the full report if desired. For context, explain how this compliance requirement helps your nonprofit use its revenue efficiently.
Use data from your fundraising software to help explain your nonprofit’s strategy. For example, you might analyze donor data to determine the average gift size and the number of donations made in a fundraising campaign. This information can guide your revenue projections and other elements of event planning since it sets a reasonable expectation for what your fundraiser could accomplish.
Helping donors understand nonprofit compliance is critical for strengthening your nonprofit’s trustworthiness and respecting the generosity of your supporters. After all, their support powers your nonprofit’s work. They deserve to know that your nonprofit operates honorably—and to understand how!
Create a page on your nonprofit’s website to consolidate information about your compliance and make it more accessible for interested donors. Include links to the IRS’s website and background information about compliance requirements, then detail how your nonprofit has approached them.
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