Blog / Nonprofits

Your Board’s Role in Ensuring Fundraising Compliance

Part 3 in our series on board development and service // by James Gilmer
Your Board’s Role in Ensuring Fundraising Compliance
The Johnson Center is partnering with Ferris State University’s Latino Business and Economic Development Center and over a dozen Grand Rapids-area organizations to support strong nonprofits and thriving communities through the Ecosystem for Nonprofit Leadership.

This blog is part of a series supporting this initiative. Contributors were invited to share their thoughts and experiences on board development and service.

Among your board’s chief responsibilities, fundraising stands front-and-center. Collectively, your board serves to ensure that programs are funded for lasting success. Board members also share the fiduciary responsibility to maintain compliance with all applicable laws and regulations in the course of delivering those programs.

As you probably know, fundraising and charitable solicitation are regulated activities in most states. State requirements apply regardless of the organization’s mission or size. This means all board members should be aware of what fundraising compliance is, and how to ensure your organization plays by the rules.

What elements of fundraising compliance fall under the Board’s purview?

State charitable solicitation registration and reporting

Nonprofits must individually register and report with each state in which they plan to solicit (Harbor Compliance, 2020a). The act of soliciting, not necessarily the receipt of funds, triggers registration requirements in most states. You should also note that “solicitation” refers to a wide range of activities. Soliciting includes, but is not limited to, sending emails, applying for grants, sending direct mail, and maintaining a public-facing Donate Now button on the organization’s website. These methods, especially online forms, may trigger additional registration requirements because they may reach donors in multiple states, if not nationwide.

At a high level, registration and reporting involve annually filing an application with the state charity official, along with copies of corporate records, recent financial statements, IRS Form 990, and a fee. The reporting process and schedule of due dates in each state vary, which means organizations may spend a great deal of administrative time managing all of this reporting internally.

Organizations that conduct any of the below activities have additional registration and reporting obligations:

  • Conducting charitable gaming, auctions, or raffles
  • Using professional fundraisers or fundraising counsel
  • Engaging in a commercial co-venture (cause marketing) or charitable sales promotion
  • Issuing charitable gift annuities
  • Maintaining a donor advised fund

Donor disclosures on solicitation materials

Once registered to solicit charitable contributions, nonprofits are required in many states to make disclosures to prospective donors (Harbor Compliance, 2020b). These statements instruct the residents of a given state how and where to learn more about the organizations that are soliciting them. By statute, the organization’s solicitation materials must contain these disclosures. Nonprofits should review the applicable requirements with their legal counsel and development staff to ensure all solicitation materials, including websites and electronic media, comply. By doing so, you also promote sector transparency and help guide intelligent giving.

Preparation and approval of IRS Form 990 and financial statements

The board is responsible for the timely preparation and approval of the annual Form 990 information return (IRS, 2020). Annual filing is required, of course, to maintain 501(c) status. Many state charitable reporting deadlines fall on or in some relation to the federal due date. Early completion of the federal return allows state registrations to be submitted without the risk of late filing penalties.

Your organization may already conduct an annual audit or review of its financial statements for operating purposes. Many states also require financial statements that have been audited or reviewed by an independent certified public accountant (CPA) for solicitation registration purposes. Organizations that register and report with state charity officials are required annually to submit the appropriate statements when their revenue exceeds statutory thresholds (Harbor Compliance, 2020c). Groups that plan to register outside their home state or see a large increase in year-over-year revenues should discuss these additional requirements with a CPA before attempting the state registration process.

The board has a responsibility to select an independent CPA with nonprofit experience for advice and preparation of Form 990 and the appropriate financial statements. Board members should individually review draft returns and statements and ask for more information as needed. Collectively, the board votes to approve final versions in accordance with its bylaws.

Understanding the risks of noncompliance

Noncompliance with state fundraising requirements exposes not only your nonprofit but also individual board members, to risk.

Many states routinely assess late fees for overdue or missed registrations. Several states, like South Carolina, publish lists of delinquent and fraudulent charities (South Carolina Secretary of State, 2020). California takes things a step further and may hold individual officers and directors personally liable for wasting charitable funds (State of California Department of Justice, 2020).

Compliance isn’t a closed-off topic, either. Almost daily, savvy readers and donors can find reports of non-compliant charities in the news, ranging from local scams to major infractions by prominent, household-name foundations. You can imagine the public relations nightmare this would be for your organization, and the negative impact this could have on your personal reputation as a board member.

Mechanisms for ensuring compliance

The good news is that fundraising compliance isn’t all doom and gloom. There are actionable steps your board can take to ensure the proper resources are allocated and procedures are followed.

Communication and accountability

It all starts with communication. Fundamentally, all board members must be fully committed to the organization and understand their duties of loyalty, care, and obedience. Your organization is required to have regularly scheduled, well-run board meetings, which of course should be documented through contemporaneous minutes (IRS, 2009). At these meetings, make compliance a subject of discussion, especially as relates to the annual budget and any development initiatives.

In order to facilitate that communication, your organization should establish clear communication platforms and channels for board discussion outside of your regular meetings. Make information, records, and financial information available to the board and appropriate staff, especially to individuals responsible for preparing and submitting government applications.

It’s also important to outline clearly the specific compliance responsibilities of board members and staff. Certain tasks may be delegated to a committee or the Executive Director, but in all cases, ensure that mechanisms for accountability and board oversight exist.

Budgeting for compliance

When preparing the annual budget, account for the cost of compliance obligations. These may include CPA engagements for Form 990 and financial statements, government filing fees, and any service or software you may use to manage state registrations and reporting (Harbor Compliance, 2020d). If your organization handles its compliance reporting internally, develop a process for tracking deadlines, maintaining information in a central location, preparing and submitting required applications, and following up with state agencies to ensure approval. Understand that this, too, comes at the cost of board and staff resources.

Finally, review your organization’s compliance strategy periodically and make any necessary adjustments to improve operating efficiency and to close any gaps with planned development initiatives.

Fundraising compliance as a framework for growth

With great responsibility comes even greater opportunity. By meeting state registration and reporting requirements, your nonprofit can leverage its registration status to solicit by any lawful means. Board members and development staff can fundraise with confidence, and even choose to ramp up their solicitation efforts. When applying for foundation and corporate support, your organization will be able to produce proof of state registration, commonly a stipulation for funding. And, when engaging with individual donors, you can demonstrate your commitment to transparency in your operations. As a result, your nonprofit may see better-funded programs, increased public trust, and growth.

Remember, communication is key, and today, that conversation starts with you. Seek more information and share what you learned, but at the end of the day, take action. Your nonprofit and community depend on it!

Harbor Compliance does not provide tax, financial, or legal advice. Use of our services does not create an attorney-client relationship. Harbor Compliance is not acting as your attorney and does not review information you provide to us for legal accuracy or sufficiency.
James Gilmer
Compliance specialist, Harbor Compliance
James is also a Co-Founder of Berks Sinfonietta, Inc.


Harbor Compliance. (2020a). Fundraising Compliance Guide. Retrieved from

Harbor Compliance. (2020b). Charitable Solicitation Disclosures. Retrieved from

Harbor Compliance. (2020c). Charitable Registration Requirements. Retrieved from

Harbor Compliance. (2020d). Licensing and Entity Management Software. Retrieved from

IRS. (2009, May). Governance and related topics – 501(c)(3) organizations. Retrieved from

IRS. (2020). Form 990 resources and Tools. Retrieved from

South Carolina Secretary of State. (2020, March 4) List of suspended charities as of Wednesday, March 4, 2020. Retrieved from

State of California Department of Justice. (2020). Delinquency. Retrieved from