Are you registered to fundraise?

This week’s blog is a reminder to check state requirements to see if your organization is required to register before launching any charitable solicitations. Or, if you are assisting a nonprofit with fundraising for pay, to see if you are required to register as fundraising counsel or professional fundraiser.

The website of the National Association of State Charity Officials has a list of all of the state contacts and links to the state agency websites (though check them as not all are still current). In some cases, they also have links to the state statutes so you can read the rules yourself.

Registration Requirements for Charities Soliciting Funds

In general, if your organization is soliciting for funds in a state, you are likely to be required to register for charitable solicitation in that state. Each state sets its own rules and there may be various exemptions depending on the budget size and type of the organization.  (See below for a discussion of  internet fundraising)

The registration process generally includes completing a form that tends to ask for much of the same information that could be gained from the Form 990 that nonprofits are required to file with the IRS. Many states ask for additional information about your fundraising programs, including whether or not you have used fundraising counsel or professional solicitors in the last year. There is usually a fee for filing and for completing your yearly renewal. And each state has guidelines for whether you meet the income threshold to require an annual audit.

Take a look at the article by Joanne Fritz that appeared on About.com — she has some very specific recommendations for you.

Registration Requirements for Professional Fundraisers

Most states also require those of us in the business of assisting nonprofits with their fundraising – aka professional fundraisers —  to also register in the state. Usually a distinction is made between fundraising counsel and fundraising solicitors.

Fundraisers solicitors are engaged in either actively soliciting for funds and/or may have access to donations directly whereas fundraising counsel (like Cause & Effect Inc.) may plan, manage, advise or assist charities in their fundraising but don’t have access to donations or solicit directly. Usually employees, directors and volunteers of a charity are excluded from this registration requirement.

The fees for registration are steep. For example, New York charges fundraising counsel $800, Rhode Island $240 – that’s annually! And depending on the state and what type of fundraiser you are, you may also be required to take out a bond.

Professional fundraisers are required to send a copy of all contracts to the appropriate state agency, usually within 10 days of signing. Many states require a “closing statement” upon completion of the contract (and some an interim if the work isn’t completed in a year) with extensive disclosures on types of fundraising and funds raised.

If you are involved in providing any services to a charitable nonprofit that involves raising money – even if you don’t consider yourself a professional fundraiser – you would be wise to check to see if you fall under state statute.

The net is pretty broad and some states are extremely aggressive in tracking down professional fundraisers. Don’t get me started on how crazy I think these registration requirements are for fundraising counsel in particular … what other professionals offering comparable management services to nonprofits require these costs and this degree of scrutiny?

Of course there are bad apple solicitors out there who intimidate prospects or raise money for phony causes. But state statutes across the country already forbid fraudulent solicitation and have penalties for such. I could say more, but this post isn’t meant to be rant. (But let me say, as professional fundraisers and through our associations, we could be much more active at the state level educating lawmakers about our profession and engaging in advocacy on these issues).

Internet Fundraising

So, what about raising money on the web? What are the registration requirements?

Here’s where things get really cloudy.

There should be very few nonprofits left that don’t have a web donation presence. And with sites like Guidestar that have partnerships with enterprises like Network for Good that support online giving, in reality, every nonprofit could be considered soliciting in any state.

Just the paperwork alone, never mind the cost, of registering in all states is significant and overwhelming for the vast majority of nonprofits. So the state Attorneys General came together many years ago to try to create some guidelines – known as The Charleston Principles —  to help state lawmakers consider how to treat internet solicitation.

The guidelines, which are voluntary recommendations, suggest that “organizations located outside of a particular state must register if they use their website to specifically target people in that state, or receive contributions from the state on a repeated and ongoing basis or a substantial basis through its website.” Email solicitations count.

I wish I could give more practical advice, but the application and interpretation of these principles is pretty uneven. You may find this Nonprofit Times article from September 2010 helpful.

Bottom line:

If you are a nonprofit, be very familiar with the statutes in each state you solicit, get advice from your legal counsel, and make sure that your board of directors understands the legal requirements and sets expectations for your registration.

P.S. Did I mention that a number of states also require disclosure statements on any solicitation mailed to residents of the state? Check on the back of the reply coupon in a number of the direct mail solicitations you received to see what I’m talking about. The Association of Fundraising Professionals has a summary of the states and their required language on their website (though don’t rely solely on this).

P.P.S. I would appreciate hearing your stories about what decisions you made to register in multiple states, why, and whether you’ve ever encountered difficulty with any state agency.

Disclaimer: This column is meant to be informational only and for the purpose of giving legal advice. You should check with your attorney to get advice on any particular aspect of your fundraising registration requirements.