Internet Fundraising Compliance

When you applied to become a 501(c)(3)nonprofit organization, there was a small pile of forms to fill out, a mission statement to create, and board members to recruit. Not only did you have to form a legal corporation, but one of your primary duties was to learn the ins and outs of fundraising.

What counts as a charitable gift?

How do I value gifts-in-kind?

What is a bequest?

What is the best way to ask donors for donations?

These and a hundred more questions require an expert development director and finance director to sort through the legal jargon of running a charity.

One major resource that the nonprofits of yesteryear did not have is the internet. Just as direct mail campaigns and flyers requesting gently used goods find their way to each of our doorsteps, so the online world has become a major part of the infrastructure towards nonprofit fundraising. With these changes, are there a separate set of rules?

Fortunately, the same guidelines apply regardless of your method of sending out an ask. The most important part is bookkeeping and remaining in compliance with the law.

According to a recent IRS Information Letter addressed to Congressman Peter Welch (D-Vt.) Website or email solicitations should comply with the same rules that apply to other solicitations.

In a nut shell, the IRS said that if you intend to be a 501(c)(3) and want to raise funds on or offline, you must ensure that you structure your fundraising programs in a manner consistent with that tax-exempt status.

You need to describe your actual and planned fundraising activities to the IRS in your Form 1023 application (“Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code”).

Here is the sticky part. You must report any expenses incurred with regard to fundraising on both Form 1023 and your annual information returns (Form 990, Form 990-EZ or Form 990-PF).

One of the many challenges that nonprofits face is maintaining a database that incorporates your channels of income to not only record donor giving, but to analyze marketing strategies and outcomes. With WidgetMakr, our dashboards allow you to keep track of various campaigns, examine donor demographics, and monitor how close you are to reaching your fundraising goals.

With the increased implementation of technology, a common fear is that new devices and programs can make fundraising more complicated. Not only do you have to follow through with your tried and true methods to obtain donations, but now you have to learn complex steps towards mobile device fundraising, make your website compatible to tablets and smart phones, and babysit an account on social media.

At WidgetMakr, we know that technology can seem complicated and that you already have a full plate. We make fundraising easy, effective, and efficient. We provide a step-by-step, paint by numbers approach so that you can focus more on achieving your mission and less time training to use the latest cyber fad. Our dashboard lets you see what is working and what needs to be revamped.

Fundraising is complicated. There are tax laws to comply with, strategies to test, vast amounts of dollars to allocate, and there is always the worry of having more projects than dollars. At least with technology, you can follow the rules that you always have to achieve results that are better than what they were.

WidgetMakr sponcers the #RevoltDC Hackathon

#RevoltDC Hackathon is designed to bring together the best and brightest developers to build the next generation of citizen/voter engagement tools.

The tools designed will be open sourced and available to anyone who wants to engage citizens/voters. The goal is to encourage and promote the use of digital political technology across the country.

In support of the June 22 hackathon, WidgetMakr will be providing APIs for attending developers to sink their mashup teeth into.

Want to pull out donor contact lists and mash it up with their responses to online advertising? Sure, no problem.

How about seeing which donors have been influenced by their Facebook friends before they made their contribution. Go ahead, knock yourself out. You are only limited by your creativity.

Attendees will be able to leverage the WidgetMakr APIs to pull and push data into WidgetMakr’s forms, robust donation processor and widget management system.

Cash Prizes will be awarded in 4 categories including:
- Big Data
- Grassroots
- Social Media
- Fundraising

An overall prize for best app will be awarded in the amount of $2,500. Please check back for an updated and formal list of all of our judges on the panel by May 22, 2013. Judges include prominant individuals from Facebook, Sunlight Foundation, PopVox, Agenda, SalientMG/Former Millenial Media Executive, Bank of America and more.

A detailed list of the API partners including links to the API will be posted at revoltdc.com by May 22, 2013.

API Partners include (but more will be added): Facebook, AT&T, CMDI’s Crimson, EventBrite, Sunlight Foundation, and PopVox.

Registration begins on May 22 and will run through the day of the event or until we are sold out. We encourage teams and you may come with some basic work you have started but not yet finished.

Registration starts at 8am and hacking starts at 9am.

PayPal FEC Compliance Issues

Hidden dangers of using PayPal for political contributions

We’ve noticed a number of Republican congressional challenger campaign websites popping up recently who are using PayPal to process their donations.

This is all well and good as long as the candidates are:

• posting the correct FEC disclaimers, and
• collecting employer and occupation information.

Unfortunately the majority of the people using PayPal are not.

While PayPal is great for shopping online, your campaign donation page needs to provide standardized disclaimers and for you to collect employer and occupation information from your donors. It should also be connected directly to your finance and compliance database.

For a good example of how you can accept online contributions with less worry and risk of audit, take a look at how Sen. Ted Cruz raises money online.

Senator Cruz uses WidgetMakr to process his transactions so

• the donations go directly into his bank account (without anyone sitting on the money and doing distributions later),
• he is paying the merchant banking fees directly to the merchant bank (so no-one is padding the fees), and
• donor data goes directly into Crimson, his campaign data platform.

The best part about using a fully integrated system is that you can track your donors every move and the FEC finance regs are built right into the platform.

Let us know if you need help setting up a quick and easy online fundraising system. It would be an honor and pleasure to help you and your campaign hit the ground running.  

What are the Biggest Fundraising Trends?

Like get rich quick schemes and magic diet pills, those in the nonprofit fundraising field are always looking for the quickest, easiest, cheapest ways to get big-time results. Like bellbottoms and disco lights, some methods have faded away into the annals of history while others are perching on the horizon ready for their day in the sun. What trends can we look forward to in the near future?

I don’t have a crystal ball, but I DO have the annual eNonprofit Benchmarks Study conducted by M+R Strategic Services which monitored 55 nonprofits to measure the ebb and flow of their strategic fundraising practices. Here are the highlights from that 44 page report:

The Stats

• Email list sizes are up by 15%.
• Online revenue grew by 21% over 2011 totals, with only the International sector seeing a decline in online giving.
• Monthly giving programs in particular have seen explosive growth, with revenue growing by 43%.
• Email lists continue to dominate in size. For every 1,000 email subscribers, groups in this study have 149 Facebook fans and 53 Twitter followers.
• Email response rates (the percentage of email recipients who took the main action in the email) were down in 2012.
• The fundraising message click-through rate for International groups dropped by 40%, and for Rights groups by 38%. Health groups declined by 10% and for Wildlife and Animal Welfare groups 3%. Environmental groups saw an increase of 14% from 2011.
• Newsletter click-through rates declined by 14%.
• Online revenue increased by 21% in 2012.
• Monthly giving revenue grew at a much faster rate than one-time giving revenue. Rights groups saw the largest growth in monthly revenue at 64%, followed closely by Environmental groups with a 58% increase.
• One-third of online revenue in 2012 was sourced to email. The remaining two-thirds of revenue came from other sources, such as unsolicited web giving, peer referrals, and social media.
• Social media audience sizes continued to grow significantly faster than email lists, with a 46% median increase of Facebook Fans in 2012. Twitter audience sizes have grown dramatically over the past year—organizations experienced a 264% increase in Followers.
• Mobile lists are growing at about double the rate of email lists, with a median increase of 32% in 2012.

The Application
This study provides us with an interesting dichotomy: online revenue is up, but e-mail click through rates are down. Here’s why: the old way of gathering dollars on the internet is taking a backseat to the trend of social media fundraising while website visitors are still pledging their support. E-newsletters are a tad passé while mobile giving is gaining in popularity.

As a nonprofit who wants to follow the trends, you might want to consider following some of the practices on the upswing such as posting several comments or Tweets a day on social media (most groups average four per day), investing less time in creating an e-newsletter (but still send one out), and don’t measure your success or change your tactics based on what groups outside of your philanthropic genre are doing. Most importantly, focus on what is working for your charity and not on what other people are saying you should be doing. Trends come and go, but no one knows your donors like you do!

Writing an Effective E-Newsletter

Every week I get several e-newsletters from nonprofits and to be honest, I rarely open them. A few happen to peak my interest and miraculously break down my barricades of time constraints and information overload. Let’s face it, many of us get a minimum of 30 e-mails per day so it’s vital to sift through what’s important and what’s junk mail. Here are some tips to stand out in the In Box:

1. Your “Subject” line makes all the difference.
Most of the time if the title is “March Newsletter” or “Name of Your Organization Newsletter,” I probably won’t open it. Yes, I contributed to your cause. Yes, I know you’re doing great things. However, I feel like I have a fairly good understanding of your cause and in this busy, stressful world it’s too easy to press the delete button when I think I already know what you’re going to say.

So how do you get your supporters to take the time to click on your e-mail? Don’t look like a newsletter! One great example is a symphony that sent out e-mails titled “20% off Concert Tickets.” If you are an art focused nonprofit, sharing a deal is a great way to appeal to your e-list. A news headline is another great hook. I received an e-mail on behalf of a homeless shelter that said something like, “Fire Destroys Mission Kitchen.” The story and pictures of this tragic event really touched my heart, along with the impact that this incident had on thousands of hungry people. (And I wasn’t the only one who felt this way. The needed funds to rebuild were raised in a couple of weeks.)

2. From who?
You have a few options here: you can send it on behalf of your CEO, with the title of your organization, or both. First of all, I wouldn’t send a mass e-mail with just the name of your CEO on it because their name may not be recognized and could be tossed out as spam. I would choose one of the second two options just so your readers know that your message doesn’t contain a virus and that it is safe to open.

3. It’s what’s on the inside that counts
Congratulations! Now that you’ve got your supporters to open your e-mail, now what? Be visually appealing: use colored text to highlight your points, pictures to emphasize your mission, and put your links to donate and to your website front and center. You only have a few seconds before they decide whether to scan your message or click on the trash bin icon. Next, keep it short and sweet. Leave the long stories and mission statements for your website. Third, make your need urgent and create a deadline for action. If they close your e-mail with the intention of giving later, they probably won’t re-open it.

E-mail and e-newsletters can be a great asset to your fundraising plan. It is easy, free, and keeps you connected to your donor base. When you know how to use it effectively, it can be a great tool with impressive results.