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  • 1.  Credit Card Fees - Reconciliation

    Posted 13 days ago

    Hello,

    In light of Blackbaud adding an additional 1.5% "application fee" on top of their already 3% (3.5% if the donor covers the fee!) credit card processing fee, our organization is taking a close look at our credit card fees. We've already found that the whole amount of the gift, whether the donor covers the fee or not, is tax receiptable, thanks. But what is still unclear to us is the backend processing of the gift amount. Our Advancement Office feels that the receiving fund should get the net amount of the gift, so the $97 that the university receives from a $100 gift. Our Business Office feels that if we receipt the donor for $100, the receiving fund must get the full donation amount and the Advancement Office must cover the difference. 

    What is best practice here? And what is allowable per IRS/Accounting rules? What does your institution do? I feel like I saw a conversation here months ago on this topic but can't find it now, my apologies if this has already been discussed at length. Thank you for your insight!



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    Emily Brock
    Assistant Director of Compliance and Gift Management
    Grand Valley State University
    brockemi@gvsu.edu
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  • 2.  RE: Credit Card Fees - Reconciliation

    Posted 13 days ago
    Emily, there is not one best practice here, and both approaches have positives and negatives. 

    The business office's point is that many expenses go into collecting a donation, but those expenses aren't deducted from the gift. What makes credit card fees different? They're just another expense connected with the work of fundraising, and the normal operating budget of the business unit that incurs them should cover them. 

    That is sensible enough, but when the donor covers the fee, it seems right to characterize this as a restricted gift, intended by the donor to cover the costs of processing the transaction. Some shops go down this road, splitting the gifts to accommodate this. Some orgs as donors to contribute substantial amounts on top of the donation, as much as 15% more, and in those cases, I believe it is necessary to treat those additional contributions as gifts restricted to operating costs, because that is very much how they are solicited, and because thes gift amounts are no longer de minimis and immaterial. 

    But for those orgs that collect smaller donor cover percentages, the operationally easiest approach is put the entire amount to one fund, and to cover the fees out of unrestricted dollars. The logic on the business end is that the ROI on covering a 3% fee is 33x. Once the org adopts this approach and adjusts budgets to account for this, the cost per dollar raised actually goes down a bit. It's just tough to impose that mid-cycle, when nobody has planned for it, especially in environments where unrestricted dollars are very tight. 


    Thank you,
    Isaac Shalev
    President
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

    Schedule a 30-minute consultation now:






  • 3.  RE: Credit Card Fees - Reconciliation

    Posted 12 days ago

    Thank you for your insight, Isaac! It's much appreciated, as always. 



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    Emily Brock
    Assistant Director of Compliance and Gift Management
    Grand Valley State University
    brockemi@gvsu.edu
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    Original Message


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