accounting for credit card fees

Audrey Katzman

We have been collecting optional credit card processing fees when donors give through our website. How do you account for them in Raiser's Edge so they don't skew campaign and fund reports? We could create a separate campaign (credit card fee) and fund (credit card fee FY24). Alternately, we could NOT enter them in Raiser's Edge at all, since these transactions are fees, not donations. Our finance dept. keeps track of fees paid on all transactions.

Donations made on our website email a receipt to the donor showing the amount of the tax-deductible donation and the credit card fee (marked "not tax deductible"). This way, the donor is aware of the total and they can match up the transactions on their credit card statements.

Any thoughts and resources on best practices would be most appreciated.

Dariel Dixon

@Audrey Katzman I don't think this is a RE thing, but an accounting thing. The gift amount should be the amount that the donor paid. I don't think you need to change anything here. The additional amount is only an increase to make sure the organization receives the intended amount that the donor was trying to convey. There will always be some discrepancy between the GL balance and the amount in RE.

Why do you believe the extra fees paid are not tax deductible? The donor paid them to the organization as part of a deductible transaction. I've never seen a practice where those fees were not made as part of the gift. Are they processed separately or as the same transaction? I would recommend getting some clarity about how those gift are processed from your credit card processor.

JoAnn Strommen

@Audrey Katzman Second or thirding what @Dariel Dixon replied. Felt it was worth more than a ‘like’ or ‘clap’ to tell you that gift amount should be what the donor paid. It is all a gift to the org - org uses for their purposes - one of which is to pay the fees/cost of doing business.

Austen Brown

@Audrey Katzman - Donors receive credit for the full amount of their gift; the intended amount + the additional donation. How you track this in RE depends on the org - I've seen it tracked through an attribute or by splitting gifts.

Elizabeth Baxter

@Audrey Katzman We have a separate campaign, named “Selective giving” and a separate fund called “Credit Card Fees” to address this. We acknowledge the donor for the entire amount received (gift amount + fees covered).

Beth Carlson

@Audrey Katzman For newbies who might be reading this, (because I was once a new to fundraising and Raiser's Edge)…according to the IRS, if someone gives your organization $100 and the processor charges you a $3 fee, you acknowledge $100. Typically organizations record the $100 in their donor database (Raiser's Edge) and accounting software (Financial Edge, etc.) as revenue (donation income) and the $3 processing fee is recorded only in an expense account in your accounting software. Now days many online donation systems give donors the option to pay the credit card fee to cover the cost of the processor. In this case, the donor is increasing the amount of their donation. The donation is the full amount of the intended donation ($100) plus the extra donation for the cost of covering processing fees ($3) so you record in Raiser's Edge and acknowledge $103. How you record this in Raiser's Edge can vary. Some of the other posts have good suggestions like Audrey did suggesting using a different Campaign and Fund for the “extra donation” or splitting the gift or using an attribute, etc.

Audrey, it sounds like donations from your website are charged a processing fee, NOT giving donors the options to add on an extra amount to their donation to cover their fee. So your email saying the $3 is not tax deductible does not seem accurate to me. The whole $100 is tax deductible not $97. The $3 is an expense or cost of doing business. Hope this helps!

Dariel Dixon

@Beth Carlson: THIS!!!! ALL OF THIS RIGHT HERE.

Since @Audrey Katzman has addressed the main part of the issue, I do want to bring up something to consider. However you decide to do this, whether it be breaking the fees into another fund or keeping them as part of the original gift, the time it will take to process them may change depending on how you proceed. My organization just keeps it as the original gift, and accounting knows how to allot the gift and the fees when the disbursement comes in. Moving fees into another fund will add extra data entry time. Just something to think about in your decision making.

@Audrey Katzman For newbies who might be reading this, (because I was once a new to fundraising and Raiser's Edge)…according to the IRS, if someone gives your organization $100 and the processor charges you a $3 fee, you acknowledge $100. Typically organizations record the $100 in their donor database (Raiser's Edge) and accounting software (Financial Edge, etc.) as revenue (donation income) and the $3 processing fee is recorded only in an expense account in your accounting software. Now days many online donation systems give donors the option to pay the credit card fee to cover the cost of the processor. In this case, the donor is increasing the amount of their donation. The donation is the full amount of the intended donation ($100) plus the extra donation for the cost of covering processing fees ($3) so you record in Raiser's Edge and acknowledge $103. How you record this in Raiser's Edge can vary. Some of the other posts have good suggestions like Audrey did suggesting using a different Campaign and Fund for the “extra donation” or splitting the gift or using an attribute, etc.

Audrey, it sounds like donations from your website are charged a processing fee, NOT giving donors the options to add on an extra amount to their donation to cover their fee. So your email saying the $3 is not tax deductible does not seem accurate to me. The whole $100 is tax deductible not $97. The $3 is an expense or cost of doing business. Hope this helps!

Audrey Katzman

@Audrey Katzman For clarity, all credit card transactions incur a fee. The donor has the option to cover the fee while they are processing their donation or not. Most do not.

JoAnn Strommen

@Audrey Katzman

Side note - for our day of giving this fall, 90% of donors covered the fee. We didn't expect it to be that high. That was for about 1000 gifts. It's definitely becoming an accepted practice and advantageous for the orgs.

Spring Velazquez

@Dariel Dixon I believe if you implement BB Complete Cover, the transaction fee payment actually goes directly to BB which is not a 501( c)3.

If you look at your BBMS statement on those transactions you'll see $100/$0 fee instead of $97/$3 transaction fee. In both circumstances the donor's charitable contribution is $100.

If you give the donor the option to pay the fees and the transaction fee does come to you then the donor's charitable contribution amount = donation + fee because they're paying the transaction fee to you, not to the credit card processor. Of course the caveat to that is your transaction fee will be higher on the donation because it's not $103 instead of $100 ??‍♀️

JoAnn Strommen

@Spring Velazquez I'm not aware of any card charging platform where the org receives $ payment for the fee. It's a fee charged by the card issuer and or any additional fees by BB or the giving platform.
Our crowdfunding platform reports to use the gift amount, the processing fee, if donor covered fee, the amount charged to the card and their platform fee and payout amount. We give donor full credit for the amount charged to their card. They are giving us the fee amount to pay the fee to the platform. IMO most orgs follow procedure to credit donor for full amount charged - donation +fee. The difference tends to be how they designate the fee and/or handle it in accounting.

Spring Velazquez

@JoAnn Strommen if your org receives the transaction fee then yes, you would credit the donor the full amount of the donation+fee. But unless they have changed it, the org doesn't receive the fee paid with BB Complete Cover. And the last time I used it, as an org you don't even receive the amount the donor paid towards the fee so you literally can't credit them for anything above the actual donation amount

Edited to note this only refers to donations processed with BBMS, not external platforms

Lee Grisham

@Spring Velazquez
You are correct here since Complete Cover is actually two donations! Just like all gifts are split gifts, Complete Cover is the donation to your org of $XX and then a “tip” donation to Blackbaud Giving Fund, their nonprofit arm. That is how they get around it. That may not be exactly how it goes, but it is essentially the same thing.

Spring Velazquez

@Lee Grisham close, but easily confusing ?!

Donor Cover: Constituent makes a $100.00 donation and pays the processing fee of $2.65. You receive $102.65 and they receive a receipt from your org for their $102.65 charitable contribution.

Complete Cover: Constituent makes a $100.00 donation and pays a $5.00 “tip” to BB to help cover the cost of cc processing. You receive $100.00, BB receives $5.00 and the donor receive a receipt from your org for their $100.00 charitable contribution.

Dariel Dixon

@Spring Velazquez I did not know that. We don't use complete cover but use donor cover instead. I would imagine that there are many organizations who have no idea of which they use, and unless they have access to their merchant services account.

Now that I think about it again, I remember some of this from when complete cover was initially being rolled out. It does make you have to know exactly how your organization is set up for online giving. Having 2 separate programs to cover gifts can be confusing. Making sure you are accurately receipting your donors is important.

EDIT: In the case of Complete Cover, I don't think the fees matter at all. Your organization isn't charged them, and even if the donor “tips”, that's a separate transaction with another entity. The OP wouldn't have any fees to separate out.

Spring Velazquez

@Dariel Dixon EDIT: In the case of Complete Cover, I don't think the fees matter at all. Your organization isn't charged them, and even if the donor “tips”, that's a separate transaction with another entity. The OP wouldn't have any fees to separate out.

Correct.