Entering Gifts Where The Donor Covered the Online Transaction Fees Into Batch When Integrated With Financial Edge

Rachel Kauer · February 2024

Hoping someone can provide some insight into the following topic:

Our School has Raiser's Edge NXT, integrated with Financial Edge NXT. I am our new Gift Processor who works on the Raiser's Edge NXT side (and who is new to the Raiser's Edge platform) who collaborates with a member of our Business Office who works on the Financial Edge side.

Recently we have started assessing if we are currently recording online gifts when the donor chooses to cover the credit card fee from third-party platforms like Boost My School (we are not set up to use Blackbaud Merchant Services and our Business Office is not interested in doing so).

Best practices seem to indicate that we should be crediting the donor for covering the credit card fee, but that the fee from the total donation needs to be distinguished for accounting purposes.

We are at a loss of how to do this in a Batch on the Raiser's Edge NXT side without messing up the Financial Edge NXT side. Our concern of course being that we need to distinguish what is a fee within the gift, so that when the gift batch is committed and my co-worker is ready to post it isn't showing up as if the entire thing is a donation.

Previously we simple didn't include the covered fee in the gift recorded in the batch, but we can't continue to do this if that's not best practice. We want the donor database to reflect the donors full contribution.

I would guess most integrated users are utilizing Blackbaud Merchant Services and maybe in that process this happens automatically. But since this is not an option for our organization at this time, I am hoping someone has either experience doing this for those 3rd party site transactions, or maybe has some insight on how it happens when you are set up for BBMS that I can attempt to replicate manually.

Thank you in advance!

Spring Velazquez · February 2024

@Rachel Kauer to determine if you should credit the donor the entire amount as a Charitable donation depends on how the donor fee cover is processed...

if the donor is covering the fee and the fee amount + the donation are given directly to you. (Ie the amount given to you is $26.50/$25.00 donation + $1.50 processing fee) then the donor should be credited for a charitable donation amount of $26.50. They are giving you the money to pay the credit card fee should you choose to do so. Your finance office should process the credit card fees as they normally do. Bear in mind that you will now be charged a fee based on a $26.50 transaction, not a $25.00 transaction, but the donors addition donation of $1.50 will still cover about 90% of the merchant services free.

However, if the donor covers the fee and your merchant services collected that fee by withholding it from your disbursement (you would receive $25.00 of the donor's payment of $26.50) the donor would be credited with a $25.00 charitable donation because that's all you are receiving.

How does your finance office currently reconcile credit card transactions? Because really nothing should change on their side. Development may want to track it for stewardship purposes, but finance shouldn't change their processes -they'll simply realize less debit to credit card fees over time

Rachel Kauer · February 2024

@Spring Velazquez

Thank you, Spring,

What you said makes sense. I checked in with my colleagues on the Finance side and the merchant is withholding the fees up front. However, I'm not able to pursue the solution you suggested for that scenario as my Director still feels it is best practice to credit the donor for covering the fees.

Right now if John Doe makes his $100 donation and covers a $10 fee, and I go to give them full credit for the amount ($110) in Raiser's Edge - because we are integrated with Financial Edge, our Finance team is saying that the $110 is posting on their end for accounting purposes.

I saw a post on a Blackbaud article that this was exactly what seemed to be happening to a Finance end user who was asking, “How do you set up the grid to have the net cash and fee expense flow through to Financial Edge in the automated API? Currently, we are seeing the full cash amount. This causes us to have to make an additional journal entry in Financial Edge and makes account reconciliation more challenging than it needs to be.”

I didn't see that their question was answered, but I didn't want to create the same challenge for my co-workers and they seem to be spot on with what they are anticipating with this other user experience.

Spring Velazquez · February 2024

@Rachel Kauer that's definitely going to be an issue for your organization. If the donor makes a $100 donation and pays a $10 processing fee to your credit card processor, you're going to receive $100 from your processor, not $110-and they won't be deducting the processing fee for that transaction. I would first check to see how the fee coverage is presented to the donor. Do they know that the $10 is going to the processor and not you? And I'm assuming they're going to receive an instant receipt for the transaction…does that come from you or does it come from the processor? And if so does it list the $10 as a service fee and not a donation? If all of that clearly indicates to the donor that the $10 is not going to your organization but going straight to the processor and is not a tax deductible donation, then I would definitely push back on why this information then needs to go into the finance system. It's money your organization is never going to see so why are they trying to account for it?

Rachel Kauer · February 2024

@Spring Velazquez

So I delved a little deeper and it seems that at the end of the calendar year Boost My School refunded a portion of SOME donor's fees back to us on those gifts throughout the year where they overestimated the fees. And it was a fairly significant amount.

I now know this is what prompted my Director to want to look into this in the first place because it came up in January when Finance tried to reconcile.

I'm not sure why they refunded it to us, instead of the donors directly…However that makes the bit about us getting the fees not clear as mud, and inconstantly applied to each donor depending on their card type, and to further complicate it that data is not available till the end of the year when Boost My School tries to pay us those refunded fees lump sum.

Donors do get a receipt automatically sent from Boost My School which credits them for covering the fee.

Now that I'm thinking about receipts…I'm wondering if maybe we can change the receipted amount to solve this issue. We currently have a business rule checked that says “do not allow the receipted amount to exceed the amount.”

But maybe we could uncheck it? Maybe we could add and record the covered fee there? In the same way, we would subtract the value of a benefit from a gift, such as a T-shirt received in return for giving.

I'm not sure if the “receipt amount” field would impact the financial edge. To your knowledge to might it?

Spring Velazquez · February 2024

@Rachel Kauer the receipt amount does not post to the Financial Edge (why it's great for benefits, in kind donations, auction items etc). But what a mess that leaves you with! I'm glad you were able to untangle why the request was made, but definitely feel like it's not quite clean (okay it makes it icky for me) for the card processor to send the overpayments that were their fault to your organization as a donation without notifying the donors of the overpayment or refunding them directly. I hope you're able to get it all straightened out ?‍♀️

Roberta A. Gilbert · February 2024

@Spring Velazquez

I'm on the Business Office side of things, and we also have FE and RE integrated. We use BB Merchant services for many of our online credit card donations, where Blackbaud covers the fees on donations up to $3,000. For donations greater than that, we receive the total donated amount, less any bank or other processing fees charged by Blackbaud. We also get a report listing the donations in detail, and showing how much was withheld before the funds were disbursed. In RE, each donor gets full credit for their entire donation, before any fees were withheld, and that is what I import into FE. BUT…. because RE batches come into FE unposted, I can edit the batch on the FE side only, before posting, and add a line to expense any withheld fees, thus bringing the cash amount equal to the total received, while keeping the revenue equal to the total donations. That way, RE doesn't have to deal with the mechanics of how to enter the fees at all.

If donors are using 3rd party processors like Boost My School or Benevity, we go by the report received from the processor. Any fees passed on to us will get expensed in a similar manner. Any fees charged directly to the donor are items usually not in the disbursement reports, and are between the processor and the donors only - we don't see them. If the donor gives us a few extra $ to cover any fees, we consider that part of the contribution amount, and it is already included in the RE entry before the info is imported to FE.

This discussion is a good one - it comes up here about once a year, especially if we are bringing in any new employees processing gifts. Our auditors find this method acceptable and in compliance with best practice.

Rachel Kauer · March 2024

@Roberta A Gilbert

Thanks, Roberta,

“If the donor gives us a few extra $ to cover any fees, we consider that part of the contribution amount, and it is already included in the RE entry before the info is imported to FE.”

By giving us a few extra dollars - do you mean you get the donation base amount plus the covered fees get paid out to your org and then the processor charges you the fees?

Or like us,

Do only get the initial base amount as a deposit because the covered fees are taken immediately by the processor?

Our business office says if I include those fees in the RE entry, it will mess their side up, because our accounts manager is only getting the base amounts on the deposits into their actual account. However, considering it sounds like your organization has made this work, I wonder if there aren't other reasons of a less technical nature that are complicating the situation for my organization.

I think what I thought was a technical question is perhaps a symptom of a “non-technical” issue. Thank you both for your input, it seems like there are ways to do this, but will ultimately require the consent of our business office.

I report to both offices, so I think perhaps it needs to be resolved on a higher level at my organization, lest I end up between the barrels of both parties.

Leia Bridgham · November 13

Hello, I am on the finance side of this. Our deposit is net of the fees. Our RE is not integrated with FE. We manually record or import the transactions in FE.

The Deposit only allows debit transactions, so to reduce the amount by the fee, I record the fee as a negative deposit. FE doesn't like this and often gets confused.

What are the best practices for recording 3rd party transaction fees when they are retained. If we don't record them in the deposit, reconciling to the bank account is a nightmare.

Thanks!

Patricia Nowak · November 13

Not sure if this will be of assistance as we do not do our bank reconciliation through FE NXT and we do not use RE NXT. We do deal with accounting for gifts that have a fee deducted before we receive funds from 3rd party processors. We record gift revenue for the full amount of the gift, then a credit card processing fee as an expense so that the two entries net to the amount being deposited into our bank account for the gift.

Entering Gifts Where The Donor Covered the Online Transaction Fees Into Batch When Integrated With Financial Edge

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