Do your homework
An important aspect of good charity governance involves doing sufficient research on any partners a charity plans to work with – even if it is simply a website for fundraising.
Crowdfunding has expanded rapidly in recent years and there are now many crowdfunding websites to choose from. However, all of them are different with different features and requirements.
The responsible persons of a charity (commonly referred to as the board, committee or trustees) should take the time to look into the details of the crowdfunding websites they are considering and ensure the one they use is reputable, well-run and will meet the charity’s needs.
Donors are likely to associate a charity with the crowdfunding website it uses, the charity’s board needs to be comfortable that the website reflects the values of the charity itself.
Charities should also consider whether crowdfunding is the most effective way to raise money, or if there are other, more suitable alternatives. While it may be a good option for some campaigns, crowdfunding is unlikely to be a long-term solution to all funding gaps. It may not be appropriate for some projects, and may not even be appropriate for some charities at all.
Terms, conditions, and fees
Before signing up to a fundraising campaign through a crowdfunding website, it is important that the members of a charity’s board know precisely what it will involve.
Crowdfunding websites vary greatly and they each come with their own terms and conditions, which may include fees, eligibility criteria and other requirements. These can extend to rules about target amounts, project deadlines and even the nature of some campaigns. The terms and conditions may also cover what the crowdfunding website does and does not have responsibility for.
Importantly for charities, it is common for crowdfunding websites to charge a fee for using the service. Fees vary, but often they are a percentage of the money raised successfully towards a fundraising target. Some crowdfunding websites only charge fees for successful campaigns (the ones that reach their stated goal) and don’t charge for unsuccessful campaigns (the ones that fall short). It is crucial that a charity’s board reads the fine print and asks questions.
A charity should decide in advance what will happen if a crowdfunding campaign falls short of its target. This may not be covered by a crowdfunding website’s policy and any decision on refunding the donations rests with the charity itself.
A charity must be open and honest about what it plans to do with the funds it receives for a campaign that doesn’t reach its target. Offering refunds is one option. However, if a charity decides that the funds it received on the way to the missed target could be used for another charitable activity, it must be clear about this in its campaign.
For example, if a homeless shelter set a funding target for an extension to its accommodation space, but wanted to be able to use whatever funds it received for meals and other services in the event that the campaign fell short of the target, the shelter should make this explicit at the outset of the campaign.
Be aware of the law
Fundraising is regulated through Australia’s state and territory governments and these laws vary across every jurisdiction – what is a requirement to fundraise in one state or territory may not be a requirement in another.
This means that:
- each state and territory (except the Northern Territory) has its own laws and regulations with which charities (and sometimes those raising funds for charities) need to comply when fundraising there;
- a charity that wants to conduct fundraising at a national level – through crowdfunding online or otherwise – may need to be registered to fundraise in each state and territory; and
- a charity may be in breach of fundraising laws and regulations if it accepts funds from someone living in a state or territory where the charity is not registered to fundraise.
The board members of a charity need to be aware of the laws that govern fundraising activities – including online campaigns. The way fundraising laws apply to crowdfunding campaigns vary between states and territories and charities need to know how they affect their campaigns before they begin.
Being aware of the legal requirements and ramifications of conducting a crowdfunding campaign is a part of running a well-governed charity and should be an important part of a charity’s planning.
For more information about state and territory fundraising regulators and legislation, refer to the ACNC’s Charity Fundraising page at acnc.gov.au/charityfundraising.
Charities can’t outsource their responsibilities
One of the attractions of using a crowdfunding website is that it allows a charity to outsource elements of its fundraising activities – the website takes care of some of the work of the fundraising campaign. However, it is vital that the charity’s board members realise that they can’t outsource the oversight and responsibility for their charity’s fundraising.
Charity board members should be satisfied that any crowdfunding website they use is reputable, secure and complies with relevant Australian law. They should also be satisfied that any crowdfunding website they use meets their expectations, and the community’s expectations, of fair practice. It is important that using a crowdfunding website does not jeopardise the charity’s reputation and standing in the community.
Similarly, if an individual is raising money for a charity via crowdfunding, the charity’s board members should ensure that the individual’s campaign is consistent with the values of their charity.
A charity’s reputation is valuable, and can be vulnerable if someone is fundraising on the charity’s behalf and they don’t do the right thing.
Charities that do have someone interested in fundraising on their behalf via a crowdfunding website should:
- attempt to speak directly with them to clarify their plans and expectations
- check the progress of the campaign and any associated messages
- agree on a method to deal with any issues that might arise during the campaign – and do so before the campaign begins.
As part of a fundraising strategy, a charity should consider having a policy for working with an individual on a crowdfunding campaign. A policy should set out basic ground rules and expected standards, including the circumstances under which the charity will not collaborate with someone on a crowdfunding initiative or distance itself from a campaign.
Ultimately, the responsibility for a charity’s fundraising rests with the charity’s board and it is important that the board members consider crowdfunding carefully.