Should you crowdfund your charity?

As the hit to fundraising during COVID-19 takes hold towards the middle of 2020, some charities are looking to crowdfunding as a possible option, but there can be risks.

Crowdfunding, thanks to the power of social media and the web, allows anyone to raise money for pretty much anything, anytime, anywhere. Even the World Health Organization launched its first appeal for public and private donors, the COVID-19 Solidarity Response Fund, managed by the United Nations Foundation and the Swiss Philanthropy Foundation. The fund raised US$71m from 170,000 individuals and organisations in the 10 days following its 13 March launch, according to medical journal The Lancet.

Crowdfunding has grown rapidly in recent years and has become an important element of financial sustainability for NFPs, but there can be risks if funds are given to unverified platforms and campaigns.

GoFundMe COVID-19 campaigns get creative

Australians are a generous people who have not cut back on charity crowdfunding so far due to the crisis this year, but there are new trends in the campaigns, says GoFundMe Regional Manager Nicola Britton.

Since March 1 this year, one-third of all fundraising on the crowdfunding platform has related to COVID-19, she reports. “We've seen a lot of creativity with the ways that people are fundraising on GoFundMe for charities during COVID-19. There are a lot of charity challenges ranging from running a kilometre per donation to shaving their heads or donating their birthdays, and other really quite excessive challenges like running 1.000 kilometers in a month.

“So I think there's a really unique narrative in how Australians are asking for charity donations at the moment. They are conscious that a lot of Australians are doing it hard and are willing to go the extra mile to make a donation.”

According to GoFundMe data, last year Australians were the third most generous country globally, behind Ireland and the United States, she told the AICD in an interview.

GoFundMe, which eliminated platform fees in 2018, is the biggest platform in Australia for charity crowdfunding and raised $38 million for the bushfires over two months, across 7,500 campaigns. Last year it processed a total of one million donations in Australia.

A number of different campaigns on GoFundMe have raised COVID-19 related funds. These include the Queensland-based Performing Arts Professionals Crisis Fund with $78,680, the Undocumented Migrants COVID-19 Fund with $63,843, and campaigns for healthcare workers including the Buy Them A Coffee fund with $100,000 and the Victorian-based Alex Makes Meals fundraising campaign with $73,070.

Another trend is that charities this year are seeing niche communities starting campaigns to raise money for them. “We are seeing more charities realising the benefits of crowdfunding for rapid response-raising,” says Britton. “They are actually using the platform themselves as well as benefiting from campaigns launched on their behalf. So they're reaching a lot of new donors that they wouldn't be able to usually tap into. We are seeing the donations come from really close-knit communities and networks.”

Both during the bushfires and during COVID-19, GoFundMe has seen the Brazilian migrant community of Australia, Italians in Australia, and the Nepalese community of Australia raise funds, as well as other migrant communities. “They want to get back to the country that is their home.”

GoFundMe has also set up industry first policies in place for crowdfunding. “We want to make sure that it's the safest place to give,” says Britton. All campaigns are verified and checked and on the rare occasion that something does go wrong, a guarantee of a refund to donors is offered in the event that a campaign turns out to be fraudulent.

One reason that campaigns are getting more creative is perhaps that Australians now have more time during the lockdown, due to working from home and not commuting. “The shaving the head trend is so interesting to me. I'm pretty sure if people were in the office every day they wouldn't be shaving off their hair as frequently or running as many kilometres.”

Crowdfunding grows

Jill Storey, CEO of Australian crowdfunding platform ReadyFundGo, says crowdfunding has grown at a “phenomenal rate” over the past decade, helping fund medical innovations and research, climate change initiatives and more. From tens of millions for firies, koalas and disaster relief, to global celebrities raising hundreds of thousands for sick or bullied kids and cancer treatment, sites such as GoFundMe, Chuffed.org, Kickstarter, ReadyFundGo, Mightycause and Kiva have burgeoned.

Research by Valuates Reports suggests that the global crowdfunding market was valued at $10.2b in 2018 and is expected to reach $28.8b by 2025. It’s important to note that at the time of publication, the impact of COVID-19 on the crowdfunding market remains unclear. Early indications are that while individuals may be reining in discretionary spending, crowdfunding campaigns remain a viable fundraising tool.

For not-for-profits, charities, individuals and businesses, crowdfunding has provided an easy and increasingly popular method of online fundraising. And with more people at home with more time on their hands, the barrage of requests is expected to increase.

However, problems can emerge for charities and donors when public passion and a governance model mostly based on trust and transparency clashes with the complex rules governing traditional charitable donations. The most high-profile example of this was the Facebook Fundraiser campaign set up in January by Australian comedian Celeste Barber to benefit the NSW Rural Fire Service (RFS).

Barber’s intention was to give a boost to firefighters and bushfire victims. But after receiving a staggering $52m in donations, it emerged that the RFS, bound by its own trust deed, could only spend the money in circumscribed ways — on equipment, facilities, training, resources and administration. The matter is now before the NSW Supreme Court.

Boards need to link fundraising to purpose, says Dr Gary Johns, Commissioner of the Australian Charities and Not-for-Profit Commission (ACNC).

In general, the principles of fundraising during this climate apply now more than ever, with boards needing to pay close attention to the purpose of their fundraising and donation recipients alike and the risks involved. “The message is still absolutely clear about purpose and if it's going to a particular charity, then you better check out that charity’s governing document. You need to make sure your fundraising is absolutely aligned to charitable purpose,” says Johns.

Becoming more transparent

Prashan Paramanathan, CEO and founder of Chuffed.org, says monies raised during targeted campaigns are more likely to reach intended recipients because of the accountability and transparency inherent in crowdfunding. “If I run a standard charity fundraising appeal, receive the money and then don’t do anything, nothing is going to happen to me,” he says. “It just gets buried.”

The centralised “big charity” approach has limitations, particularly in relation to disaster relief, he says. During the summer bushfires, Chuffed.org hosted several fundraising campaigns on the ground.

“Community organisations don’t need the same structure that a massive charity that has no relationships in that community needs,” says Paramanathan. “They don’t need to employ staff to check whether or not people are legitimate recipients of the money… they can just walk around people’s houses and see that they’ve been burnt down.”

Crowdfunding campaigns are run on public forums, with the same reliance on social proof associated with Uber ratings or Yelp reviews. And if you don’t follow through? “A whole bunch of people (will) comment on your campaign and on your Facebook page that you didn’t do what you said you were going to do, so it becomes a much more public issue that you have to deal with,” says Paramanathan.

Some COVID-19 related campaigns currently on Chuffed.org include: Moving Feast by Social Traders in Victoria, which has raised $274,899 to provide tens of thousands of emergency meals and food boxes to struggling families, and the Victorian First Nations Mutual Aid Fund which has raised $41,432 for distressed Aboriginal communities.

Tax and regulation

The Australian Taxation Office says there are no special tax rules applicable to crowdfunding. However as a general rule, if you or your business receive payments from crowdfunding platforms, the effect on your tax depends on how you use the funds. If used to meet business expenses, then the funds must be declared as assessable income. If used for personal emergency relief, then the funds are not counted as assessable income.

The Australian Charities and Not-for-Profit Commission warns donors to check the credentials of funding platforms carefully before committing any money, to be aware of scams. It also warns charities to check fees charged before launching a campaign and to check the legal requirements of each state in which the fundraising will take place.

AICD’s view on fundraising

The AICD is advocating for a consistent approach to fundraising laws to ensure that red tape is not an obstacle to fundraising, to support the continued existence of many charities. This could include facilitating the use of new online fundraising campaigns by registered charities through a temporary, nationally consistent minimum code of conduct for non-face to face fundraising activities. 

For more information on this please see the AICD article COVID-19 and NFPs: government relief package needed.