Charities Told to Do Their ‘Homework’ on Crowdfunding – ACNC Guide

The Australian charity regulator has warned the social sector to “do its homework” before embarking on a crowdfunding campaign, in a new online guide.

The Australian Charities and Not-for-profits Commission (ACNC) has launched the guide to help charities, donors and fundraisers with their use of crowdfunding websites.

The guide, called Crowdfunding and Charities, examines the increasingly popular method of online fundraising. Crowdfunding generally sees individuals and organisations set fundraising targets online, and then calls for support from members of the public.

But the guide warns that “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”.

It calls on charities to know the law relating to crowdfunding in different jurisdictions and said that outsourcing fundraising to a third party was not a way to “outsource” their responsibilities.

“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 guide said.

“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.”

The guide points out that fundraising is regulated through Australia’s state and territory governments and these laws vary across every jurisdiction, so that 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,” the guide said.

ACNC commissioner Susan Pascoe said the guide provided useful, practical information on how charities and fundraisers could harness it to raise money responsibly.

“Emerging ways to fundraise and donate, such as crowdfunding, bring with them great potential benefits for charities, fundraisers and donors,” Pascoe said.

“But with any new or emerging fundraising method, there are also aspects of its use that people need to consider before they embark on a fundraising campaign or donate to a cause.

“This new guidance provides simple, practical steps for those charities and individuals considering using crowdfunding to raise funds, as well as for members of the general public thinking of donating to crowdfunding-based appeals.”

The 2016 Giving Australia research report highlighted that the rise of crowdfunding and other technologies had allowed a “charity bypass” in Australia with more donors directly engaging with their causes often leaving charities in their wake. But more charities were taking on crowdfunding as an alternative to traditional fundraising.