Crowdfunding – a Solution or a Problem?

Crowdfunding can be a great way for charities to raise funds for a worthy cause but a badly communicated and delivered campaign can be problematic, writes HLB Mann Judd.

Competition for the charity dollar is becoming increasingly difficult. With barely a spare day in the calendar, charities are looking for ways to differentiate and capitalise on opportunities to further their cause.

Corporations in their quest to be employers of choice look to partner with charities to demonstrate their corporate social responsibility. Additionally, many workplaces encourage “Casual Friday” to raise funds for a worthy cause throughout the year.

Now we have the added competition of individuals raising money through crowdfunding for their own causes. Examples of crowdfunding campaigns have included individuals raising money for worthy causes but there are also some that may be construed as not so worthy, such as cosmetic surgery and weddings.

It is easier than ever for people to fundraise online

The reasons for the increased popularity of crowdfunding are obvious. It opens up fundraising to a wide cross-section of the public. Despite the best efforts of responsible crowdfunding websites, crowdfunding is not immune from unscrupulous fundraisers.

Crowdfunding provides fundraisers with an opportunity to communicate with, and potentially receive funds from, a wider audience than they would ordinarily have access to. Similarly, it also provides donors with a way to donate directly to a wider range of causes from all over the world.

Charities can’t outsource their responsibilities

One of the main benefits for charities in 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.

Before engaging with an outsourcing solution for fundraising there are a number of factors for the charity’s board members to consider, such as whether it aligns with the charity’s values and the potential effect a campaign could have on the charity’s reputation.

Board members should ensure they have performed adequate due diligence on the crowdfunding organisation and are satisfied the crowdfunding website is secure, complies with relevant Australian law, is reputable and meets their expectations as well as the community’s expectations of fair practice.

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.

Crowdfunding can be a great way for charities to raise funds for a worthy cause but a badly communicated and delivered campaign can be problematic.

For more information visit hlb.com.au.