Fundraising Platforms

Online fundraising, especially peer-to-peer fundraising, is a relatively new method of charitable fundraising.  As a third-party fundraising platform, you are giving charities and their supporters new opportunities to connect with donors.  To ensure that you are acting to the maximum benefit of the charities and donors using your website, fundraising platforms should follow these tips:

  • Conduct basic due diligence to discourage potentially fraudulent uses of your platform.  Verify on the IRS website that a charity is tax-exempt and that contributions are tax deductible.  Confirm the charity’s registration status in the states in which it must register.
  • Confirm that a person claiming to work for a charity is actually associated with that charity. Verify that any bank account information is associated with a charity, not an individual.
  • Obtain each charity’s written approval before collecting funds for it.  At least 38 states require express/written permission from a charity before its name is used in connection with a solicitation.
  • Educate the charities and their supporters who fundraise on your website. 
    • Prominently disclose what type of vetting, if any, takes place before a charity can participate on your website.
    • Explain how often donations will be forwarded to a charity.
    • Clearly state if there is a minimum amount of contributions required before donations will be forwarded and what happens if that amount isn’t met. 
    • Be transparent about any transaction fees and the portion of a donation that actually reaches the charity.
    • Promptly remove any charity that asks to be removed from your website.
    • Provide contact information on your website specifically for charities to ask questions or to report fraud.
    • Establish and display a privacy policy for donors’ information and make sure any personal or financial information you collect about donors or charities is secure.
  • Develop and follow policies and procedures that can help you detect more sophisticated attempts at fraud.  Review and test your policies and procedures regularly and fix flaws as they become known.

Fundraising platforms should also be aware of possible legal requirements:

  • Charitable fundraising laws vary from state to state.  In some states you may be classified as an unregulated vendor, or a moderately regulated commercial co-venturer or professional fundraising consultant or fund-raising counsel, or a more actively regulated commercial fundraiser or professional solicitor.  Make sure you understand your legal status and any corresponding reporting or contractual responsibilities in each state that you operate.
  • If you fall under the legal definition of a professional fundraising consultant or fund-raising counsel or commercial fundraiser or professional solicitor, make sure your contracts with the charities are in writing and include all of the language or disclosures required by state law.
  • Be cooperative with charity regulators and law enforcement if they contact you with basic questions about how your fundraising platform works or with information about a potentially fraudulent user of the platform.