Guidance Concerning Online Giving Platforms and Fiscal Sponsors
The marketplace of online giving platforms serving the nonprofit sector has greatly expanded over the last decade and is likely to continue to grow. As with most technology solutions for our sector, the fiscal sponsorship field must wrestle with some unique considerations, given the quasi-autonomous nature of the sponsor-project relationship.
It’s healthy to have a marketplace of both nonprofit and for-profit technology providers in the giving and crowdfunding space. While powerful tools for fundraising, third-party giving and crowdfunding platforms can present challenges, and in some cases, cause harm to both sponsors and projects. Extreme cost volatility compelled many sponsors to end their relationship with WeDidIt, and apparent business challenges with the popular platform FlipCause are wreaking havoc in the sector as funds are being withheld from nonprofits across the country, including many fiscal sponsors. In fact, FlipCause is under investigation by the CA Attorney General and has recently filed for bankruptcy protection. No company or product is guaranteed for success, despite the best ideas, intentions, and leadership. The market will provide sorting and options, but fiscal sponsors need to be especially intentional about how they relate to this subindustry, given the operational complexity that sponsors manage.
Recently, we have seen the concerning rise of “auto-listing” nonprofits on giving platforms–essentially using IRS public data on nonprofits to pre-set giving platform accounts to be “claimed”. GoFundMe’s charitable affiliate recently did this and incited swift and significant backlash from the nonprofit community, leading GoFundMe to reverse course. While not against the law as far as we can tell, the practice of auto-listing does toe some boundaries of propriety related to organizational consent in general, as well as lead to potential operational problems for fiscal sponsors in particular.
To help fiscal sponsors better navigate the ever-evolving landscape of crowdfunding platforms, we offer the following policy and practice recommendations to the field.
Sponsors, not projects or giving platforms, need to decide (with project input) which giving platform(s) sponsors will utilize to support project fundraising. Sponsor finance teams have to manage significant complexity in individual and online giving in general, so the sponsor should select one or more (but a limited number) of giving platforms that integrate well with its operating systems, while meeting the needs of projects. Some sponsors allow projects to add a preferred platform that is not among those pre-selected, but will add a service charge to cover the added integration and accounting effort. Of course, sponsors should periodically evaluate solutions and gather input from projects.
Make sure the giving platform(s) you select can clearly segregate gifts (and other revenue streams) by project and integrate well with your accounting system. The need for clearer gift tagging in online giving platforms has long been a priority for fiscal sponsors and, more recently, has created a sub-market of platforms that are indeed fiscal sponsor-friendly. In addition to this basic functionality, easy integration with your accounting system(s) through good upload templates, APIs, etc. is a must to raise efficiency and lower the potential for data entry errors.
Be mindful of what platforms practice auto-listing and what consents are entailed. Candid’s work to provide greater visibility for sponsors and projects is proceeding. Now in its public phase, Candid allows sponsors first, then affiliated projects to opt in to having a full profile on the platform. Recently, projects have been given the ability to claim and edit their profiles as well. In addition, Candid asks projects for consent to sharing profile data with third parties, which includes third-party donation platforms. Consent, however, is not granted on a per platform basis. Though Candid remains diligent in ensuring understanding among sponsors and projects about what it means to appear in Candid’s public data, sponsored project data could find its way to being listed on third-party giving platforms, if the projects don’t opt out of third-party sharing as noted above.
Some nonprofit giving platforms that use affiliated Donor Advised Fund (DAF) structures permit donations to be made prior to or without the nonprofit (or fiscally sponsored project) first claiming their profile. In other words, someone could find you on a giving platform and make a donation to you without your prior knowledge or consent. (In these cases–absent payment instructions from the donee–the platform usually conveys notification and the gift by check to your registered address, or other means.) The ability to make a donation to a sponsor or project without prior consent raises two issues for sponsors and their projects:
(a) Sponsor choice may be foreclosed or unnecessarily complicated. Sponsors and their projects should always have the ability to select giving vendors and direct donors to those solutions. A project that is automatically listed on a platform that it didn’t select might receive a gift, thus compelling the sponsor to respond and potentially enter into a relationship with a giving platform that neither it nor the project had vetted or selected, even if for the management of the one gift. This could lead to added operational and systems challenges, per item (1).
(b) Giving without (perceived) consent or opportunity to decline might occur. Nonprofits should always have the ability to reject a gift, if it entails compromising values, unwanted affiliations, or onerous terms. In our current atmosphere of legal and political threats to the nonprofit sector, in particular NSPM-7, the ability to make a contribution without prior knowledge or consent raises optical and potentially legal concerns. For example, in the case of a nonprofit-owned giving platform using a DAF structure, the gift might be accepted by the platform before notifying the nonprofit or sponsored project it’s intended for. While the end recipient could still reject the gift, bad actors wanting to ensnare a sponsor or project by showing they accepted a contribution from an unlawful source or for unlawful purposes could construe that initial acceptance as part of an evidence trail. Today, we need to be mindful of potential pitfalls in our giving systems.Consider sector focus, ownership, operating history, and stability when selecting a giving platform. Lastly, when selecting a platform, conduct due diligence beyond basic costs, business terms, and systems compatibility. For example, is the platform for-profit or nonprofit? If it’s for-profit, who are its founders and investors? Is there private equity involved? How long have they been in operation and how committed to the nonprofit sector is the company? Many platforms offer loss-leader rates initially to build market share, only to sell off the platform or greatly increase fees once users are deeply ensconced. If it’s nonprofit, what’s the underlying business model and does it seem sustainable? Philanthropy has been a lead investor in some nonprofit platforms, but philanthropic investment always comes to an end. Inquire about plans for sustainability and the commitment of leadership to steward growth.