Our family tries to be careful with our money in all aspects of spending, including the charities we support.  Today I wanted to share a few thoughts about how you can make sure the charity you are supporting is being responsible with your donation.

GoFundMe, the new way to give?

New crowdfunding options for charitable donations and fundraising present great opportunities and challenges.  Perhaps the best known site is GoFundMe.  Other popular options include Fundly, Bonfire, YouCaring, IndieGoGo, and Giveforward.  GoFundMe charges a variable rate for a fundraising campaign.  In 2017 the 5% administrative fee was dropped for personal campaigns, replaced by a ‘suggested tip’ option that helps cover company overhead.  The 5% fee remains in place for nonprofit donations.  A 2.9% credit card processing fee applies to all transactions.

What does 5% look like?  A December 2017 article in Fast Company stated that “an estimated $3.5 million in fees” was collected from Hurricane Harvey relief campaigns hosted on GoFundMe.

Other sites operate with varied fee structures for crowdfunding campaigns.  Facebook is also an active player in crowdfunding, offering users the option to donate to a variety of charities.  In late 2017 Facebook stopped charging a 5% processing fee for donations to nonprofits.  The social network now covers the cost of credit card processing and vetting the 750,000 charities available to Facebook users.  There is still a 6.9% to 8.8% fee for personal campaigns.

Obviously all these groups have to charge a certain amount for overhead to keep operations running.  It takes staff and technology to keep sites secure and easy to use.  But the big question about crowdfunding is – How do I know the beneficiary will get the money?  Each site has a slightly different method but I will stay with GoFundMe since they are the biggest site in this category.

GoFundMe will only release funds collected to the person/group named as the beneficiary of the funds.  For example, if I started a campaign for John Smith following Hurricane Maria, GoFundMe would only release the funds to the John Smith I designated as the target of the campaign.  GoFundMe would not release the funds to me to give to John Smith.  Part of the overhead expense for GoFundMe (and other sites) is making sure that the information I presented about John Smith in the charitable campaign is legitimate.  The GoFundMe platform is protected by a guarantee which would issue a full refund in the event of “intentionally misleading” campaigns.

Traditional Charities

The new face of online giving presents challenges and opportunities for traditional charities.  Crowdfunding allows campaigns to be personalized while traditional charities have resources to mobilize large relief efforts.  The resources needed for large scale relief efforts cost money to maintain and organize.

Overhead expenses tend to be a criticism for traditional charities.  The American Red Cross, for example, has several executive officers with annual compensation over $600,000.  Put into perspective, these leaders are in charge of a worldwide relief organization with a 2017 revenue of $2.6 billion.

The benefit of working with a traditional charity is the financial transparency that is required.  Sites like BBB Wise Giving Alliance and Charity Navigator allow potential donors to find out how their money will be spent.  Localized charities with specific causes tend to provide the most cost effective solutions.

Don’t forget the little guy!

The local church, community organization, children’s home, etc. faces the challenge of maintaining an ongoing relationship with members and supporters in this new environment of activism and charity.   Transparency and clear goals are crucial factors for success.  Our church produces a quarterly report that details contribution and where those funds have gone.  For a recent relief effort for Dominica, a report is maintained weekly and available for anyone to see exactly where the money has gone.

All groups accepting donations should be prepared to provide a detailed financial account of spending – whether required by law or not.  The “bad apple” analogy works well in this instance.  One mismanaged group in a charitable field can impact the efforts of all groups.

What are your thoughts on the current state of charity and giving?  Have you ever setup or participated in a crowdfunding effort?  I’d love to hear your thoughts in the comments below…