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When fundraising is too successful
UPDATED 3rd June 2020
Fundraising can be a tough gig. There are so many worthwhile causes in constant competition that it can be hard to find donors and reach your goals.
With over 58,000 different charities in Australia, we know that many are often stretched for resources. But what happens when an incredible tragedy really touches people around the world and pockets open with an avalanche of donations?
The recent bushfires across our country invoked this exact response. Viral social media was the vehicle and we are now seeing a new challenge unfold for those who sought to raise money for specific causes.
This unexpected result has created an almighty headache, so today we want to discuss how you can avoid the same thing happening to you.
What is your fundraiser for?
One of the most obvious lessons learned from the recent bushfire related fundraising efforts is to be careful how you describe your purpose. The more specific you are with your intended distribution of funds, the more constrained you are when it comes time to spend.
The success of Celeste Barber’s fundraiser is undeniably impressive. Over $50 million raised from all corners of the globe – it was an amazing result and it far exceeded expectations. But with that success has come some headaches.
In line with good practice, and as required by Facebook, Ms Barber nominated a registered charity – the NSW Rural Fire Service Brigades and Donations Fund (The RFS Fund) – as the fundraising recipient, which would have been just perfect for the $30,000 target she hoped for. But when the world opened their hearts and wallets, it became apparent that there was a limitation on how that volume of funds could be distributed. The RFS Fund’s trust states that any donations must be used…
“to enable or assist [RFS] to meet the costs of purchasing and maintaining fire-fighting equipment and facilities, providing training and resources and/or to otherwise meet the administrative expense of the brigade which are associated with their volunteer-based service activities.”
Update 3rd June 2020:
The NSW Supreme Court has considered this matter and handed down its decision on 25 May 2020.
The NSW Rural Fire Service asked four questions of the Court in relation to spending that $51 million, and three received a “yes”. The one “no” was whether funds could be paid to other charities or rural fire services to assist in providing relief to persons and animals affected by bushfires.
The Court concluded that “Some donors may have intended or hoped that the money they donated would be used for the purposes beyond those which the Court has advised are permissible. Despite the [NSWRFS] trustees’ wish to honour those intentions or hopes the law provides principles that ensure a degree of certainty in the application of trust funds including charitable trusts funds and the Court has applied these principles in giving its advice in these reasons.”
The trust does not allow for the redistribution of funds to other charities or to other services that are undoubtedly providing necessary support to the affected communities. So, despite the overwhelmingly kind-hearted initial motivation, there is now a lot of money tied up by legal limitations.
A lesson fundraisers can take from this is to ensure that your purpose and objectives are crystal clear, and potential donors understand how the funds will be utilised. It would take a highly optimistic fundraiser to consider the ‘problem’ of too much money, but the bushfire fundraising effort might encourage that thinking in the future. Fundraisers may need to consider how they can build in flexibility to redirect dollars should their results be greater than expected, without being so vague as to discourage donors or be seen as poor governance.
Know your fundraising laws
Making sure that your fundraising meets all legal obligations is an absolute must – primarily because there are legal penalties if your organisation acts unlawfully and the damage to your reputation can be irreparable.
It is also important that as an industry sector, not for profits are ethical and maintain the public’s trust. Unlawful fundraising can severely impact public confidence and make all charitable efforts come into disrepute.
Each state and territory in Australia has a different regime for fundraising and if you anticipate that your campaign will run across the nation, you should be familiar with each region’s compliance requirements. Remember that online donations can come from anywhere… so you must observe laws outside your own state.
Justice Connect Not-for-profit Law has a Guide to Fundraising Laws in Australia available online that provides an overview of these rules.
Your obligations
When you undertake a fundraising campaign, you have obligations to your donors, as well as regulatory commitments.
First and foremost, you need to make sure that your campaign is honest and transparent. You should not have any misleading information about how donations will be utilised and the purpose of the campaign should align with your organisation’s mission. And of course, when you receive the funds, you need to make sure you distribute them accordingly… shared with the beneficiaries you outlined in the description of the campaign or used for the specified purpose.
Licence and registration details must comply with regulations for all your marketing collateral. Again, remember that each state has its own laws so you might need multiple licences.
Fundraising record keeping and accounting should also be meticulous to minimise confusion post-campaign. Accuracy is key and you need to make sure donations remain separate to other organisation funds.
There’s no doubt that fundraising is complex, but with thorough planning and understanding of the legal requirements, you can be confident that your success will be a cause for celebration… not a financial nightmare.
At Accounting For Good we have a team of highly skilled NFP accounting specialists. We are unmatched in our technical knowledge and expertise. Contact us if you would like to find out how we can help your organisation today.
Read more not for profit accounting articles.
