RAQs: Recently Asked Questions

Topic: Fundraising - 10/04/2017
A member asked if there are any legal issues to consider when using GoFundMe to fund-raise, especi...
Posted: Wednesday, October 4, 2017 Permalink

MEMBER QUESTION

A member asked if there are any legal issues to consider when using GoFundMe to fund-raise, especially for association libraries.

WNYLRC ATTORNEY'S RESPONSE

The lawyer answers…

Fund-raising in the current climate (or any climate) is tough.  There are state and federal accounting rules, bylaws, “best practices,” and internal policies to abide by, while at the same time there is pressure to make sure the campaign is well-executed, fun, and most of all: productive. 

The various online options for fundraising enhance productivity.  Online fundraising can bring a new array of donors into the mix, can reinvigorate current benefactors, and can make giving as easy as sending a text message.  It is also becoming a necessity…for some (mostly under age 35) donors, not offering these options can mean your fund-raising effort doesn’t exist! 

What does a library have to coordinate when getting into the world of online fund-raising?  There are a host of legal issues.  Our member asked about GoFundMe, the current site du jour, so we’ll use that one.

First of all, for those libraries that are registered 501(c)3’s and charitable not-for-profit corporations, no matter where the fund-raising takes place, the solicitation, donor acknowledgement, accounting, and reporting are governed by the same rules as your “analog” fund-raising.  So, first, when evaluating whether or not to use a GoFundMe, make sure your treasurer and accountant are part of the set-up, and you check your policies, so internal awareness and regulatory compliance can be assured.

GoFundMe (and others) wants you to use their utility for your “Campaign” (as they call it in their “Terms” as of 10/23/2017) so they have thought about these things.  That said, there is a catch.  Here is how they support efforts by charitable entities:

Charitable Giving: Campaigns are not charities to which you can make tax-deductible charitable contributions. However, in addition to the Services described above, GoFundMe permits Donors to contribute directly to certain charitable organizations ("Charities") through the Platform. Any donation you make to a Charity through the Platform will be subject to a Services fee as described at http://www.gofundme.com/pricing. You understand and acknowledge, however, that GoFundMe is not a charity. If you or your charity would like to register to be listed as a charitable organization on the Platform, please contact us at support@gofundme.com and we can help facilitate that process. As used in this Agreement, the term "Campaign" does not refer to a Charity, and you acknowledge that contributions to Campaigns are not deductible under your jurisdiction’s applicable tax laws and regulations.

See what they do there?  They put the tax issue on your organization, while making sure they still get their fee!  --And considering that these fees can be almost 8% of the money donated, it can add up.

So, second, do the math: does the potentially broader audience and ease of donating warrant the payment of the fee?

That said, this is the USA and GoFundMe provides a service for this fee.  For smaller libraries without big advancement, marketing, and IT departments, sites like GoFundMe can provide an easy-to-use “front end” for your campaign.  You can tell your story, use their various resources for promoting the campaign, and get a polished-looking product entirely supported by the vendor’s structure.  Of course, the content in that “front end” still has to be supplied by you, and it should be coordinated with the library’s website and social media presence.

So, third, ask: does the library have the technical and outreach ability to make the best use of the utility?  If no one on staff is confident about gracefully integrating the link on the library’s website, and using social media outreach to drive donors to the site, other avenues might be a better use of resources.  In other words: for some places, online is the way to go, while for or others, up close and personal could still be a winning strategy (with no fee!).  This is a question only your internal team can answer.

And finally, does the type of library or archives you are affect this issue?  Absolutely, but there is no categorical rule on this. The minutia of a library’s bylaws, IRS status, policies, and the goals of the fundraiser govern the use of online fundraising. 

Generally speaking, if an institution can fundraise for something in the “real” world, they can do it online.  Just make sure your solicitations, accounting, and reporting follow the usual rules…something that starts (and ends) with making sure your team is in the know, has designed the campaign before it is launched, and has the capacity to solicit, acknowledge, account for, and report to donations as required.

As offline, so online!  Good luck.

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The WNYLRC's "Ask the Lawyer" service is available to members of the Western New York Library Resources Council. It is not legal representation of individual members.