Crowdfunding: a licence to collect money?

Tragedy has just struck your friend at work. There are going to be big costs, and you want to help. In the old days, you’d send the hat around; these days you’d start a collection on the internet using a crowdfunding platform. See here for examples.

You’ll need a bit more than a hat, but not much. After just a few easy steps you can be asking the world for money to help your friend. I tested it. No catches, nothing onerous, no regulation, no promising to do anything.

Well, not that most people will notice anyway. Because most people don’t read the small print, the terms and conditions of using the service. In these it’s odds on that you will find that it is your responsibility to comply with all applicable laws and regulations. See the third last section here for an example.

And by starting the crowdfunding campaign you have entered the world of fundraising, and that, I’m afraid, is regulated. And in Australia, because of our federal system, there’s not one set of laws and one department to deal with, but potentially one (or more) for each of our eight states/territories.

So for the conscientious law-abiding among you out there you would either ask somebody you think might know, or Google ‘crowdfunding and fundraising laws’. You’d get no joy from the latter, and there aren’t many of the former who do know, so here’s the result of me checking the requirements in the ACT for you.

Searching ‘fundraising’ on www.act.gov.au takes one to a page on ‘regulatory compliance’ for ‘public events’. You wouldn’t have thought that your campaign was a ‘public event’, but in the list of activities that may require the bureaucrats’ permission you see ‘Charitable Collections Licence’. Sounds more like you. Plus as you read further on the page you see that ‘fundraising’ in the ACT appears to be about what they call ‘lottery-type activities’ run at an event. Not you, so back to ‘charitable collections’.

A collection is

the soliciting or receiving by a person of money or a benefit if, before or during the soliciting or receiving, the person represents that the purpose of the soliciting or receiving, or that the purpose of an activity or enterprise of which the soliciting or receiving is part, is or includes a charitable purpose.

Through all the ‘soliciting and receiving’ here, it says that you are collecting if you are telling potential donors that you are collecting for a ‘charitable purpose’. That seems to match what you are doing. Or does it? Here’s what the same page says about ‘charitable purpose’:

In general a charitable purpose includes:

–  the relief of poverty or sickness or the needs of the aged;

–  the advancement of education;

–  the advancement of religion; or,

–  purposes beneficial to the community (benevolent, philanthropic and patriotic).

For a purpose to be charitable it must also be for the public benefit and

–  not confer a private advantage;

–  not be harmful to the public; and,

–  also may be extended to include social, mental and spiritual benefits.

I guess you could say that helping your friend is ‘beneficial to the community’, but this would be only in the sense that he is a member of the ‘community’, and that’s a very narrow definition of ‘community’. So probably not what they mean. The next requirement, that your purpose must be ‘for the public benefit’, seems to rule out your campaign – the money is for one person, and one person only.

For extra comfort with your decision, you check the list of exemptions. None apply except for possibly this one:

the soliciting or receiving of money or a benefit by an entity if the proceeds received from collections conducted by the entity is less than $15 000 in a financial year.

You don’t feel much like an ‘entity’, but that doesn’t matter because you plan to set the target at only $10 000. Red tape avoided. (And that includes a report to the Government when the campaign’s finished.)

What if you wanted to raise say $30 000 though? It’s ACT legislation, so perhaps it’s implied that it is the amount collected in the ACT to which the limit applies? Do you have to estimate how much will come from the ACT as opposed to other states and territories. (And maybe overseas.) Better ring the office responsible.

The first person at that office hadn’t heard of crowdfunding, and when she realised that my question couldn’t be answered by her standard responses, passed me to her manager. She too hadn’t heard of crowdfunding, and when she realised that she didn’t have the answer to the ‘public benefit’ question, promised to ring back. On the return call she said that, as a result of discussing the question in the office, it was thought that such campaigns were indeed a ‘charitable collection’. However, if I aimed to raise less than $15 000 in the ACT, I would be exempt. And that an application could be lodged if the campaign, after starting, looked like reaching $15 000 from the ACT. (How, with crowdfunding, would one know?) Oh, and that they would require medical evidence that it was a genuine cause. She had nothing to offer on the ‘public benefit’ question, confusing it with ‘private advantage’.

I’m not convinced, by a long shot, that I’ve got to the definitive answer, so I’m off to read the legislation and draft a written request to the department for a more formal ruling. I’ll leave you to start on the other seven states.

 

Using the ACNC Register to decide where to give in a crisis

A couple of my friends have asked me who they should give to if they want to give cash – the right gift by the way – to help Nepal.  Right after one of the Assistant Commissioners of the Australia Charities and Not-for-profits Commission (ACNC) shared, on LinkedIn, the Australian Council for International Development’s (ACFID) 28 April post on just that question.  The ACFID encouraged Australians to donate to the 31 ACFID members listed in their post.

But which one (or more if you like, but less than 31)?  How to choose?  The ACFID says that they are all equal, but left any statement about how confident you could be that your money would (a) get to Nepal, or (b) be used effectively, to your confidence in ACFID.  The Assistant Commissioner was more helpful though to the average giver, going on to say in his post that these 31 were ‘charities that you can support with confidence’.

So, my friends, is it wise for you to accept this recommendation, saying that these 31 charities met all reasonable objective tests for charities in whom you can have ‘confidence’, and therefore move to your personal preferences to select one or more recipients for your gift?  I say not.  I say that there is some basic ‘due diligence’ that you can do (or have done for you).   And the place to start is the place recommended by the ACNC:  the ACNC Register, a register of all charities registered in Australia[i].

Let’s see what happens when I put the first nine and the last six of the ACFID’s 31 charities to this test.

The aim is to get down to a much smaller number than 31.  It’s a humanitarian crisis so speed is important; I will therefore eliminate or retain a charity based solely on what is said in the register[ii] (or its attached documents).

First up, approximately 25% of a charity’s entry is devoted to describing and showing where in the world the charity operates.  We are giving to Nepal, so if ‘Nepal’ is not mentioned in the ‘Operates in (Countries)’ list, we would want to check on its website.  Unfortunately, even though this is one piece of information thought important enough to put on the one and half pages of information on each charity, and the Commissioner promotes the use of the charity’s website if you want more information, it is absent for two charities:

       Act for Peace, and

Anglican Board of Mission – Australia

Out for these two then.

Second, is there a recent financial report of the type required by the ACNC to look at?  Not for these five:

ActionAidAustralia

ADRA

Australia for UNHCR

Lutheran World Service, and

UNICEF Australia

[Comment added 5 May 2015].  For the first and last of these, they are only in the list because of my requirement for recent financial statements, not for a non-compliant report.)  If you are happy to either rely on financial information that is at least 16 months old, then please remove them from this list add them to the list in the final paragraph.

Down to eight now.

Third, is there an audit report included in the financial report?   That eliminates Australian Himalayan Foundation, the one charity in the list that works solely in Nepal.

[Comment added 5 May 2015].  I missed the audit report (two paragraphs under another heading).  However, because the financial report, including the audit report, is a concise/summary report rather than a full report, the result is the same.

Fourth, did the auditor give a ‘clean’ opinion?  For two of my 15, he couldn’t.   These two:

Transform Aid International

World Education Australia

(And particularly disappointing, given that we are making a donation, was the fact that both the qualifications were because the charity had decided that it couldn’t implement controls to ensure that all the money intended for it actually got into their bank account.)

And for Anglican Aid, the auditor tells us that because the financial report, a special purpose report, was designed for the Anglican Synod of the Diocese of Sydney it ‘may not be suitable for another purpose’.  Not confidence inspiring for the donating public, so out it goes too.

That leaves just three charities out of the 15.  Union Aid Abroad – Apheda has submitted their Annual Information Statement (AIS), but it was three months late, and that was after being allowed seven months after their year-end to submit.  Dents the confidence, so out it goes.

Anglican Overseas Aid – not to be confused with Anglican Aid above – submitted their AIS on time, but their financial report was three months late.  I’ll let you decide whether they stay in your shortlist.  If not, we down to two:

Leprosy Mission Australia and

World Vision Australia

Extrapolating, that’s four, maybe five out of the 31.  Let me know if you need help with a couple of further objective criteria to get the number down further.

 

 

 

[i] For instance, in their latest media release, they said “we encourage the public and donors to use the Charity Register as a resource to help them make informed giving decisions” (http://www.acnc.gov.au/ACNC/Comms/Med_R/MR_125.aspx).

[ii] I had assumed that they would at least all be registered charities.  I was not disappointed.  I had also assumed that they would all be up-to-date with the lodgement of the required Annual Information Statement.  Again I was not disappointed.  (Although if this research had been a few months earlier, there are at four that may have failed on this criterion, having submitted their AIS after the standard period allowed.)