How much do you really know about charitable crowdfunding?
Combine today’s online social sites with your neighborhood car wash or barbeque fundraiser, and you have crowdfunding, an online community donating contributions towards everything from a business venture to a charitable cause. It’s a wonderful way to give towards a worthy cause or help someone in need; however, the BBB has seen firsthand crowdfunding scams involving tragedies, like Hurricane Sandy and recent floods in Texas, to name a few. A crowdfunding page may be created, for instance, requesting donations for a family who experienced flood damage in their home to assist with repairs.
Anyone can easily create a page on a crowdfunding site. Some sites’ only vetting process is requiring a Facebook and PayPal account. The page organizer sets a financial goal to be raised and length of the campaign, usually from one day to 60 days. That’s it, no additional set up required. Many sites may remove a page if it cannot be verified, and many ensure safe encryption to protect transactions; however, this alone does not protect against fraud. Scammers are relentless, and unfortunately, many crowdfunding sites rely on donors to report any fraud.
The Better Business Bureau of Greater Houston and South Texas’ Senior Coordinator of Philanthropy Review Ashly Ordaz compiled this information and urge donors to protect their gift to a crowdfunding page by following these tips:
Don’t give blindly. Investigate before you give. Check BBBHouston.org for public BBB charity reports. The BBB is the only charity monitoring organization that evaluates charities against 20 Charity Standards for Charity Accountability; items reviewed include an audit, IRS Form 990, among others. Also, visit the charity’s website for more information about its mission.
Ask questions and request information. Reach out with your questions, including: Is verifiable contact information available? Are progress reports posted? Are donors acknowledged? Specialized crowdfunding sites may be more adept to spot problems as opposed to a site that allows any type of campaign, which may be more challenging to identify scams.
Verify if your donation is tax deductible. Please be aware that donations to crowdfunding projects that help individuals may not be tax deductible. Remember to check if the organization is registered with the state and IRS as a 501(c)(3) charity. Also, always consult with your tax professional before giving.
Read the website terms and conditions. Check if the site disclaims legal responsibility for campaigns created on their site. Do they self-regulate? Is there another vetting system, other than checking Facebook and PayPal? If funding goals fail, will you be notified? Under what conditions are donations refunded, if at all? How and when will money be returned?
Remember, scam artists will emerge after a natural disaster or tragedy. Scammers strike while the “emotional iron is hot” and find different ways to create fake crowdfunding pages. Always ask how they are specifically helping the cause. Are they a victim, a family member? Is there verifiable information for the featured organization?
Give to someone you know. Always try and give to a person or organization you know and trust. Campaigns posted by individuals are more challenging to verify.
Scammers continue to use social media as a tool to promote their “cause,” and unsuspecting donors may, unknowingly, share bogus information throughout social media.