Bee Investigator

A few things to know about crowdfunding

Car washes, bake sales and spaghetti feeds could become a thing of the past in the fundraising world as more people are turning to crowdfunding websites like GoFundMe to support their cause.

Crowdfunding sites raised $16.2 billion in 2014, a 167 percent increase over the $6.1 million raised in 2013, according to a report by Masssolutions. The company collected data from 1,250 crowdfunding platforms.

Creative endeavors, disaster relief, memorial funds, education trusts, vet bills – there are no restrictions for what people can solicit money for on GoFundMe, the No. 1 crowdfunding platform in 2014.

The cause needn’t be noble either; there’s even a section dedicated to funding other people’s vacations.

Whatever the cause, donors expect the funds they give to be used for the effort stated on the website.

Since GoFundMe tops the industry, I’ll tell you a few things you should know about the business to ensure your money is well spent, but I suggest you do research before using any of them to bestow gifts.

First, these are for-profit companies, so you won’t get tax write-offs for your kindness in most circumstances.

GoFundMe does have a charity page that raises money for well-known organizations such as Goodwill Industries International and the American Red Cross. While you can get a tax break for that donation, GoFundMe is going to take its share like they would for any other cause. I would suggest sending your donation directly to the charity.

GoFundMe collects 5 percent of the total donation volume. The company that processes the payment also charges around 3 percent.

“While GoFundMe is a for-profit company, let’s see how our operating costs measure up against some famous charities dedicated to helping others: Red Cross (9.1 percent), Susan G. Koman for the Cure (17.8 percent), Wounded Warrior Project (41.9 percent),” Kelsea Little, GoFundMe’s media director, wrote to me in an email.

She has a point, but when you donate to a reputable nonprofit you can rest assured that there is some accountability in how it spends the money. The public can access tax records that detail its earnings and expenses.

For example, the American Cancer Society’s tax form states funding goes toward research, prevention programs and patient care. But if you want to help pay for the chemotherapy treatments of an individual whose story appears on GoFundMe, there are no assurances.

“With millions of campaigns, it’s not feasible for GoFundMe to investigate the claims stated by each campaign organizer,” Little wrote. “Rather, we provide visitors with the tools to make an informed decision as to who they choose to support.”

Essentially, they encourage donors to “only donate to people you personally know and trust.”

It makes sense; it’s really up to the individual to make wise charitable decisions.

But then GoFundMe suggests to organizers that they leverage their local media to promote their story, which, in effect then solicits money from thousands of strangers.

“Your local newspaper and TV news stations are starving for interesting stories like yours,” the GoFundMe website reads.

I disagree with the starving part, but The Modesto Bee has included links to GoFundMe accounts in a number of stories since 2012, two years after the company was founded.

There have been some pretty positive outcomes to those stories.

A Waterford boy raised about $10,000 on GoFundMe for the construction of the city’s skate park, which opened in February.

“GoFundMe was a catalyst to our connection with the grassroots fundraising efforts underway in the community,” said Waterford City Manager Tim Ogden. “Donations received through change buckets, car washes, recycling bottles, face painting, et cetera, were added to the site in lumps to show fundraising progress.”

GoFundMe was also the source of fundraising that helped a Modesto couple buy iPads for two brothers suffering from progressive multiple sclerosis who were featured in The Bee.

Many of the stories in which we’ve included GoFundMe links are about victims of homicides, crashes or other tragic circumstances. The family is usually raising money to defray funeral expenses or establish a trust fund for surviving children.

We know the events to be true and the reporter is going to talk to the family about what they intended to do with the money but, again, there are no assurances.

Whether it’s a nationally publicized disaster such as Hurricane Katrina or a local tragedy, there is no shortage of people willing to capitalize on kindness, defrauding people out of money under the guise of a charitable effort.

Follow your gut, do your homework and use your good judgment when you’re feeling philanthropic.

Have an item for Bee Investigator? Contact Erin Tracy: (209) 578-2366, etracy@modbee.com, @ModestoBeeCrime

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