Crowdfunding provides enormous opportunities for today’s classrooms and school programs to raise money because of its efficiency. Organizers can create campaigns in no time, and share them with hundreds if not thousands of people online.
However, these same opportunities also pose serious risks to those involved. Over the last few years, it has been found that crowdfunding may expose organizers, donors, schools, and districts (especially those without any policies or procedures) to a number of serious liabilities.
A variety of publications about crowdfunding in K-12 schools have been posted, including some from state and local school boards, education law firms and attorneys, state auditors and comptrollers, and even media outlets. Some of these publications contain guidance for school districts around crowdfunding, urging districts to implement policies and procedures around crowdfunding, and additionally including items and content that should be considered.
In order to make it easier for administrators to make decisions regarding crowdfunding in their districts, this article has consolidated and synthesized the common guidance and best practices of four different publications.
This article examines the following four publications:
1. “Crowdfunding in Public Schools: Mitigating Potential Liability
through Effective Policies” written for the National School Board Association’s Council of School Attorneys (COSA) by Erin Duryea Gilsbach, Esq. of King, Spry, Herman, Freund & Faul.
2. “Crowdfunding Classrooms” a Special Report by Dave Yoast, Ohio Auditor of State
3. “Online Fundraising Helps Schools, But Requires District Oversight” published by the California School Boards Association
4. “What School Districts Need To Know About Crowdfunding” published by the Fisher Phillips Law Firm.
For the remainder of the article, references made specific to the above articles will be associated with their number.
Here’s what each publication states that districts should do in regards to crowdfunding:
1. “Schools should have careful regulations regarding who can raise funds on behalf of a school and what procedures and protections should be put into place to protect the school in such instances”
2. “Because of these risks, it is prudent for school districts to adopt a crowdfunding policy that mitigates them.”
3. “Districts need to be aware of all such campaigns conducted in the name of the district, a district school or a district employee. It’s important that the district set ground rules that ensure transparency, fiscal integrity and effective use of the funds.”
4. “Because of these potential legal ramifications, schools should consider establishing a policy either allowing or prohibiting crowdfunding.”
Listed below is the common guidance posted consistently across their publications, followed by the specific suggestions stated by each publication. For school districts looking to get ahead of the issues associated with online fundraising, this guidance should be understood and carefully considered:
Require Prior Administrative Approval of All Crowdfunding Campaigns
1. “Individuals wishing to raise funds for a particular school should be required to obtain written approval after providing pertinent details, such as the site on which the funds would be raised, a complete copy of the proposed listing, and a copy of the school personnel’s personal profile to be listed on the site.”
2. “Require that all crowd-funding campaigns by reviewed and approved by a designated school administrator,” and “Mandate that no donations will be accepted without school board approval.”
3. “Policy regarding online fundraising campaigns that will benefit the district, regardless of whether the campaign is proposed by a district employee or another person or organization, should require prior approval from the superintendent or other designated employee.”
4. “Require review of any draft proposal prior to it being posted on a permissible website. This allows administrators to ensure the draft proposal does not violate any federal or state law and that it safeguards the school from a negative public image.”
Identify An Approved Crowdfunding Site List
1. “Develop an Approved Site List…Several education-based crowdfunding sites already have safeguards in place to prevent misuse of funds and/or misappropriation of materials…consider all of the available sites and approve only those that provide the safeguards deemed most appropriate by the school.”
2. “Designate which crowdfunding services can be used by teachers.”
3. “Some districts may also choose to specifically identify the crowdfunding platforms that may be used, based on the policies and agreements required by certain sites, the way in which the site collects donations, whether donations are sent directly to the school to ensure they will not be diverted or misused and/or the fees or percentage of donations charged by the site.”
4. “Designate permissible crowdfunding websites that teachers can post proposals on. Schools should consider all of the available sites and approve only those that provide the safeguards deemed most appropriate by the school.”
Bonus info: Get the School District Crowdfunding Considerations Guide for a real example of the risks that school districts are facing and the 7 areas that administrators need to consider.
Require That Donations Are Distributed Through the District or School
1. “Only Permit Crowdfunding on Sites that Send Proceeds and/or Items Directly to the Schools, NOT the Individual Employee…Schools should require that funds and/or items be delivered directly to the school administrator “
2. “These should be services that send donations directly to the school, not to the teacher, to ensure that donations are not diverted or misused.”
3. “Districts should ensure that donations are subject to fiscal accountability measures related to the collection, accounting, expenditure, inventory and audit of donations.”
“Identify the crowdfunding platforms that may be used, based on…whether donations are sent directly to the school to ensure they will not be diverted or misused.”
4. “[Donations] must be paid directly to the school and not any individual school representative. The policy should specifically prohibit the donations from going directly to any individual employee.”
Establish That All Donations Are Property of the District
1. “Schools should also make clear, via written policy or procedures, that all funds and/or materials are property of the school and shall remain with the school in the event that the teacher terminates his or her employment with the school.”
2. “Establish that all crowdfunding donations are the property of the school district, to be entered promptly into the district property inventory or deposited in district bank accounts so that they are subject to normal financial oversight and auditing.”
3. “Mechanisms for financial transparency should also be addressed, including a requirement that the campaign…states that funded resources will be owned by the district.”
4. “Specify that the donations are the property of the school…The policy should specifically note that the proceeds or donations from any crowdfunding proposal remain with the school.”
Establish Review & Approval Criteria
1. “Approving administrators should carefully review the proposed posts to ensure that no potential legal liability, violation of state or federal laws, and/or violation of the school’s policy and/or procedures exists. The proposed posts should also be reviewed to ensure that the posts do not paint the school, the district, or any of its employees or students in a negative light. Ideally, school regulations/procedures should prohibit all posting of student images on the site, limiting pictures to that of the classroom, the teacher and/or photos of students where the students are not identifiable (i.e., their hands, backs of heads, etc.). Reviewing administrators should have the authority to deny permission for a teacher to crowdfund on behalf of the school and/or the teacher’s individual classroom where potential issues or violations are present. Where a reviewing administrator spots an issue that might have legal implications, legal counsel should be consulted.”
2. “Direct the designated administrator to ensure that the proposed crowdfunding campaign does not violate any federal or state law, including those governing the confidentiality of student information, and that the campaign seeks donations that comport with the district’s education philosophy, needs and technical infrastructure.”
3. “Criteria to be considered in determining whether to grant the request should be clearly spelled out in the policy, and could include the extent to which the proposed fundraiser:
» is consistent with the district’s vision, goals and priorities;
» conforms with the board’s goal to provide equity in resources across school sites and student populations;
» is compatible with existing infrastructure, if it involves the purchase of technology, equipment or furniture;
» supports a one-time purchase and does not create an ongoing obligation that the board may not be able to sustain;
» does not violate any law or district policy, such as policies that establish criteria for the selection of instructional materials or that protect the privacy of student information and photos;
» does not pose any potential conflict of interest;
» and meets any other factors considered relevant and nonarbitrary.”
4. “Ensure the draft proposal does not violate any federal or state law and that it safeguards the school from a negative public image.”
“Reviewing administrators should have the authority to deny permission for a teacher to crowdfund on behalf of the school or the teacher’s individual classroom where potential issues or violations are present. Where a reviewing administrator spots an issue that may have legal implications, legal counsel should be consulted.”
Livingtree helps districts across the country support online fundraising in their schools by providing complete oversight and financial control through the Livingtree Give fundraising management platform. The platform provides a system for your district office to oversee all online fundraising and crowdfunding activities (in or outside the platform) with built-in tools like automated campaign approval processes, accounting code tracking, and detailed reporting of all fundraisers.
For administrators looking to use this guidance to address the issues of crowdfunding in their districts, check out the blog, “How to Make Crowdfunding Work in Your School District (A Step-By-Step Guide).” This guide covers the process that some specific districts went through in order to solve these issues and successfully support fundraising in their districts.
For additional crowdfunding information including the publications, policy examples, procedure examples, presentations, etc., visit our resources page to download them for free.