Purpose Purpose Purpose
The unfortunate complications encountered by Celeste Barber’s Bushfire Fundraiser are an example of good intentions colliding with the legal concept of charitable purpose. Here are two lessons that all charities can learn from the saga.
Background
Celeste Barber’s extraordinarily successful Bushfire Fundraiser through Facebook broke records, raising more than $51 million. The fundraiser was accompanied by the following text:
“Want to join me in supporting a good cause? I’m raising money for The Trustee for NSW Rural Fire Service & Brigades Donations Fund and your contribution will make an impact, whether you donate a lot or a little. Anything helps. Thank you for your support.”
As with all Facebook fundraisers, donations went to the Paypal Giving Fund, a public ancillary fund set up to receive and distribute funds to deductible gift recipients.
Given the large amount of funds raised and the relatively limited purpose of the NSW Rural Fire Service & Brigades Donation Fund (the RFS Fund) donors and media then began asking how the money was going to be distributed and to whom. There were suggestions (including from Ms Barber) that the funds would be distributed across a range of different organisations and states/territories.
At this point Barber learned (through some “pretty long and pretty boring conversations”) that things were not so simple – amongst other things, the RFS Fund trust deed prevents money raised from going to anyone other than the RFS. Once the funds go to the RFS, they can’t (easily) be distributed by the RFS to bushfire relief organisations, such as those providing housing or services to affected families.
Others have proposed solutions for a broader distribution of funds. Below, we focus on the principles at play and key lessons charities can take away.
Lesson 1 – What you say when fundraising constrains what you can do with the funds
The first lesson is for charities (and individuals and organisations) who fundraise – be careful when articulating the purpose you are fundraising for, and how you intend to spend the money.
Some donors have asked why PayPal doesn’t simply distribute the funds raised to a number of different organisations. Unfortunately, PayPal can’t do so without potentially breaching the law. The accompanying text for the Celeste Barber Fundraiser clearly said funds would go to the RFS Fund. The Facebook page also listed the RFS Fund as the charity the fundraiser was “benefitting”. There are terms on PayPal’s website that state that it retains exclusive control over how funds are distributed, but overall it was very clear to donors who read the page that money was going to the RFS Fund and not to other organisations or funds.
This constrains how the funds can be distributed. If PayPal distributed the funds in a manner contrary to the clear purpose of the fundraiser, it could be in breach of fundraising, consumer and trust law:
- Fundraising laws vary from state to state, but generally require fundraisers to ensure funds raised are directed to the beneficiaries or purpose communicated to the donors;
- Consumer Law includes prohibitions on misleading and deceptive conduct in trade and commerce – which the ACCC has stated extends to some fundraising campaigns.
- Trust law may also impose a trust over donations for a particular purpose – in which case use for any other purpose breaches the trust.
These are sensible restrictions, but may have unintended consequences for charities that are not careful with their fundraising materials. For example, a health care charity might say in its fundraising materials that “100% of your donation goes to free hearing tests”. This fairly innocuous statement could breach the above laws if the health care charity used some of the money for unrelated admin costs, or a different program (such as eye-sight tests).
Charities can avoid this through clear, careful fundraising communication. Instead of “100% of donations” charities could say “Your donation will help us provide free services like hearing tests”. This is makes the charity’s intended use for the donation clear but still gives that charity flexibility if circumstances change.
Lesson 2 – A charity’s purpose constrains how it can use donations it receives
The second lesson is for charities who have received funds– you can only spend funds to further your charity’s purpose.
The RFS Fund Trust Deed states that its Trustees must use its funds:
“to or for the Brigades in order to enable or assist [RFS] to meet the costs of purchasing and maintaining fire-fighting equipment and facilities, providing training and resources and/or to otherwise meet the administrative expense of the brigade which are associated with their volunteer-based service activities.”
Supporting Brigades is important for bushfire preparedness, but given the amount raised donors (including Ms Barber) wanted to provide broader relief – including to wildlife and affected families. The restrictions of the RFS Fund will make this very difficult to achieve.
This is not a failure of charity law. Being purpose-driven (rather than profit-driven) is what separates charities from the for-profit sector. Purpose helps donors know what they are supporting. It also provides charity Boards with a framework to guide their decisions. There a good reasons why charities can’t stray outside their purpose.
For charities, this is a reminder to be familiar with your purpose (usually set out in your governing document), and make sure your resources are directed towards it. We often engage with charities with good intentions that want to support a cause or project outside their usual activities. All too often the charity’s focus is on the value of the cause or project without first establishing whether it is consistent with the purpose of the charity.
Next steps
The Celeste Barber fundraiser is a heartening example of generosity in the face of disaster, but it also highlights the importance of careful fundraising communications and awareness of charitable purpose. Charities should ensure they understand these principles.
If you need help, have a conversation with our For Purpose team at Moores. It won’t be long or boring, and it might be just what you need to ensure your fundraising efforts don’t go awry. For more informaiton, please do not hesitate to contact us.