Across the country, many school districts are grappling with the complexities of overseeing fundraising efforts conducted by various school support organizations. In 2022 alone, over six million crowdfunding campaigns were launched globally, and by 2030, the World Bank predicts the market will grow to an astounding $300 billion. This trend is no surprise, given how easy it has become to launch and manage campaigns through various online platforms. While some groups have embraced online payment options like Venmo and PayPal, others lack the infrastructure for processing card payments and are still dependent on cash transactions. Adding to the challenge, many fundraising platforms charge high fees—sometimes as much as 12%—which complicates the district’s ability to monitor both the funds being raised and the associated costs.
For schools and fundraising organizations like PTAs, PTOs, and booster clubs, crowdfunding offers a powerful tool to support vital programs, activities, and facility upgrades. However, for districts, this trend presents a range of challenges—chief among them being oversight, transparency, and potential legal or reputational risks. The need for school districts to implement a clear, well-defined crowdfunding policy to safeguard their interests while empowering their organizations to raise funds effectively has never been more urgent.
Whether districts have formal oversight or not, crowdfunding campaigns are already taking place in schools and can expose school districts to significant risks when not properly managed. One of the most prominent risks is fraud. If funds raised are not properly managed, they can be misappropriated or even stolen, leading to legal repercussions and severe reputational damage for the district.
Another major concern is legal violations. When these campaigns lack district oversight, Family Educational Rights and Privacy Act (FERPA) and Individuals with Disabilities Education Act (IDEA) violations are not uncommon. (See Neola Policy 8330 – Student Records and Neola Policy 2460 – Special Education)
The Council of School Attorneys (COSA) cites two examples:
- A teacher in a California school district stated in her crowdfunding campaign that a lack of certain materials prevents her students from achieving their math IEP goals and that the crowdfunding campaign will “assist in implementing their IEP goals and ensuring that their goals are being achieved.”
- A crowdfunding campaign where a teacher shares the story of her 13-student classroom, in which every student has autism, saying, “because of their inability to care for themselves, our classroom becomes filthy and germ-ridden by the end of the day. We need cleaning supplies and health supplies like tissues and hand sanitizer to help keep our students healthy.”
Lastly, reputation management is crucial. Although a crowdfunding campaign may be well-meaning, if it goes awry, it can reflect poorly on the entire district since those campaigns typically use the name, image, and likeness of a school. Any mismanagement or fraud associated with a campaign can make headlines, damaging the trust that the community places in the district.
While some states have comprehensive policies that school districts can easily adopt to govern crowdfunding, other states are just starting to dive into providing guidance. That leaves many district leaders in the position of having to craft their own policy.
A solid crowdfunding policy should prioritize the protection of the district from risks, ensuring a transparent process for fundraising campaigns while maintaining control over the flow of money. Here are some key components to consider when creating a crowdfunding policy for your school district:
- Approval Process:
- Require prior approval for all crowdfunding campaigns that includes a mandatory timeline for submission in advance of the campaign launch. This helps maintain control over the campaigns and ensures they align with district values and goals.
- Clarify eligibility by defining who is permitted to run crowdfunding campaigns, whether it’s a teacher, a school-related organization, or a student group. This ensures consistency and transparency in the approval process.
- Set review and approval criteria that makes clear the district’s authority to deny proposals that do not meet stated criteria. Criteria should align with district policies and goals to ensure the campaigns serve the intended purpose.
- Designated Platforms:
- Mandate the use of district-approved crowdfunding platforms to ensure compliance and transparency. This enables easier tracking of funds and greater oversight.
- Use of Funds:
- Ensure proper financial oversight by stipulating in district policy that all funds raised must be used for the specified purpose and that funds cannot be diverted to individuals.
- Require a profit analysis form to be submitted after each campaign detailing how the funds were allocated and utilized.
- Risk Mitigation:
- Adhere to a district policy that will help mitigate legal risks, such as FERPA violations or potential breaches under the IDEA, in addition to reducing financial risks associated with fraud, mismanagement, and financial malfeasance, providing protection to all stakeholders, including employees, volunteers, and donors.
By addressing these aspects proactively, school districts can safeguard against legal violations, financial misconduct, and reputational damage. Neola provides its clients with policy language, robust procedures, and customizable forms to enable districts to harness the power of crowdfunding while protecting their financial and reputational interests. (See Neola Policy 6605 – Crowdfunding and Administrative Guideline 6605 – Crowdfunding)
This article has been developed in collaboration with Givebacks. Givebacks helps school districts streamline and enhance financial oversight, fundraising, and secure payments, ensuring greater transparency, compliance, and protection for parent organizations and school communities. By providing districts with tools to monitor, manage, and safeguard financial activities, Givebacks helps reduce risk while improving efficiency in school-related transactions. Visit givebacks.com to learn more.