New Giving Fund Compliance Standards For Nonprofits

PayPal Charitable Giving Fund Adopts Industry Leading Compliance Standards After MultiState Group Investigation

BACKGROUD

The PayPal Charitable Giving Fund, Inc. (PPGF), is an independent charitable organization that provides companies such as PayPal, eBay and other technology platforms, with a secure and easy way for their customers to support causes that matters to them. Donors can choose to make donations to organizations that are among the PPGF participating charities. PPGF then ensures that 100% of every donation reaches the donor’s chosen charity.

The benefit of giving through PPGF or any other Giving Fund is that it provides donors with a professionally managed platform where they give to desired causes at a fraction of cost of donating through a private foundation. Apart from having an exposure to millions of potential online donors, the benefit to participating charities is the relatively low fundraising costs.

To be included in the PayPal Giving Fund, charities must meet the following criteria:

1. Verification of the tax-exempt status of the charity in the United States through regular checks of GuideStar’s database of charities in good standing with the IRS.
2. Confirmation through GuideStar’s database that the charity has not been identified by the United States Office of Foreign Assets Control as being subject to sanctions.
3. Verification by PayPal that a charity has not previously breached PayPal’s Acceptable Use Policy.

When a selected charity does not pass PPGF’s vetting requirements or does not maintain criteria to remain eligible, PPGF could remove the charity and redirect the charitable funds to a similar charity.

THE ISSUE

For whatever reason, on December 23, 2016, PPGF began listing charities on its giving website, Cause Hub, that were not enrolled with PPGF but that were on a list received from GuideStar of 501(c)(3) charitable organizations. It is worth noting that other third-party fundraising platforms also did the same.

PPGF’s additional of ‘unenrolled’ charities led to a multi-state groups consisting of representatives of state Attorneys General, Secretaries of the State, and state consumer protection agencies to issue a Civil Investigative Demand and Subpoena, through the Nebraska Attorney General’s office. The multi-state group raised a number of issues, including question as to whether PPGF adequately disclosed that:

• A donation made by a donor via the PPGF website was a donation made to the PPGF entity and not the intended charity selected by the donor.
• PPGF did not have a prior relationship with all the charities listed on the website because some charities were “unenrolled” charities.
• A donation would not be provided to the intended charity that is listed on its website if the selected charity did not pass PPGF’s vetting process.
• PPGF might reassign their donations, also known as “exercising its variance power” over the donors’ donation, if the intended charities selected by the donors did not pass PPGF’s vetting process.
• Donors would not be informed that PPGF had “exercised its variance power” if the intended charities selected by the donors did not pass PPGF’s vetting process.
• Donors’ contact information may not be passed on to the intended charities if the selected charity is deemed ineligible to receive the donation.
• PPGF’s vetting process may not always include a review of each selected charity’s compliance with each state’s charitable registration requirements.
• The time frame it would take for potential donors’ donations to reach the intended charities.

ASSURANCE OF VOLUNTARY COMPLIANCE

In response, PPGF suspended the listing of unenrolled charities on is Cause Hub to address this issue. PPGF fully cooperated with the multi-state group and raised the bar for other third-party giving funds by implementing industry-leading disclosure standards for the protection of consumers.

PPGF agreed with the Multistate Group to implement the following disclosure provisions, with the effective date being January 14, 2020:

• Make unavoidable and prominent disclosures that the donors are making donations to PPGF and not to the charity they select. For the purposes of this AVC, “unavoidable and prominent” means that the information is not included in an optional pop up window or on another page accessed by a link on the original page. It also means that the information must be located on a page that each and every donor must access prior to donating to PPGF and in a position on that page that is in immediate proximity to a necessary field or button used by each and every donor.
• Not use language implying that potential donors are directly donating to their chosen charity.
• Make unavoidable and prominent disclosures to potential donors regarding fees associated with using PPGF’s online platform, or if no fees are charged, the absence of such fees.
• Make unavoidable and prominent disclosures regarding the expected time frame in which the grant to the charity chosen by the donor will be made.
• Make unavoidable and prominent disclosures that PPGF has the ability, under defined circumstances, to reassign funds to a similar charity.
• Provide a general description of circumstances that would cause the reassignment of funds to a similar charity, including a straight-forward explanation of any vetting processes. The description regarding the circumstances of reassignment must be directly accessible from a link within the disclosure set forth above.
• Disclose whether charities are reviewed for compliance with state charitable registration requirements.
• Disclose to potential donors that their contact information will not be shared with charities that are ineligible to receive a grant as a result of any vetting procedures.
• Notify donors when PPGF exercises its variance power and redirects a donation to an organization other than the one the donor selected.

For more information, click here.

By Franklin Asongwe