How To Prepare Your School District For Crowdfunding Risks
Crowdfunding continues to be an increasingly popular way to raise money. So popular in fact, that school districts and their teachers are beginning to turn to popular donation platforms to secure additional funding or to offset the costs of classroom materials.
Even though crowdfunding has proven to be a great tool for schools and teachers, it’s important to understand how this practice can be risky business for educators and entities. To combat liabilities associated with crowdfunding within your district, regulatory policies should be put in place to govern how schools and personnel use this fund-generating resource.
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We all know that teachers regularly shell out their own cash to purchase material designed to enhance their students’ learning experiences. We also know these additional classroom resources aren’t cheap, which is the number one reason many educators are turning to crowdfunding. So, what exactly is crowdfunding?
Crowdfunding is when an individual or organization asks for and accepts donations from the general public over the internet to fund a specific cause. The practice has been wildly successful in the not-for-profit sector and has helped many seek treatment for health concerns. But in recent years, crowdfunding has gained momentum among the education community. Unfortunately, nationwide, school officials are not prepared to address issues that may arise as a result of crowdfunding.
Any time a school or educator starts a crowdfunding project, they open themselves up to substantial liabilities. With all of the potential risks that can result from these fundraising campaigns, it’s crucial for school districts to implement crowdfunding policies that will help protect them.
The following are issues school districts and their educators must consider in order to reduce the risks that come with crowdfunding:
- Financial Records: Crowdfunding deals with money and items of value so school districts and their teachers must understand the laws associated with this type of transaction. For example, any money received or collected by a public employee must be deposited and accounted for by the district’s treasurer within a specific timeframe. If the money is not recorded within the designated timeframe, the treasurer could be held legally responsible. Your school’s crowdfunding policy should require that all campaigns be registered by the school. Moreover, it should be stated that donations belong to the school district. Payments should be made directly to the school, never directly to a teacher.
- Confidentiality: Federal laws are in place to ensure that the disclosure of confidential information about a student isn’t given without the proper consent. Any school district that fails to adhere to these laws risks losing government funding. To maintain student confidentiality, place a trusted school official in charge of reviewing all crowdfunding campaigns before they go live to confirm they are within federal regulations.
- Reputation: Typically, a school’s likeness will be used for crowdfunding campaigns. Protecting your school’s reputation and credibility is vital for success. Consider a policy that requires a school official to review all campaigns to ensure that the district or schools within the district are not portrayed in a negative light. This will help any damages to a school’s reputation or credibility.
As you move forward with your own policy, be sure to remember to include the following additional guidelines:
- State which crowdfunding platforms are permitted for use by the district’s teachers.
- Require all donations be approved by the school board before they are accepted.
- Require the purpose of all donations to be clearly stated.
If you don’t have a crowdfunding policy in place already, make it a priority for the district. In addition to the layer of protection a policy will provide, it will also help ensure that the funds raised as a result of these online campaigns will go toward bettering the student learning experience as intended.
If you want to learn more about crowdfunding policies or if you are looking for assistance, email Rea & Associates. Our government services team is always happy guide you through the process.
By Derek Conrad, CPA (New Philadelphia office)
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