Why nonprofit organizations shouldn’t use Dropcash

Dropcash is a simple tool that tracks donation amounts for someone raising money.  It uses Paypal and is very easy to set up.  The only direct costs that the fundraiser will incur is the fee to Paypal.

Nonprofits and Software providers can learn a lot form its simplicity but nonprofits should not direct their own fundraisers to use dropcash.  Here’s why.

  • Taxes.  People raising money on behalf of an organization are not an officially recoginized 501c3 nonprofit.  As such, donations are NOT tax-deductible.  Furthermore, the person doing the fundraising needs to claim the donation as revenue.  There is a potential for all sorts of laws to be breached here.  As a nonprofit, you’ve got to ask yourself is this worth it.  Not really.  Potential donors can’t be questioning whether or not you will actually get the money.
  • Tracking or lack thereof.  If people are donating to your organization, you should know.
  • Brand protection.  Who knows what this perosn is spewing on their blog?  Does it represent your organization?  Even worse, does it make false claims or make you look bad?  It’s just not worth it.
  • Reporting.  You need more and better info to build on the fundraiser’s efforts in the coming years.
  • Paypal.  I’ve used Paypal as a purchaser before.  I can’t remember the last time, but I still get those emails asking me to update my account (i think they are fake).  Regardless, why put your donor through that hassle.

All this being said, I think if someone was just trying to raise money online for themselves it is quick and easy.  But anyone doing Third Party Fundraising for a nonprofit should check with the nonprofit that will be getting the proceeds first.

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