IN THE TRENCHES

Tips for Creating an Online Fund-Raising System

Even the smallest charities can give online fund raising a try, say those who have

ALSO SEE: Small Charities Find Online Giving Full of Rewards and Challenges

helped nonprofit organizations set up that option for donors.

Nonprofit services such as Network for Good and CanadaHelps.org can allow small organizations -- even those that do not have their own Web sites -- to accept online donations. Called "charity portals," these sites allow donors to search for the name of a charity to which they want to give and make their donation online. The portal electronically transfers the money to the charities, though some portal services deduct a credit-card or other processing fee first. But once gifts reach about $20,000 annually, nonprofit groups should consider turning to more sophisticated for-profit service providers, says Tim Mills-Groninger, associate executive director of the IT Resource Center, in Chicago, which offers technology help to nonprofit clients. Although he acknowledges that the $20,000 threshold is somewhat arbitrarily chosen, it does indicate that online giving has become a significant source of revenue, rather than an incidental one.

Depending on the route taken by an organization, starting costs for an online fund-raising system can range from free if the organization uses a charity portal to thousands of dollars if an organization builds and oversees its own online-giving system. For instance, Street-Level Youth Media, a Chicago charity that provides free technology programs to local inner-city young people, pays nothing for its online-giving capability. The organization uses Network for Good, and site hosting is donated by a local firm, says Paula Kowalczyk, Street-Level's development director. By contrast, the Light, operator of two listener-supported Christian radio stations in Michigan, spent less than $1,000 to set up its self-administered online-giving option, and now spends about $250 per month on software licensing and credit-card processing fees, according to Jenn Czelada, the general manager.

When considering for-profit service providers, charity leaders should ask for references. If previous clients vouch for a provider's reputation, nonprofit managers should be certain they understand the terms of their agreements, says Walter Sczudlo, executive vice president at the Association of Fundraising Professionals, in Alexandria, Va., the largest such association. The association has drafted Internet transaction guidelines, which outline the points such agreements should include, such as ownership of data, fees, and which party's privacy policy controls the donation transaction.

Charities should have an agreement with every organization collecting funds on their behalf, Mr. Sczudlo recommends. And to protect their reputations, charities should monitor how their names and logos are used by those organizations. To see which people or organizations have links to a nonprofit organization's site from their Web pages, go to any search engine, and enter "link:" followed by the charity's Web address. (For example: link:http://philanthropycareers.com)

Nonprofit organizations that try online fund raising should also ensure that they or their service providers register with state regulators where applicable, says Mr. Sczudlo. Currently, 39 states and the District of Columbia have registration requirements for charities, and such organizations need to consider whether the online funds they raise from those states are enough to warrant registration. The National Association of State Charity Officials has issued guidelines, titled the "Charleston Principles." Although not legally binding, says Mr. Sczudlo, they suggest registration when a charity receives 100 individual donations from a particular state or $25,000 in contributions from one state.

Protecting donor privacy is key, too. Although it sounds obvious in these security-conscious times, says Mr. Sczudlo, he nevertheless warns that every charity should have a privacy policy posted on its Web site. The policy, he says, should be easily found by visitors to the site and written in plain language, spelling out how donor data will be used and, if applicable, shared. Mr. Sczudlo recommends an online resource to assist charities in generating their policies: the Center for Democracy and Technology.

--Kimberlee Roth