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How to Choose a Web Hosting Agent for Online Fundraising
Summary:
There are many organizations that provide services to nonprofits that are designed to help raise money on the World-Wide Web. This essay offers some suggestions about how to evaluate their offerings and choose among them.
Answer:
This item was placed in an archive with other early FAQ discussions of questions about accepting donations online on February 24, 2006. To see the other articles, open http://www.idealist.org/npofaq/0/1547.html —Ed.
Choosing a Web Hosting Agent
by Eric Mercer
States regulate solicitation and professional solicitors because of the occasional scams and unethical behavior that have punctuated the business. Donors are not the only victims in such cases, as the charity involved may lose its nonprofit status and will certainly forfeit much of its public trust and future ability to solicit donations. Even hosting agents with the best intentions can cost a charity in public trust if it behaves irresponsibly. This text is intended to provide some criteria to aid charities that are considering using a third-party Web hosting agent as part of an online charitable solicitation program.
There are many different mechanisms available that nonprofit charities may use to promote donations online. This document only addresses the case of a service provider who makes space available on a Web site for charities to post Web pages that will solicit donations and collect financial information like credit card numbers.
Please note that this text is not legal advice nor should it be construed as such, and charities should consult a lawyer regarding the complicated legal issues that apply to charitable solicitations.
Some criteria that mark a responsible hosting agent for Web site solicitations are:
- Security. Any Web page form into which financial information is entered by a donor (i.e. credit card numbers), must be "secure." A secure Web page is encrypted before it is sent to the Web server, so that the information can't be read by anyone who intercepts its transmission. Web browsers indicate a secure page with a key or lock icon that changes when a secure page is loaded. Avoid any hosting agent that doesn't use secure Web pages to collect credit card or other financial data.
- Publicly Documented Policies. Both donors and charities should be able to find online all policies and procedures that the hosting agent follows with regard to selecting clients, billing, handling financial data, and other procedures relevant to the indicators listed above. This information should be available online, although it may be acceptable for the hosting agent to provide phone numbers to get appropriate information (if the phone numbers are easy to find on the Web site!). The harder you have to work to determine the hosting agent's policies, the stronger the argument for staying clear of it entirely.
- Financial Responsibility. The hosting agents financial procedures must be sound. If the hosting agent handles the donated funds before sending them to the charity, controls must be in place to insure that all donations are properly recorded and processed, and that staff are not able to "skim" from the incoming funds. The best way to insure this is to have the hosting agent document that an independent auditor reviews its financial records and procedures annually. The audit (or independent review) results must be publicly available, and if the hosting agent balks at sending you a copy absolutely do not use their services.
- Clarity in Its Dealings. By reviewing the hosting agent's Web site, you should be able to answer all the following questions. If some are not answered in the public Web pages a prompt response to an email inquiry suggests a responsible hosting agent. The more information you have to ask about instead of easily finding it on their Web pages, the less likely the hosting agent is reputable.
- Does it charge the charity or donor for its services? If so, how much? Consider comparing its rates to other providers of similar services. The most attractive hosting agents will have the minimum charges and therefore presumably the minimum administrative overhead costs. The best hosting agents may be nonprofit charities themselves and will charge charities only for direct costs, supporting their own administrative overhead costs with grants or charitable solicitations.
- Is it a 501(c)(3) public charity? If so, is its "notification of tax exempt status" letter from the IRS, and its last year's IRS Form 990 available online? Otherwise, can you easily get copies of these documents by mail for free or a minimal copying charge?
- Does it promote its charities to potential donors with Web pages that do more than just list the hosted charities? Are these materials very general promotions of charitable giving or are they endorsements of specific charities that the Web hosting agent is paid by? For instance, does the hosting agent's materials only tell potential donors about the benefits of donating, or talk positively about supporting worthy causes in general? Or does it aid its sponsored charities in developing their solicitation materials, or specifically promote individual charities using texts written by its own staff? Generally, the only marketing material the hosting agent should provide must be directed toward the CHARITIES, encouraging them to sign up and use its services, and potential donors should at most be provided with a simple directory of hosted charities. The charities must clearly provide the material themselves that promote their own programs. Otherwise, the hosting agent is more likely to be considered as professional solicitor, and probably must be registered as such in every state that requires it. Note that a hosting agent that serves as a professional solicitor may be perfectly reputable, but at this time few providers of this service have actually registered (exposing themselves and the charities they host to legal action). A separate text is available entitled, "Some Legal Implications of Soliciting Online Using Third-Party Hosting Agents." (See http://www.nonprofits.org/npofaq/16/21.html.)
- Does it also provide charities with solicitation services other than Web hosting, such as direct mail or other tools used by professional solicitors? Even if the company believes it is not itself a professional solicitor, does it employ any professional solicitors of charitable donations as independent contractors? Professional solicitors must be registered as such in every state that requires it.
- Is it registered as a professional charitable solicitor in the state where it is based, and in every other state that regulations such activities? Note that determining whether such regulations apply to a particular Web hosting agent is not simple, and many or most Web hosting agents may not be professional solicitors and therefore do not need to register as such.
- Does it collect information about donors and sell this information? If so, does it state this clearly and provide the donor with the option of being excluded from such lists?
- Advance Permission From the Listed Charities. If the hosting agent lists charities before getting permission from them to act as their agent, it is essentially using the name of those charities to promote its own service. This is not particularly encouraging if you are looking for an ethical service provider. Although a hosting agent that simply provides links to a nonprofit charity's Web page is doing a positive service, if it accept pledges or donations for that charity it absolutely must have obtained advance permission. Note that even if the agent only accepts and forwards pledges and not credit card information, there is still a fair chance it is collecting the donor's information for use in compiling a mail list of donors that it can sell to charities and professional solicitors. The hosting agent's policies on this matter must be stated explicitly in an obvious place if they are at all reputable.
Eric Mercer (mercere@netcom.ca) -- June 28, 1998
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