Krystian Seibert has made a comment on my post Diverting Facebook donations (January 6, 2020). Mr Seibert is described as an Industry Fellow at Swinburne Business School, Melbourne. His online CV says:
Krystian Seibert is a researcher, educator and advocate focused on public policy, philanthropy and the not-for-profit sector.
He has particular interest in the regulation of philanthropy and the not-for-profit sector, the legitimacy or ‘social license’ of philanthropy, and the role of not-for profit sector advocacy as a driver of social innovation.
Krystian teaches strategic philanthropy as part of the Master of Social Impact and is an active participant in public policy debates in relation to philanthropy and the not-for-profit sector. Most recently, he played a key role shaping amendments to Australia’s electoral laws to ensure that they do not harm the ability of charities to undertake issues-based advocacy, with his comments on the amendments referenced during the debate in the Australian Senate.
… Krystian was an adviser to a former Australian Assistant Treasurer. In this role he was responsible for the delivery of major not-for-profit sector reforms including the establishment of Australia’s first independent charities regulator, the Australian Charities and Not-for-profits Commission (ACNC), and the passage of Australia’s first comprehensive statutory definition of charity, the Charities Act 2013.
He is clearly better qualified than I to address this issue. He says:
An interesting issue.
The relevant rules to examine would be those of the PayPal Giving Fund, which is a public ancillary fund (https://www.ato.gov.au/Non-profit/Getting-started/In-detail/Types-of-DGRs/Public-ancillary-funds/) – that’s where the money will still be, as the PayPal Giving Fund only distributes them after 15-60 days of an appeal commencing.
The trust deed of the RFS Donation Fund isn’t actually relevant, at least not at this stage.
The PayPal Giving Fund’s ACNC page and governing documents can be found here: https://www.acnc.gov.au/charity/2a364343e6b055199bb7be2c82d73471#financials-documents.
As a public ancillary fund, the trustees of the public ancillary fund legally make the decisions about where donations are distributed.
They can act on a recommendation of the person setting up an appeal. They can’t actually promise to honour instructions, as that would create a separate fund and the donations wouldn’t be tax deductible (see Note 2 to Guideline 45 within the Public Ancillary Fund Guidelines 2011: https://www.legislation.gov.au/Details/F2016C00434/3339ba19-0f73-4bae-ae35-32f26e3c8243).
In theory, the trustees could donate them to any charity with so called ‘Item 1 deductible gift recipient’ status. That would be acting consistently with both trust law and tax law and their governing document.
I imagine how it’s set up is that each appeal is structured as a ‘sub-fund’ and then the person setting up an appeal makes a recommendation about how it’s distributed. Ideally this would be consistent with how the appeal is marketed.
This is all indeed consistent with how the PayPal Giving Fund trust deed is drafted, with this being set out in clause 4.7: https://acncpubfilesprodstorage.blob.core.windows.net/public/33bd51ba-3aaf-e811-a963-000d3ad244fd-8d7aa3c8-a499-4e1e-9f4f-adb50ec97271-Governing%20Document-f3e76742-55b0-e811-a960-000d3ad24282-Trust_Deed_PayPal_Giving_Fund_Australia_Redacted.pdf
So up until this point, there would be legally nothing stopping Barber from recommending the funds be distributed from the PayPal Giving Account to other charities. Then it depends on what the response of the PayPal Giving Fund’s trustees is.
However Facebook may have certain terms and conditions for appeals using its platform, and also the PayPal Giving Account may have a policy – e.g that it considers a ‘recommendation’ for a distribution to be the charity which an appeal is set up for. But they may also adopt a flexible approach, I don’t know.
State and Territory fundraising laws may also apply and provisions about misleading and deceptive conduct, however with such conduct it’s unlikely that the appeal would be considered in trade or commerce (but it may be).
It’s somewhat complicated. However, it’s a question about how the PayPal Giving Fund is operated. It’s not about the RFS Donation Fund.
I note that clause 4.7 of the PayPal Giving Fund trust deed says:
(c) The donor or group of donors (or persons nominated by the donor or group of donors) may make requests or indicate preferences, as to the name of the management account, and as to the payments or applications from the account.
(b) The trust is under no obligation to comply, and the Trustee may not agree or give an assurance that it will comply, with any request or preference.
Of course, PayPal would normally pay the money to the charity nominated when the account has been set up, otherwise people would not trust it. But given Ms Barber’s campaign is now the biggest fundraiser in Facebook history (Sharon Masige, ‘Celeste Barber’s bushfire fundraiser on Facebook is officially the largest in the platform’s history, raising over $40 million’ Business Insider Australia (7 January 2020)) they may agree that this is not a normal case and flexibility is required.
But that does not resolve all the complexity. First Ms Barber may be a donor (in that she no doubt has made a personal contribution) but there are thousands of donors. She may even represent a ‘group of donors’ but she cannot claim to be ‘nominated’ to speak for all donors. As a donor or nominee of a group of donors, she could make a recommendation to the Trustees to distribute the money to funds other than the NSW Rural Fire Service & Brigades Donations Fund. That may be more well received if it is supported by the trustees of the RFS fund. But some donors may be disgruntled if they feel their donation has not gone to the charity that they intended to donate to.
There is no doubt a record of each donor (in order to issue a receipt) so it would be possible to contact each donor and ask them how they want their donation distributed to ensure that an amount equal to the amount that people want to go to the RFS actually gets there, but one can imagine that would be a huge undertaking.
And, as another lawyer on the blog said:
I suspect if any of the donated funds were not passed to the Trustees, they would be obliged under their fiduciary duty to sue for their recovery or be sued by the potential beneficiaries for failing to collect all the funds due. Interesting legal point though if Brigades have no legal standing as beneficiaries…potentially a failure in the Trust to settle properly and a need to make an application to the Supreme Court for appropriate rectification orders. Hopefully won’t go that far though, but legal advice will definitely be required.
Interestingly, the article cited above, says:
While Facebook’s website says donations to the PayPal giving fund are sent within 15 – 90 days, Antonia Sanda, Head of Communications at Facebook Australia told Business Insider Australia this will not be the case in this instance. Instead, PayPal is working to expedite the funds raised through Celeste’s page to the NSW RFS as soon as possible.
“Facebook Australia and PayPal Giving Fund Australia recognise the importance of donated funds being granted swiftly for the purpose of disaster relief and we are working with NSW Rural Fire Service to do everything we can to expedite the process and grant donated funds to them as soon as possible,” Sanda told Business Insider Australia in an email.
While PayPal is looking to expedite the funds, it still has to “go through the appropriate checks and processes to ensure that all the money ends up going to the right accounts and organisations”.
Once the money ends up in the NSW Rural Fire Service & Brigades Donations Fund it has to be spent in accordance with the trust deed governing that fund.