# Quick update

Network for Good roundup

I wrote last week about the apparently high fees that Network for Good charges to process donations. Katya Andresen was good enough to stop by and give some clarifying info via comments (which you can see by clicking the link to the post). One of the major differences she pointed to between Network for Good and the simpler, cheaper PayPal is a potential legal issue: briefly, she argued that Network for Good takes care of the state-by-state registration that is necessary to solicit donations from all 50 states.

I did some research into this, starting from links that she sent me, and concluded the following. Warning: I just wrote this up and realized it’s really boring. Feel free to skip to the next section if you don’t care about the intricacies of payment processing.

• The legal issues are very hazy. You do need to register with most U.S. states in order to solicit from their residents, but there is no clear legal precedent or consensus on whether putting a “Donate” link on your website amounts to soliciting from all these states. Very few nonprofits are actually registered with all relevant states at this point … so it seems unlikely that this is a major short-term concern. However, it isn’t clear, and it’s probably wise for a nonprofit to cover its bases.
• If this registration is necessary, it is still far from clear whether using Network for Good “takes care of” this registration for you. I’d guess that it doesn’t – a “Donate” link is a solicitation to donate to your organization, not Network for Good, even if the funds go through Network for Good. (If it were a solicitation for Network for Good, that would be a whole different legal can of worms.)
• So I doubt this particular concern is relevant to PayPal vs. Network for Good … however, there is a larger issue that it brought up, which is that nonprofits have their own set of legal issues to deal with, and PayPal really isn’t set up specifically to serve their needs. This was confirmed by my attempt to get them to answer a legal question: I got passed through 5 people before finally getting a mailing address for their legal department, and being told I would have to use that channel. Not helpful. So there is an argument for using a processing agent that exists to serve nonprofits and deal with their legal concerns.
• But that said … why does the processing agent have to be a nonprofit itself?
• This seems to add so much unnecessary confusion – when considering Network for Good vs. JustGive, I can see that JustGive charges lower fees, but are they filling in the gap by getting more private donations that could be going to help people all over the world instead? I have no idea. And that’s what I really care about – not how much of a given transaction goes to the processing agent, but how efficient the agent is overall, which affects how much total money is left over to do other good things.
• Any time a business can feasibly charge to cover its full costs, it should do so, rather than undercharging and having Kevin Bacon (among others) help fill in the gap by fundraising from philanthropists. Network for Good and JustGive don’t serve the poor; they serve nonprofits that can afford to pay them.
• Conclusion: I’d still probably use PayPal over JustGive, and JustGive over Network for Good, but there are at least arguments for all three, counter to my original post. What I really want to see is a for-profit existing to serve nonprofits with their payment processing needs.

I am guessing Katya is rocking a Google alert, so I’m hoping she’ll correct anything inaccurate here.

Tactical Philanthropy makes me happy

Sean Stannard-Stockton just published a post that I think gives a really great characterization of us. He calls us the “pissed off donor model,” which I hadn’t thought of, but it’s accurate: GiveWell grew straight out of our attempts to donate, and our realization that the resource we wanted and needed doesn’t currently exist. It’s cool to see someone else describing the project in a way that really gets to the heart of what we’re about and what we believe in – and his claim that foundations should not do everything in-house, but instead should conduct “aggressive marketing campaign[s] to make sure other foundations can learn from their mistakes” – is exactly the mentality we wish we saw more of.

Stay tuned

My next post (Tuesday or sooner) will be a story of nonprofit incompetence that will shock and amaze you. I am currently deciding whether to give the name of the nonprofit in question – I think at this point it would be distracting and also might get me knifed in an alley, so I’m leaning against, but feel free to send me emails calling me a wuss in the hopes of changing my mind.

• Jeremy Gregg on February 18, 2007 at 11:27 pm said:

(not sure what that says about me…but….)

I responded on my blog with what I am calling, “An Open Letter to Venture Philanthropists,” since I believe that it will take such a person to change this system.

http://theraiser.blogspot.com/2007/02/open-letter-to-venture-philanthropists.html

Thanks for helping me to clarify some of my thoughts on this issue.

I’ll let you know if I hear from Gates, Branson or Omidyar. 🙂

• Katya Andresen on February 20, 2007 at 2:08 pm said:

I tried to post here earlier but it didn’t work — one more try, because I wanted to respond. First, thanks for the update. You asked for any clarifications – the main one would be to explain that Network for Good is registered in the 39 states and has completed the 42 filings that are required in those states. (North Dakota, California and Virginia require multiple filings to be undertaken to comply with the charitible filing requirements, which is why there are 42 filings for 39 states.) So how does that help the nonprofits that use our system? As a donor-advised fund, we accept the donations FOR the nonprofits that use our system. Those donations are to Network for Good, then we grant the funds to the nonprofit directly. So that is how we cover the state registration issue for nonprofits. The funds are collected by us. Hope this makes things clearer – if not, let’s continue the conversation. Oh, and regarding Kevin, he’s offering $10,000 matching grants to nonprofits at Six Degrees right now, so he’s doing his part! Not saying that just because I’m a Footloose fan, he really is supporting donors that fundraise for their causes with our SixDegrees charity badges. Thanks for all the feedback, we’re listening and will put together a better explanation of our fees. Please weigh in when we do! All best, Katya • Right, that makes sense. At least, it seems safer to be soliciting through Network for Good than to be soliciting directly (via PayPal, for example) if you’re unregistered in some states. It still doesn’t seem 100% safe – as all the sites I looked at said, the legal issues are fuzzy, and a button that says “Donate to XYZ through Network for Good” seems like it could still be construed as a solicitation for XYZ. But it’s clear that in this way, Network for Good is providing something that the for-profit processors aren’t (especially useful for charities that just want to get up and running with minimal hassle). I have to be honest. It still seems to me that it’s better, for all but the smallest charities, to just bite the bullet, do the registration, and use a cheaper merchant. You can register in all but four states using a single form, so this registration doesn’t seem prohibitive. Still, I want to make sure this point isn’t lost: that my initial post on this topic was wrong in its extreme conclusion, and I really appreciate your patiently working through the explanation with us. My initial post was vitriolic, partly because that’s just my writing style, and partly because I was reacting to the current answer on your website – which truly feels like smoke and mirrors. But I was missing part of the picture, and I appreciate your straightening me out matter-of-factly rather than just reacting to my tone. That reflects well on Network for Good. (And I’m editing the original post to link to this conversation.) • Matthew Monberg on February 22, 2007 at 9:58 pm said: Registration is costly and difficult. We are in the middle of registration right now, so I’m speaking from current experience. I think it should be mentioned that Network for Good provides a way for donors to give to charities while remaining anonymous, and does offer the donor the opportunity to cover processing fees if they wish to. Back in December, the Children’s HopeChest online giving page went down, and was not going to be up in time for capturing year-end gifts. Having Network for Good really saved us. We redirected our giving page to our profile on the NFG site, and sent an e-mail to all of our donors asking them to give via Network for Good. This conversation strikes me as similar to the “straw ratio.” Should we pick the cheapest merchant out there, looking only at the discount they charge? Surely there is more to the picture–as Katya is pointing out. For the past several years, we’ve had nothing but problems with the CHC online giving page–related to our online authorization and merchant processing vendors. There are times I would’ve paid 10% of the gift just to have it work right. Going with Network for Good because they register in all 50 states is nice…but that’s not really their unique selling point. It’s about ease of use. And that’s worth a little extra–in my opinion. I can see how donors would disagree with that position, but they don’t live in the hell that online giving can be if it is done wrong or you have the wrong merchant. • That certainly adds helpful context. I’d be interested in hearing about people’s experiences with JustGive and PayPal. You probably know about this already, but just making sure – there is a single form that will register you in all but 4 of the states that require it. http://www.multistatefiling.org/ • Michele Rodriguez on March 20, 2009 at 4:12 am said: Our organization uses Just Give on our basic donation page on our website. I like them better than Network for Good because they charge us less (only 3% with zero other fees) and we’re small so every little penny saved counts. I also like their backend better because it is lighter and less complicated. You still receive the ability to have a donor give a gift or make a donation in memory of a loved one and even make a recurring gift and, like Network for Good, essentially Just Give is handling your donation not your organization. I can offer an even better solution for nonprofits that I’m currently working on implementing and that is using Google Checkout. Nonprofits that have a Google Grant (as ours does) get free credit card processing until 2010 and can integrate Google Checkout into their website. If you ask me, that’s really helping when you consider the AdSense grant that comes along with it drives traffic to your site too! Of course, the org is essentially handling the donor information whereas with Network for Good and Just Give your organization doesn’t. Another one to check out, and one we use right now when we have paid events, is Click and Pledge. It is comparable to Network for Good’s Donate Now package but is less expensive if your charity is small. Click & Pledge’s credit car fee is an expensive 4.5% but the sign up fee is a once a year$50 and there is no monthly fee. You get the easily customizable and integrated shopping cart/check out that Network for Good offers too. Network for Good’s costs are $150 down/3% per transaction/$29.95 per month. We don’t receive enough online donations to make that initial set up fee/monthly fee outweigh the higher transaction cost of Click & Pledge.

• Jim Grant on January 23, 2014 at 5:10 pm said:

OK – I know this is an old post, but it is still relevant. Until recently, we were fairly happy with Network For Good, but a recent exception has somewhat soured the relationship. We recently changed bank accounts, and I went through the process to change our account info with NFG, including registration for EFT direct deposit. This is a great feature, especially since they collect all of an org’s donations for a month, hold them for 2 more weeks, then either issue a check or make a direct deposit. Basically, every donation is held for 2 – 6 weeks, depending on when they receive it, and if are receiving a check, expect another week’s wait. So, last month we did not receive our direct deposit. NFG customer service said they processed the new account change in time, but had not authorized the new EFT in their system, so a check had been mailed. No further explanation as to why the EFT was not authorized. This month, no EFT. Customer service looked into and determined they had made a data entry error, and so the EFT failed. This puts them into backup mode, which means a check must be issued. But wait! That is a ‘batch’ mode operation, which only runs once per month. By special request, I could get an expedited check, but this is also a batch operation, and it takes a week to 10 days before the check MIGHT be issued. In other words, they made a mistake, and have no way of making it right. We’re at 8 days, and no check issued yet, forget about how long it might take to get through their mail system and get to the post office for delivery. We are shopping for a new service.