When a charity collects donations online, you’d expect that money to go straight to the organization helping those in need. In reality, that money often passes through a financial intermediary before it reaches the nonprofit’s bank account.
But when an intermediary runs into financial trouble, the consequences can extend far beyond the balance sheet.
A food bank in Colorado learned that the hard way. St. George Episcopal Mission in Leadville says it lost access to nearly $28,000 in funds meant to help feed struggling families after the company handling its online donations filed for bankruptcy.
“We would once a month get a disbursement,” Melissa Earley, pastor in residence, told CBS News Colorado in a story published Feb. 24 (1). “Then we started noticing we were getting those disbursements more slowly and in smaller quantities.”
St. George Episcopal Mission relied on California-based Flipcause, a third-party fundraising and payment processor, to online donations from supporters. These platforms are widely used by nonprofits because they make online giving easier. For the food bank, Flipcause helped keep its pantry full of canned goods and even fresh produce.
In December, Flipcause filed for bankruptcy with nearly $28,000 still earmarked for the Colorado nonprofit, and they weren’t alone. According to Oakland Voices, citing court documents, Flipcause owed $29 million to roughly 3,200 “unsecured creditors” — mostly nonprofits — across the country (2).
Furthermore, Oakland Voices reports that court documents show, in the year leading up to the bankruptcy filing and while nonprofits waited on donations, the company paid out over $3.8 million to executives, families and “a web of related entities” (3). Flipcause executive chairman Emerson Ravyn testified the payments were “bridge financing” in anticipation of a sale that never materialized, but Earley sees it differently.
“They stole from us,” she told CBS News Colorado. “They stole from people who are hungry. They stole from people who are unhoused, from immigrants, from kids’ sports teams.”
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According to Oakland Voices, Flipcause is now set to be sold in bankruptcy court for $400,000 (4). It’s unclear how much, if anything, nonprofits that used the platform might be able to recover.