We did this for my son's first, second and third birthdays.
The first birthday we collected for Give What You Got - a local charity that puts together birthday care packages for KC area foster kids. The kids are anywhere from 1-18 and they take used items so guests didn't have to buy something new if they didn't want to. One thing they needed was bags/duffels/suitcases b/c many of the kids are schlepped from house to house with just a trash bag full of their things and if their possessions don't fit, they leave them behind. We had a great collection!
The second birthday was collecting for harvesters. Again, another way to give what you may already have but not using so no one had to spend money if they didn't want to.
The third birthday was an animal shelter! (Animal Haven/SPCA) Our dog had just passed away so we collected in his honor. Some people brought dog/cat stuff and some brought things the shelter needed like paper towels, cleaner, etc.
I'm looking forward to him turning 6 because then you can do a party AT Harvesters! Your daughter might really like it. Guests bring food to donate and then stay to fill packages for those in need. Harvesters provides a cake for the birthday celebration. I know three separate 7 year old boys that have recently volunteered or partied there and really enjoyed the experience.
Another idea would be to collect for Rose Brooks (battered women/children), Children's TLC or Big Brothers/Big Sisters.