Fundraising Guidance for Registered Charities

May 01, 2010

How do I find the CRA Guidance on Fundraising for Canadian charities?

The CRA Guidance on Fundraising for Canadian charities is located on the CRA website at http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-028-eng.html

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May 01, 2010

Is the CRA Fundraising Guidance a change in CRA’s position?

“Has the Canada Revenue Agency (CRA) changed its position on fundraising by charities? No.”

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May 01, 2010

Does the Canada Revenue Agency dislike fundraising by Canadian Registered Charities?

No.  The CRA recognizes that many charities need to fundraise in order to be able to have the resources those charities need to fulfill their charitable mission.

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May 01, 2010

Why does CRA have a fundraising guidance?

CRA has a fundraising guidance because the public is concerned with how charities fundraise and CRA wants Canadian charities to understand what CRA’s expectation are of Canadian charities.

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May 01, 2010

Does CRA have jurisdiction over registered charities under the Income Tax Act?

Yes.  For most people it is obvious that CRA has jurisdiction over registered charities under the Income Tax Act.  However, a recent case International Pentecostal Ministry Fellowship of Toronto v. The Queen - (FCA)  http://www.globalphilanthropy.ca/index.php/blog/comments/international_pentecostal_ministry_fellowship_of_toronto_v._the_queen_fca/ makes it clear that the arguments forwarded by some tax litigators that CRA does not have jurisdiction to regulate registered charities under the Income Tax Act is without merit.

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May 01, 2010

Does the CRA’s Fundraising Guidance apply to all Canadian Registered Charities?

Yes.  CRA advises in their Fundraising Guidance “This guidance applies to all registered charities.”  There is no exemption because a charity is small or for certain types of registered charities.

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May 01, 2010

How is fundraising defined by the Charities Directorate in their Fundraising Guidance?

CRA has a particular definition of fundraising in the guidance which includes certain elements and excludes certain elements.

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May 01, 2010

Is donor stewardship considered by CRA to be fundraising or a solicitation of support?

May 01, 2010

What are some of the defined terms in the CRA Fundraising Guidance?

Here are 6 definitions contained in the CRA Fundraising Guidance

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May 01, 2010

What is prohibited conduct under the CRA Fundraising Guidance?

CRA sets out 4 categories of prohibited fundraising conduct.

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May 01, 2010

What are illegal fundraising activities or activities contrary to public policy for CRA?

Here is an excerpt from CRA’s Fundraising Guidance describing “Conduct that is illegal or contrary to public policy”

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May 01, 2010

When is Fundraising considered to be “Conduct that is a main or independent purpose of the charity”?

There has been some confusion over when conduct that is a main or independent purpose of the charity in terms of CRA’s Fundraising Guidance.

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May 01, 2010

When does fundraising involve too much private benefit for Canadian charities according to CRA

In its Fundraising Guidance, CRA discusses when ” Conduct that results in more than an incidental or proportionate private benefit to individuals or corporations”

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May 01, 2010

When is fundraising considered to be deceptive by CRA in its fundraising guidance?

The CRA discusses when fundraising actvities are considered deceptive in its Fundraising Guidance.

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May 01, 2010

What does CRA’s Fundraising Guidance have to say about allocation of expenditures?

CRA’s Guidance of Fundraising in section 8 deals extensively with why you need to allocate expenditures on the T3010 Registered Charity Information Return and sets outs various tests that can help determine whether an expenditure is fundraising, charitable or combination of both.  People who complete the T3010 need to be aware of CRA’s expectations with respect to allocation of fundraising expenditures..

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May 01, 2010

Allocation of staff time by Canadian registered charities and the CRA Fundraising Guidance?

Many charities have employees who are doing lots of different jobs.  Even though someone may have a title like “Resource Development Coordinator” it does not mean that they are only fundraising.  Staff can allocate their time between fundraising, charitable activities, administration etc.  Remember that grant writing to government and foundations is not considered “fundraising” for purposes of this guidance.  Keep in mind that although CRA does not require that staff keep time sheets it is a good practice to have at least weekly timesheets and not just an end of year estimation.

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May 01, 2010

How does CRA’s Fundraising Guidance evaluate fundraising activities by Canadian charities?

CRA is looking at many different matters when evaluating whether a charity fundraisng activities are compliant?  One of the methods is to look at the amount of fundraising expenditures to fundraising revenue.  Some people have fixated only on the ratio but it seems to me that CRA in general is more concerned with whether a charity is conducting prohibited activities or certain “indicator of concern” than just the fundraising ratio.  Anyway amongst the general public about 40% of people think charities should not be spending any money on fundraising costs and the other 60% expects that on average charities should spend something like 15%.  While there are some charities that can do some fundraising with no cost this is increasingly the exception and not the rule.  CRA’s general acceptance of fundraising ratios of 35% or less and statement that fundraising costs to reveneu above 70% “will raise concerns with the CRA” and “The charity must be able to provide an explanation and rationale for this level of expenditure to show that it is in compliance; otherwise, it will not be acceptable”.  CRA’s position to say the least is generous.  Charities should be cognizant of their fundraising costs and as the public is very concerned with fundraising costs those charities with higher fundraising costs should be able to show why the costs are so high and what is being done to reduce to the ratio of fundraising cost to expenditure.

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May 01, 2010

Does CRA recognize that fundraising for some Canadian charities is more difficult than for others?

Yes.  CRA sets out in its Fundraising Guidance a number of factors that would make it more difficult to fundraise including the following:  1) smaller charities may be less efficient at fundraising 2) some causes have less appeal than others and 3) some fundraising activities that are tailored to donor acquisition or planned giving such as bequests may result in expenditures today while only a financial payoff many years down the road.  CRA may take into account other legitimate reasons that fundraising may be higher for a particular organization or in a particular year.

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May 01, 2010

What are best practices for fundraising by Canadian charities according the Fundraising Guidance?

CRA in its Guidance on Fundraising sets out a number of best practices that Canadian charities should pay attention to when fundraising.  These include prudent planning processes, appropriate procurement processes, good staffing processes, ongoing management and supervision of fundraising practice, adequate evaluation processes, use made of volunteer time and volunteered services or resources and disclosure of fundraising costs, revenues, and practice (including cause-related or social marketing arrangements). If you follow CRA’s advice on best practices it will reduce the likelihood that your fundraising activities will be non-compliant

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May 01, 2010

What are areas of concern for CRA in fundraising activities by Canadian charities?

There are certain activities that are “prohibitied activities” such as illegal activities.  There are other activities that are not prohibited by CRA but CRA has some concerns when the fundraising activities of charities shows these “indicators of concern”.  Some of these indicators of concern include sole-sourced fundraising contracts; non-arm’s length fundraising contracts; paying too much for fundraising merchandise; fundraising activities where most of the gross revenues goes to private individuals or corporations; commission based fundraising remuneration and misrepresentations by the charity.

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May 01, 2010

Is a foundation created to fundraise for a Canadian charity main purpose fundraising?

In the fundraising guidance it talks about registered charities cannot have fundraising as a main purpose.  Some people are confused by this.  What about a hospital foundation, university foundation or other foundatioon that spends almost all of its time fundraising and then gifting over the funds to a Canadian registered charity.

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May 01, 2010

Some questions useful for Canadian charities to understand their fundraising ratios

Here are a few questions that Canadian charities can ask themselves to understand their fundraising ratios.

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May 01, 2010

Some frequently asked questions about the fundraising guidance from the Canada Revenue Agency

Here are some frequently asked questions about the CRA’s Fundraising Guidance.

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May 01, 2010

Canadian charity Board of Director questions on CRA’s Fundraising Guidance

The CRA Fundraising Guidance is an important document for boards of directors to understand and to ensure that their charity complies with the requirements of the fundraising guidance.  Here are some questions that a board of a Canadian charity may wish to ask in relation to the Fundraising Guiance.

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May 01, 2010

Factors to Consider Before Signing a Fundraising Contract according to the Ontario Public Guardian

The Ontario Public Guardian and Trustee in its publication Charitable Fundraising: Tips for Directors and Trustees sets out a number factors for charities to consider before signing a fundraising contract.  If the fundraising contract is potentially large or you are uncertain about legal requirements relating to fundraising it may be best to retain a charity lawyer that is knowledgeable about legal requirements for Canadian charities.

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Do you require legal advice with respect to Canadian or Ontario non-profits or charities?

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Charity Lawyer Mark Blumberg

Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

mark@blumbergs.ca
416.361.1982
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