Here is an article on CBC today entitled “Charities paid $762M to private fundraisers”.  It looks at third party paid fundraising costs.

Here are some quick thoughts:

1) It is good to see that the media is making greater use of the T3010 information filed by every Canadian registered charity.  If you want to see the last few years filings go to http://www.cra-arc.gc.ca/ebci/haip/srch/advancedsearch-eng.action

2) The title is sensationlist – I never know who comes up with these titles!  “Charities paid $762M to private fundraisers”.  This is actually over 5 years.  So really we are talking about an average of about 150 million per year.  Charities fundraise about 8-10 billion per year or about 40-50 billion over the five years.  The revenue of charities in Canada is actually over 180 billion dollars per year.  I am not great at math but the angle on the story is not exactly right.

3) The problem is a few aggressive telemarketing companies who are involved with unsolicited calls to people who have no previous relationship with the charity and often these telemarketers are compensated using commissions and use techniques that could be considerated abusive.  One of the companies that is most complained about is actualy a public company, not a private company at all. 

4) You need to go beyond the headline but the article provides: 
“There are 85,000 registered charities listed on the CRA’s website. Of those, 651 — or less than one per cent — used external fundraisers in 2008. And of those, nearly one-third, or 214, paid more than 50 per cent of what they earned to their fundraisers.”  When you are talking about questionable conduct of 214 charities – it is important to keep in mind that there are 85,000 registerd charities and we are talking a very small number who may be acting innapropriately.  The reason I say “may” is that these filings are not always correct – sometimes the charity makes a mistake and sometime CRA makes a mistake.  One missing zero can make a big difference.  If you think that there are too many charities take a look at my article https://www.canadiancharitylaw.ca/blog/do_we_have_too_many_registered_charities_in_canada/

5) While perhaps all charities are created equal they certainly don’t last long that way.  There are great charities and really bad charities. Sort of like children – some really sweet and nice and some really obnoxious.  Only grandparents think that all their grandchildren are wonderful!  So stop thinking that you can donate to a registered charity and don’t need to do your due diligence – not all doctors are great, same applies to lawyers and pop singers – don’t just donate to a charity because they ask.

6) “The CRA recommends that no charity spend more than 35 per cent of revenue on fundraising and can revoke the registered status of any organization whose expenses seem disproportionately high.”  Actually the way I would express it is that CRA wants charities to spend no more than they need to in order to fundraise.  The CRA is first and foremost concerned with what is referred to as “Prohibited fundraising conduct” which includes illegal activities, when fundraising is a main or independent purpose of the charity, when there is more than an incidental or proportionate private benefit to individuals or corporations; and when fundraising misleading or deceptive.  They are concerned about appropriate allocation – some charities have good numbers because they don’t properly allocate fundraising costs to fundraising.  Others don’t understand allocation and anytime anything relates to fundraising they call the whole event fundraising.  In part 9 dealing with “9. Evaluation of fundraising activities” the Guidance provides:

Fundraising Ratios and the CRA’s Approach
The CRA recognizes that the charitable sector is very diverse and that
fundraising effectiveness will vary between organizations. There can be
good reasons for a charity to incur higher fundraising costs for a
particular event or in a particular year. As a result, a range of factors
will be considered in the course of a CRA review. One of the factors
that the CRA will consider is the ratio of fundraising costs to
fundraising revenue. The following table provides some general
guidance in terms of where the CRA may seek additional information
or justification for fundraising costs.

Fundraising ratios alone are not determinative in assessing whether a
charity’s fundraising complies with the requirements of the guidelines
in this guidance. However, these ratio ranges give charities a way to
generally gauge their performance and understand the circumstances
where the CRA is likely to raise questions or concerns.

In addition to considering where a charity falls within the ratio ranges,
the CRA will look to the factors described in paragraphs 10 and 11
below, when it considers a charity’s fundraising activities. In addition,
the CRA’s assessment of a charity’s fundraising will take into
consideration the following factors:
a. The size of the charity (which might have an impact on fundraising efficiency).
b. Causes with limited appeal (which could create particular fundraising challenges).
c. Donor acquisition and planned giving campaigns (which could result in situations where the financial returns are only realized in later years).

CRA also looks to certain “Best Practices” and “Indicators of Concern”.

If you want to understand the CRA’s position I would suggest you read the CRA’s fundraising guidance – if you are a director of a charity you should already know the content quite well.  Here it is https://www.canadiancharitylaw.ca/blog/canada_revenue_agency_guidance_on_fundraising_by_canadian_charities/  The Fundraising Guidance is over 50 pages of rules and expectations.  I would guess that most charities have never even heard of the guidance.  We don’t need another 10 pages of rules – what we need is for people to read the guidance – here it is again if you missed it:  https://www.canadiancharitylaw.ca/blog/canada_revenue_agency_guidance_on_fundraising_by_canadian_charities/
If you really care about fundraising regulation you might find one of these presentations across Canada helpful:
https://www.canadiancharitylaw.ca/blog/upcoming_charity_law_seminars_across_canada_with_mark_blumberg_or_clip/

7) I am quoted as saying “That private fundraisers earned $762 million over five years isn’t “particularly shocking” when compared with the billions of dollars that Canadians donate year to year, said Mark Blumberg, a Toronto lawyer who specializes in charities law.”  “The large number just reflects that Canadian charities are doing a lot of fundraising,” Blumberg told CBC News. “The part that is of concern to me is when, say, a million dollars is paid to a fundraiser, and that fundraiser brings in, say, $1.1 million — so, say, 90 per cent of the funds is actually going to the fundraiser. In that case I’d be very concerned.”

I think they got the quote correct.  What is missing is not the “billions of dollars” Canadians donate – actually it is about 50 billion over the 5 year period.  I would also point out that fundraising accounts for a very small amount of the 180 billion in annaul revenue of Canadian charities – most revenue comes from government and earned income, not fundraising.  By the way paying taxes and having those funds be used for important services like schools, hospitals, universities etc. is a lot more efficient than having charities have to fundraise/beg for money.  So if one is concerned with efficiency it is probably better to have higher taxes and less fundraising.

8) The Association of Fundraising Professionals put out this statements and other information:
http://www.afpnet.org/Audiences/PublicPolicyIssueDetail.cfm?ItemNumber=4606

9) Imagine Canada put out this statement:
http://www.imaginecanada.ca/files/www/en/misc/statement_regarding_cbc_10232010.pdf

10) Here is an article in Charity Village by Harvey McKinnon, a respected fundraiser, on the subject:
http://www.charityvillage.com/cv/archive/apod/apod10/apod1001.asp

The CBC article is at: http://www.cbc.ca/canada/story/2010/09/21/con-charities-fundraisers.html#socialcomments#ixzz10P5ULqdU