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

CRA in its Fundraising Guidance notes:

“a) Conduct that is illegal or contrary to public policy

Fundraising activities that are illegal or contrary to public policy are prohibited and may result in revocation of registered charity status. [Footnote 1]

Examples of illegal fundraising activities are activities that are criminally fraudulent or violate federal or provincial statutes governing charitable fundraising, charitable gaming, the use of charitable property, or consumer protection.

Illegal fundraising is prohibited whether it is carried on by the charity itself or it is carried on by a third party on behalf of the charity. Charities should ensure that third parties raising funds on their behalf are complying with all applicable laws.

In particular, fundraising that includes the issuance of improper donation receipts is contrary to the Income Tax Act and can lead to revocation. [Footnote 2]  The CRA takes the position that fundraising is not acceptable even where the fundraising activity is not in itself illegal but is associated with illegal conduct. This is the case where a charity knows, or ought to have known, that it is furthering illicit practices or transactions.

For example, where a charity fails to exercise adequate care to ensure the integrity of a third-party tax shelter scheme marketed to multiple donors, it may be facilitating or advancing wrongful conduct by others. This may be grounds for revocation or other sanctions.

Under section 230 of the Income Tax Act, registered charities are required to keep books and records to allow amounts deductible, or subject to be collected, to be determined, and to verify donations to the charity for amounts eligible for deductions or credits under the Income Tax Act.

Public policy

Registered charities, or third parties acting on their behalf, are not permitted to engage in conduct that is contrary to public policy. Fundraising activities can be contrary to public policy if they result in incontestable harm to the public interest or if they do not comply with government rules, directives, and regulations.

The courts have held that fundraising contracts can be harmful to the public interest if they result in misrepresentation to the public about whether donated amounts go to the charity or to pay the fundraising company collecting them (Ontario Public Guardian and Trustee) v. Aids Society for Children (Ontario), [2001] O.J. No. 2170 (QL).

Making a fundraising solicitation that does not comply with Canadian Radio-television and Telecommunications Commission directives, the Commission’s telemarketing rules, or other established government policy may also be considered contrary to public policy.”

To review the CRA Fundraising Guidance see “How do I find the CRA Guidance on Fundraising for Canadian charities?”.