Fundraising Activities

Activités de financement

F1. En quoi consistent les activités de financement?

F2. Qu’est-ce qu’une demande d’appui?

F3. Nous sommes un organisme de bienfaisance enregistré nouvellement créé. Nous avons entendu dire qu'il y a des exigences fiscales reliées aux activités de financement. Que devons-nous savoir sur les activités de financement?

F4. Notre organisme de bienfaisance peut-il engager quelqu'un pour gérer une campagne de financement et lui verser un pourcentage des dons recueillis?

F5. Notre organisme de bienfaisance enregistré envoie des étiquettes d’adresse au public dans le cadre de notre campagne de publipostage. S'agit-il d'une dépense acceptable?

F6. Pourquoi une activité de financement n'est-elle pas une activité de bienfaisance? Je ne comprends pas la différence.

F7. Y a-t-il une limite aux dépenses que notre organisme de bienfaisance enregistré peut consacrer aux activités de financement?

F8. Notre organisme de bienfaisance enregistré vient d'organiser une grande collecte de fonds. Existe-t-il des directives concernant la délivrance de reçus?

F9. J'ai entendu le terme « sans lien de dépendance » appliqué aux organismes de bienfaisance enregistrés. Que signifie-t-il?

F10. J'ai entendu parler d'une campagne de financement très réussie menée par un organisme de bienfaisance dans un autre pays. Mon organisme de bienfaisance enregistré aimerait reproduire cette campagne au Canada. Pouvons-nous le faire sans problèmes?

F11. J'ai entendu dire que le Conseil de la radiodiffusion et des télécommunications canadiennes a introduit une nouvelle règle ayant un impact sur la sollicitation téléphonique. Ces changements ont-ils une incidence sur la façon dont les organismes de bienfaisance enregistrés peuvent collecter des fonds?

F12. Qui est responsable en dernier ressort des activités de financement d'un organisme de bienfaisance enregistré?

F13. En tant qu'administrateur d'un organisme de bienfaisance enregistré, puis-je être tenu pour responsable personnellement de ne pas avoir protégé les droits d'un donateur dans le cadre d'une activité de financement?

F14. Certaines activités de financement en particulier préoccupent-elles l’ARC?

F15. Certaines activités sont-elles considérées principalement comme des activités de financement à cause de ce qu’elles sont?

F1. What are fundraising activities?

F1. What are fundraising activities?


Short answer

Fundraising activities include a solicitation of support, actions undertaken as part of the research or planning for a future solicitation of support, and actions involving communication or other dealings with donors or prospective donors relating to a solicitation of support

  • by a registered charity or someone acting on its behalf
  • to individuals or corporations
  • for voluntary cash or in-kind donations
  • with or without tax receipts
Long answer

A fundraising activity can be

  • a self-contained activity  or a component of a bigger activity
  • a single event or a series of initiatives (such as a capital campaign)

There are two general groups of fundraising activities:

  • External activities — activities that can be seen by the public, for example, mail campaigns, luncheons, dinners, golf tournaments, fairs, and telethons.

  • Internal activities — activities that may not be public, but are relevant to the success of fundraising – such as research and planning and taking care of  donors. Some examples are creating a donor database or a prospective donor list, managing donor stewardship or organizing donor recognition, and activities relating to mounting fundraising activities.
More…

Charity Central learning module on Fundraising

F2. What is a solicitation of support?

F2. What is a solicitation of support?


Short answer

A solicitation of support is any statement (possibly in one or more of any of a variety of forms) made to seek donations.

Long answer

A solicitation of support includes sale of goods and services to raise funds, as well as requests for contributions not involving an exchange. Staff or volunteers of a registered charity or a contracted third party can seek a solicitation of support of the charity’s behalf.  . The charity is responsible for all of its fundraising activities on its behalf regardless of who is performing the activity. It must direct and exercise control over its fundraising activity.
Solicitation of support does not include

  • volunteer recruitment
  • requests for funding from government or from another charity

These activities are not considered fundraising activities. Some charities might classify volunteer recruitment as program activities.

F3. We’re a newly organized registered charity. We heard that there are tax requirements for fundraising. What do we need to know about fundraising?

F3. We’re a newly organized registered charity. We heard that under the Income Tax Act there are certain requirements that apply to our fundraising. What do we need to know about fundraising?


Short answer

Two things must be remembered to keep your registered charity’s status:

1. fundraising must not be your primary activity

and

2. you must devote certain portions of your resources to charitable programs or services (including gifts to qualified donees) rather than fundraising expenditures.

While the Canada Revenue Agency accepts that you will encounter costs in your efforts to raise funds for your charitable purpose, it expects that these expenses will be reasonable.

Long answer

When you registered your charity, you declared your charitable purpose. That purpose must always be the focus of your time and resources.
The CRA does not view fundraising as a charitable activity. Spending excessive amounts on fundraising could also result in the charity not meeting its disbursement quota (DQ), that is, its spending requirement.

More…

For further discussion on fundraising, see the checklist of allowable activities .
See guidelines for fundraising events and charitable activities at General guidelines for issuing receipts applicable to all fundraising events or activities

F4. Can our charity hire someone to manage a fundraising drive and pay them a percentage of the donations they raise?

F4. Can our charity hire someone to manage a fundraising drive and pay them a percentage of the donations they raise?


Short answer

Maybe. A registered charity may, provided it is carrying on its own charitable activities, enter into fundraising contracts. The charitable activities carried out by such fundraisers must be conducted under the registered charity’s direction and control and the fundraisers must not be paid more than reasonable market value.


On the other hand, you may want to consider paying a fundraiser based on effort (for example, devotion of time and resources) rather than fundraising success. Payment based on effort is less likely to result in disproportionate or excessive "private benefit”, which is benefit to individuals or corporations, rather than to the public.

Long answer

If a charity provides a commission or a percentage for fundraising on the basis of results rather than effort, a disproportionate or excessive remuneration may result in an unacceptable contractual arrangement. Charities are not to enter into fundraising agreements that result in unduly rich remuneration for the fundraiser.


Excessive “private benefit” to fundraisers (as well as to members and directors of the registered charity) must always be avoided. Private benefit is seen in contrast to public benefit. Your registered charity’s purpose indicates the public benefit you intend as a charity. When funds are spent to further your objectives, then the merit of the expense is self evident. If funds are spent on something not directly furthering your objectives, then you need to carefully consider the expense.


Any private benefit associated with a charity’s operations is only acceptable as a minor and incidental by-product of its work. Any private benefit must not be excessive or disproportionate to the public benefit of the charitable purpose it exists to pursue.


When the fundraising arrangement includes commission-based payment or other compensation based on the number or amount of donations raised, the charity will want to ensure that such provisions would not result in lopsided or excessive private benefit. Groups such as Imagine Canada and the Association of Fundraising Professionals discourage use of commission-based fundraising because of the conflict it may create between a fundraiser’s personal interests and those of the charity. Since you can’t measure the link between performance-based fees and the effort required to secure donations, contracts providing for such fees could possibly result in a windfall profit for the fundraiser. This is particularly true when the compensation is set at a high percentage and limited or no additional provisions govern how the work is done.

Example

This year, XXX Charity paid a fundraiser at a modest rate based on calls completed, regardless of whether a donation was received. YYY Charity paid on an hourly basis at a reasonable market value for the work entailed. Neither of these arrangements usually results in disproportionate or excessive private benefit.


For the same event the year before, however, XXX had paid a different fundraiser on a percentage basis an amount that was later seen as an amount exceeding reasonable market value for the work he did. Within a few calls, the fundraiser had been able to land some very large contributions and was eligible for a significant payment. In this circumstance the private benefit to the fundraiser, therefore, was not minor (or “incidental”) to the broader public benefit associated with the charities work.

More…

If you have any concerns about certain expenses or budget items, consult a professional who is familiar with registered charities.

F5. Our registered charity sends mailing labels to members of the public in our direct mail campaign. Is this an acceptable expense?

F5. Our registered charity sends mailing labels to members of the public in our direct mail campaign. Is this an acceptable expense?


Short answer

Yes. This minor solicitation of support is treated as an acceptable fundraising expense.

Similar promotions for donations must be incidental and are considered minor if:

  • the promotional items were supplied at arm's-length,
  • the promotional items were purchased at a value no more than the retail value, or
  • any associated private benefit was necessary.
Long answer

Any personal or corporate benefit associated with a charity's operations is only acceptable as a minor and incidental by-product of its work. No private benefit should be disproportionate to the public benefit that the charity exists to pursue.

Before purchasing gift incentives or donor premiums, make sure that any private benefit associated with such purchases is minor or incidental.

To qualify as incidental, any personal or corporate benefit would have to be necessary. Consider whether:

  • a supplier is dealing at arm's-length from the charity
  • it can be shown that the gift incentive increases the net amount or number of donations.
More…

Review the general fundraising guidelines.

F6. Why isn’t a fundraising activity a charitable activity? I don’t understand the difference.

F6 Why isn't a fundraising activity a charitable expenditure? I don't understand the difference.

A charitable expenditure is spending that directly furthers your charitable purpose. If your charitable purpose is to fight childhood diseases, then distributing mosquito nets and immunization campaigns might be among your charitable programs. In order to finance these programs, you need to raise funds. You might hold an auction, a dinner, or a golf tournament. Those are your fundraising activities.

The distinction between charitable expenditures and fundraising expednitures is not always clear. One activity can have both charitable and fundraising components. While a fundraising banquet isn’t a charitable program or service, a guest speaker’s presentation at the banquet may educate a new audience about a topic included in the charity’s purpose.

In this combined activity, the charity needs to decide how to allocate the elements of the event and their costs for reporting purposes and needs to maintain separate records of those costs. A registered charity is allowed to spend up to 20 per cent of its total receipted income on non-charitable expenditures of which fundraising is only a part. This limitation is explained in the disbursement quota FAQs.

Example

123Go, a children's health charity, has a month-long awareness campaign in which most of a printed flyer provides information about childhood diseases and a paragraph on the back page appeals for funds so 123Go can continue its work. Note: 123Go, in this example, does not use a professional fundraiser to create or distribute the flyer. For its record keeping, the charity separates the portion that furthers its charitable object and the portion that raises funds. On the two-page flyer, the closing paragraph represents 15 per cent of the content. Therefore 15 per cent of the writing, printing, and distribution costs is considered fundraising costs, while the other 85 per cent is seen as 123Go's charitable costs.

More…

See the Disbursement Quota FAQs.

F7. Is there a limit on how much our registered charity can spend

F7. Is there a limit on how much our registered charity can spend on fundraising?


Short answer

Yes, there certainly is. Your charity's stated purpose when you registered must always be your main focus of time and resources. To ensure that this emphasis is maintained, you must calculate your "disbursement quota" each year. This calculation determines how much of your receipted donations you must spend on your charitable purpose in the coming year and at the same time, how much you must limit your spending to on fundraising, administrative, and other indirect costs.

The disbursement quota includes two types of spending requirements based on:

  • the receipted income (donations) during a fiscal year
  • the assets the charity holds that are not used in its charitable activities.

The disbursement quota balance regarding receipted income is 80 to 20 per cent:

  • at least 80 per cent must be spent on charitable expenditures
  • no more than 20 per cent can be spent on non-charitable expenditures, including administrative and fundraising costs

Regarding the charity’s assets, the charity needs to spend annually

  • at least 3.5 per cent of the average value of the assets that the charity holds that are not used for charitable activities.

Fundraising expenditures are ineligible for use toward meeting disbursement quota obligations. Spending excessive amounts on fundraising could result in your charity not meeting its disbursement quota. See Disbursement Quota FAQs.

Long answer

A registered charity cannot engage in fundraising as a primary activity. Devoting a substantial portion of your revenue to fundraising activities also puts your registered status in jeopardy. Making fundraising a primary activity and/or spending most of your revenue on fundraising could potentially lose you your ability to function as a registered charity.

Registered charities that have major shortfalls in their charitable spending over a number of years risk losing their charitable status. They also risk losing their status if fundraising costs are excessive, particularly if the charity is not able to show that such costs would decline in future years.

More…

Information on the Annual spending requirement (disbursement quota)

F8. Our registered charity just held a major fundraiser. Are there guidelines about issuing receipts?

F8. Our registered charity just held a major fundraiser. Are there guidelines about issuing receipts?

Yes, there are guidelines

The FAQs about Receipting, will take you to another part of this website, but clicking the back arrow on your browser will bring you back for more FAQs on fundraising.

F9. I have heard the term 'arms-length' applied to registered charities. What does it mean?

F9. I have heard the term arm’s-length applied to registered charities. What does it mean?


Short answer
At arm’s-length describes a relationship in which the parties act independently of each other.

The opposite — not at arm’s-length — includes individuals who are related to each other by blood, marriage, adoption, and common law relationships. Not at arm’s-length also covers people acting together without separate interests, such as those with close business ties.

Long answer

The concept of arm’s-length is used, amongst other things, in registered charities to clarify private benefit. For example, promotional items must be supplied at arm’s-length at a reasonable market value and without any excessive private benefit to the supplier, the charity’s board, or any individual members of the board.

F10. I heard about a very successful fundraising campaign run by a by a charity in another country. My registered charity would like to duplicate that campaign in Canada. Can we do that without any problems?

F10. I heard about a very successful fundraising campaign run by a charity in another country. My registered charity would like to duplicate that campaign in Canada. Can we do that without any problems?


Short answer

Not necessarily. Problems can occur when you simply copy the fundraising program of another charity without considering your charity's purpose as well as federal and provincial laws, among other issues.

When in doubt, check with a professional advisor and/or consult with the Canada Revenue Agency guidance and the relevant regulatory authorities to determine whether the contemplated initiative is permissible in your charity's circumstances.

Long answer

Registered charities should conduct an appropriate due diligence review of the legal liability or the suitability of a program prior to adopting another charity's fundraising program (whether the other charity is within or outside of Canada). A due diligence review may include some, if not all, of the following:

  • The fundraising program may have originated in the other country and been adopted without taking into account the differences in the regulatory bodies between Canada, the other country and that particular province.
  • The corporate objects and powers of the registered charity may be very different from the charity in the other country.
  • Even if a legal opinion has been obtained by another charity concerning the legality of a fundraising program, the legal opinion will not have application to your charity.
  • Even if a fundraising program is determined to comply with all applicable laws, it may not be practical for your registered charity to undertake the same program due to the inexperience or size of your charity.

If you are still not sure, check with the Canada Revenue Agency guidance and the appropriate regulatory authorities.

F11. I’ve heard that the Canadian Radio-television and Telecommunications Commission has introduced a new rule that impacts telemarketing solicitation. Do these changes impact how registered charities can fundraise?

F11. I've heard that the Canadian Radio-television and Telecommunications Commission has introduced a new rule that impacts telemarketing solicitation. Do these changes impact how registered charities can fundraise?


Short answer

Perhaps. Registered charities that use telemarketing are impacted. Registered charities that make fundraising solicitations that do not comply with Canadian Radio-television and Telecommunications Commission directives, the CRTC's telemarketing rules, or other established government policy may be subject to review.

This is particularly important since 30 September 2008 when a do-not-call list (DNCL) was implemented. Although charities are exempt from the do-not-call list, individuals can specifically request that a charity remove them from their list. The charity should maintain its own DNCL and comply with that request.

More…

If the CRTC can be of any assistance, you can contact them: www.crtc.gc.ca/eng/contact.htm

Visit the CRTC's National Do Not Call List
or see the Canada Revenue Agency page.

F12. Who is ultimately responsible for registered charity fundraising?

F12. Who is ultimately responsible for registered charity fundraising?


Short answer

The legal responsibility for fundraising lies with the charity and its board of directors. The charity and its board of directors have to provide direction and exercise control over all fundraising activities.

Long answer

Directors have a responsibility to exercise prudence in overseeing the operations of a charity and protecting its charitable property, which includes protecting the charity's property from undue risk of loss and ensuring against excessive administrative expenses.

Example

The duty placed on directors of charities from fundraising programs was underscored in a 2001 Ontario case in which the court found the AIDS Society for Children and its three directors liable for unreasonable fundraising costs of almost $740,000 and imposed a further $50,000 penalty on the directors of the charity. It had been discovered that despite raising over $920,000 through public donations, no funds had been spent on charitable programs. More than 76 per cent of the money raised went to fundraising companies for fees.

The court held that directors of a charity:

    • have an obligation to the charity and the property held by the charity
    • are accountable to the public for all funds publicly raised
    • are accountable to use such funds to further the objects of the charitable institution

For more details, see Ontario (Public Guardian and Trustee) v. The AIDS Society for Children (Ontario), [2001] and/or here

More…

For CRA's policy on directors and trustees, see the Summary Policy

F13. As a director of a registered charity, can I be held personally liable for not protecting a donor's rights in a fundraising operation?

F13. As a director of a registered charity, can I be held personally liable for not protecting a donor's rights in a fundraising operation?


Short answer

Yes, you can. The Courts have placed a fiduciary duty on boards of directors to oversee charitable fundraising and ensure that the rights of a donor have been adequately protected, as seen in the AIDS Society case (see example below).

Long answer

Directors of a charity should actively review, approve, and oversee all fundraising activities of a charity, including the terms of contractual relationships with professional fundraisers. A risk management approach to fundraising is essential in order for board members to avoid personal liability.

Example
The duty placed on directors of charities from fundraising programs was underscored in a 2001 Ontario case in which the court found the AIDS Society for Children and its three directors liable for the unreasonable fundraising costs of almost $740,000 and imposed a further $50,000 penalty on the directors of the charity. It had been discovered that despite raising over $920,000 through public donations, no funds had been spent on charitable programs. More than 76 per cent of the money raised went to fundraising companies for fees.

The court held that directors of a charity:

  • have an obligation to the charity and the property held by the charity
  • are accountable to the public for all funds publicly raised
  • are accountable to utilize such funds to further the objects of the charitable institution

More ...

See Checklists for Charities and more on directors' liability .

F14. Do some fundraising activities in particular concern the CRA?

F14. Do some fundraising activities in particular concern the CRA?


Short answer

Yes, certain activities will raise flags for the Canada Revenue Agency (CRA).

The CRA has created a list of indicators that may cause them to further review a registered charity’s fundraising activities.

Long answer

Indicators relating to contracting with professional fundraisers:

  • Sole-source fundraising contracts without proof of fair market value
    The contract was not open to competition. The charity entered into an agreement with the only party that was given the opportunity to make a proposal. 

  • Non-arm’s-length fundraising contracts without proof of fair market value
    Non-arm’s-length contracts are contracts given to individuals who are related to someone in the charity by blood, marriage, adoption, or common law relationships, or individuals with similar interests, such as those with close business ties.

  • Activities where most of the gross revenues go to the contracted non-charitable parties

  • Commission-based remuneration to the fundraiser or payment based on the amount or number of donations

Other indicators:

  • Total resources devoted to fundraising are greater than the total resources for charitable program activities.
    This could indicate that fundraising is the main object of the charity. Fundraising can only be a secondary objective. It is a means to help the charity further its charitable object.

  • Misrepresentation in disclosure of fundraising or financial performance
    CRA expects the charity, or anyone acting of its behalf, to be truthful in making representations about the charity’s fundraising or finances.

  • Purchases of unnecessary fundraising merchandise
    In buying and giving gift incentives, a charity has to demonstrate that the incentives will result in an increase in donations.

  • Purchases of fundraising merchandise at more than fair market value
    Even if the merchandize increases donations, an unacceptable portion of the charity’s resources are being devoted to non-charitable ends.

  • Purchases of fundraising merchandise from suppliers who are not at arm’s-length
    If the fundraising merchandise is purchased from a supplier not at arm’s-length, the merchandise must be at fair market value or lower. 

  • Poorly documented fundraising initiatives
    Fundraising initiatives have to be documented.  Records should include minutes of planning meetings and written contracts, and show that the charity applied sound risk management practices as explained in the fundraising guidelines.
More...

Charity Central learning module on Questionable Practices

F15. Are some activities considered mainly fundraising because of what they are?

F15. Are some activities considered mainly fundraising because of what they are?


Short Answer

Yes. Some activities by their very nature are considered predominantly fundraising. Activities that are considered mainly fundraising include telemarketing and infomercials.

Long Answer

Some activities are always considered fundraising, such as:

  • activities related to charitable gaming
  • activities that have goods or services sold as a fundraiser by or on behalf of the charity