DQ3. How much is a registered charity required to spend to meet its disbursement quota, and when is it required to spend it?
With the passing of the 2010 federal government budget, registered charities are now required to spend an amount equal to 3.5% of their investment assets each year if their total investment assets equal or exceed a threshold amount of $100,000. For charitable foundations, the threshold amount is $25,000. This is called the Capital Accumulation Rule. The Canada Revenue Agency has issued new guidelines to help registered charities calculate the DQ for fiscal years that end on or after March 4, 2010.
The expenditure obligation applies to assets held by registered charities that are not used directly in their charitable work or administration. These assets include, for example, endowments and other investments or capital accumulations. A registered charity must, subject to certain exceptions, spend at least 3.5% of the average value of such assets annually, if their total investment assets equal or exceed $100,000.