I heard something about illegal fundraising. How can fundraising be illegal?
Registered charities are prohibited from engaging in anything illegal or contrary to public policy. Fundraising can be illegal if it contravenes the Income Tax Act or any other laws. It is also unacceptable for a registered charity to fundraise or otherwise make its resources available to support terrorism.
Fundraising activity would also be illegal if it were criminally fraudulent or violated federal or provincial statutes governing charitable fundraising, charitable gaming, the use of charitable property, or consumer protection.
The CRA has published the Guidance CPS 028 Fundraising by Registered Charities. It contains a section on illegal activities. Read about them at .
You will want to make sure that any commercial or trading activities you carry out do not contravene the Income Tax Act.
The CRA has published a Checklist on Avoiding Terrorism Abuse at https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/checklists-charities/checklist-charities-on-avoiding-terrorist-abuse.html
Could I be held responsible for illegal fundraising if someone else carried it out?
Very possibly. Assuming you are a board member, you are responsible for direction and control of your charity. Due diligence is expected of you as a board and of a charity’s directors and officers.
Illegal fundraising by a registered charity is prohibited whether carried out by the registered charity or by a third party on behalf of the registered charity. In the same way you are responsible for maintaining direction and control of your charity, you have to maintain direction and control of any third party fundraiser.
You must take all necessary steps to ensure that fundraisers working on behalf of your charity are complying with all applicable laws.
In particular, fundraising to facilitate or advance an illicit gifting arrangement or involving improper issuance of donation receipts is not charitable and can lead to revocation of your charitable status.
The possibility of revocation for a registered charity applies even when the fundraising activity is not in itself illegal, but is associated with illegal conduct. Where a charity knows, or ought to have known, that through its fundraising it is furthering illicit practices or transactions, the Canada Revenue Agency takes the position that this fundraising is grounds for revocation.
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. Charities are prohibited from entering into fundraising contracts that result in the public being misled about the use of donations.
Making a fundraising solicitation that does not comply with Canadian Radio-television and Telecommunications Commission directives, the CRTC’s telemarketing rules, or other established government policy may be considered contrary to public policy and is also prohibited.
What will the CRA do if an audit raises concerns about a charity’s fundraising activities?
If the Canada Revenue Agency (CRA) is concerned about a charity’s fundraising activities, it can do a number of things to bring the charity into line. The steps it can take are outlined below, and are progressively more grave. They are known as the “compliance continuum”. CRA generally looks at the seriousness and persistence of the misconduct, and whether it was intentional or not, in determining what its response will be. The measures are:
- sending education letters
- signing compliance agreements with the charity
- assessing a monetary penalty
- suspending a charity’s tax-receipting privileges
- revoking a charity’s registered status
Revocation is allowed at any time but generally it is the last resort used by the CRA.
The CRA Compliance Continuum
Are some fundraising activities prohibited?
A fundraising activity is prohibited when it
- is illegal or contrary to public policy
- is the main or independent purpose of the charity
- results in an out of proportion or more than incidental private benefit to individuals or corporations
- is deceptive or misleading
Charity Central Learning Module on Prohibited Conduct
CRA Guidance on Fundraising by Registered Charities