This module identifies the ratio of fundraising costs to fundraising revenue as stated in the CRA Guidance.
This ratio is one of the factors that the CRA will look at in assessing a charity’s compliance with the CRA guidelines.
Other factors that the CRA considers are:
- the size of the charity
- causes with limited appeal
- donor acquisition and planned giving campaigns
- best practice indicators
- more information is available at www.charitycentral.ca/node/495
- questionable practices – more information is available at www.charitycentral.ca/node/498
If the ratio of its fundraising costs to its fundraising revenue is:
- Under 35%, it is unlikely to generate questions or concerns by the CRA.
- Between 35% and 70%, the CRA will examine the average ratio over recent years to determine if there is a trend of high fundraising costs. The higher the ratio, the more likely it is the CRA will be concerned the charity is engaged in fundraising that does not comply with the requirements of the Act.
- Above 70%, this level will raise concerns with the CRA. The charity must be able to provide an explanation and rationale to show that it is not engaged in fundraising that does not comply with the requirements of the Act.
Note that these fundraising ratios aren’t sufficient by themselves to determine whether a charity complies with the requirements of the Act. They provide a way to generally gauge a charity’s fundraising performance and understand the circumstances when the CRA is likely be to be concerned.
For more information, see Guidance CG-013, Fundraising by registered charities.
Size of Charity
The CRA will look at the size of a registered charity to determine whether its fundraising costs are reasonable.
- given the size of the community it serves or works with
- whether the charity is able to show that costs are adequately controlled
Causes with Limited Appeal
For registered charities working on causes that have limited appeal, the CRA may be prepared to accept higher fundraising costs as long as:
- the cost can be shown as reasonable, given the cause that the charity is advancing.
- the charity can show that the costs are being adequately controlled.
Note: Charities working on causes with limited appeal may include those charities researching relatively unknown diseases or those working with causes that are less popular with the public.
Donor Acquisition & Planned Giving Campaigns
Donor acquisition and development and planned giving campaigns are longer-term strategies. They generally do not produce major results in the year the expenses are incurred. So, the CRA may be prepared to consider higher fundraising costs in the initial years of these activities.
The charity needs to show that it is using the recommended best practices for fundraising to control and reduce costs.
The CRA does expect the costs of donor development to decline over time as the donor base and fundraising activity become more established.
Information in this module is provided for general educational purposes and not as legal or accounting advice. Consult a lawyer or accountant for professional advice.
Information is accurate as of 2019.
For changes after this date, consult Canada Revenue Agency.