F26. How does our charity figure out the fundraising costs of an activity that is both fundraising and charitable?

F26. How does our charity figure out the fundraising costs of an activity that is both fundraising and charitable?


Short answer

If an activity clearly has both fundraising and charitable objectives, you may be able to divide up the costs of this activity based on the costs of the resources used for each objective. In some cases, the input costs related to each objective are discrete—as when different staff within your charity prepare different parts of a publication—and can be reported on your T3010 form as separate costs. The costs will show here the same way they do in your financial records. If the costs are not discrete, you should allocate them based on reasonable proportions applied consistently. Allocation of costs usually requires that the activity not bear traits that would cause it to be considered entirely fundraising (see long answer below). 

Examples

  • Eco-Charity publishes a newspaper insert with 65 per cent content from its program department and 35 per cent content from its development department. The staffing expenses for each department are the same (i.e., personnel are paid similarly regardless of which department they work in).  It costs $10,000 to print and distribute the insert. The cost to the program department is $6,500 (a T3010B charitable expenditure) and the cost to the development department is $3,500 (a T3010B fundraising expenditure).

  • Cup-of-Kindness Charity published a newspaper insert with 75 per cent of the content produced by its program department and 25 per cent of the content produced by the development office. Personnel in the development office are slightly better paid than program staff. Costs were allocated according to the resources used to produce the content for each department: the expenses of the program department to produce 75 per cent of the content (a T3010B charitable expenditure) and the expenses of the development office to produce its 25 per cent of the content (a T3010 fundraising expenditure). Since the value of the development office resources was more than 25 per cent—its salaries are slightly more expensive—this was reflected in the allocation of 73 per cent and 27 per cent.

Costs are not always discrete. The costs of printing and mailing covered all the materials regardless of objective. In this case, the charity assigned costs in proportion to the amount of content devoted to each objective—73 per cent as a charitable expenditure and 27 per cent as a fundraising expenditure.

Long Answer
  • If an activity’s main objective is fundraising, then all the resources that are used have to be reported as fundraising expenditures on the T3010 form.
  • A charity can show that an activity was undertaken without fundraising by satisfying one of these two tests:

    Substantially All Test
    If 90 per cent or more of the resources used for an activity is to further an objective other than fundraising, then none of the expenses have to be reported as fundraising.

    Four Part Test
    If an activity did not pass the substantially all test, the charity may still show that the activity happened without soliciting support by answering the four questions in the Four Part Test.

More…

Substantially All Test
Four Part Test
CRA Guidance on Fundraising by Registered Charities