DQ2. How much is a registered charity required to spend to meet its disbursement quota, and when is it required to spend it?

Short answer

There are two types of expenditure obligations included in the disbursement quota. One type of spending requirement is calculated based on the receipted income of the charity, and the other is calculated based on the assets it holds that are not used in its charitable work.

Long answer

A registered charity must spend a percentage of the income it receives during a particular fiscal year, for which it issues tax receipts, before the end of its next fiscal year. The usual percentage is 80%, however in some cases private foundations must spend 100%. As well, certain types of receipted donations, such as bequests or gifts that donors direct be invested for at least 10 years, are not subject to this spending requirement.

A second expenditure obligation applies to assets held by registered charities and not used directly in their charitable work. These assets would 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.