F14. Do some fundraising activities in particular concern the CRA?
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Yes, certain activities will raise flags for the Canada Revenue Agency (CRA).
The CRA has created a list of indicators that may cause them to further review a registered charity’s fundraising activities.More...
Indicators relating to contracting with professional fundraisers:
- Sole-source fundraising contracts without proof of fair market value
The contract was not open to competition. The charity entered into an agreement with the only party that was given the opportunity to make a proposal.
- Non-arm’s-length fundraising contracts without proof of fair market value
Non-arm’s-length contracts are contracts given to individuals who are related to someone in the charity by blood, marriage, adoption, or common law relationships, or individuals with similar interests, such as those with close business ties.
- Activities where most of the gross revenues go to the contracted non-charitable parties
- Commission-based remuneration to the fundraiser or payment based on the amount or number of donations
Total resources devoted to fundraising are greater than the total resources for charitable program activities.
This could indicate that fundraising is the main object of the charity. Fundraising can only be a secondary objective. It is a means to help the charity further its charitable object.
Misrepresentation in disclosure of fundraising or financial performance
CRA expects the charity, or anyone acting of its behalf, to be truthful in making representations about the charity’s fundraising or finances.
Purchases of unnecessary fundraising merchandise
In buying and giving gift incentives, a charity has to demonstrate that the incentives will result in an increase in donations.
Purchases of fundraising merchandise at more than fair market value
Even if the merchandize increases donations, an unacceptable portion of the charity’s resources are being devoted to non-charitable ends.
Purchases of fundraising merchandise from suppliers who are not at arm’s-length
If the fundraising merchandise is purchased from a supplier not at arm’s-length, the merchandise must be at fair market value or lower.
- Poorly documented fundraising initiatives
Fundraising initiatives have to be documented. Records should include minutes of planning meetings and written contracts, and show that the charity applied sound risk management practices as explained in the fundraising guidelines.
Charity Central learning module on Questionable Practices