CRA Guidance on Fundraising
Arthur Drache, July 09, 2009
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| The Charities Directorate has now issued what will be known as CPS-028, its guidance on charitable fundraising activity. Let's say right up front that it is a considerable improvement over the consultation document which was released some time ago. And that consultation paper was certainly a good step up from what appeared to be the benchmarks used by CRA auditors. |
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| There is a temptation to do a comparison between this document (which is the final form) and the consultation paper but in our view this sort of exercise is without particular value. Suffice it to say that the Charities Directorate clearly heard a lot of the submissions from the sector and took them to heart. What is striking is that there has been a toning down of language which suggests that those who wrote this fiunal version were cognizant of the concerns voiced. |
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| We stated with respect to the consultation paper and state again that the fundamental problem faced by the administrators and of course charities is that the disbursement quota (which is designed to limit fundraising and administrative costs) is out of step with reality, almost 35 years after the concept was introduced. This is indirectly reflected (again) in the document, which states: |
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| "Fundraising Ratios and the CRA's Approach |
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| The CRA recognizes that the charitable sector is very diverse and that fundraising effectiveness will vary between organizations. There can be good reasons for a charity to incur higher fundraising costs for a particular event or in a particular year. As a result, a range of factors will be considered in the course of a CRA review. One of the factors that the CRA will consider is the ratio of fundraising costs to fundraising revenue. The following table provides some general guidance in terms of where the CRA may seek additional information or justification for fundraising costs. |
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| Fundraising ratios alone are not determinative in assessing whether a charity's fundraising complies with the requirements of the guidelines in this guidance. However, these ratio ranges give charities a way to generally gauge their performance and understand the circumstances where the CRA is likely to raise questions or concerns. |
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| In addition to considering where a charity falls within the ratio ranges, the CRA will look to the factors described in paragraphs 10 and 11 below, when it considers a charity's fundraising activities." |
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| Now this is an administrative guidance and does not over-rule the statute. But you have to remember that if the CRA follows a lenient administrative policy, the decision is hardly likely to be challenged. |
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| We often have said with regard to various "guidances" that the real test is for charities to take certain situations which they find themselves in and test them against what the guidance says. To some extent the document does this with some of the questions and answers at the end. |
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| But we were more impressed by testing several client situations from the past couple of years where there was a mix of charitable activity linked with fundraising. One was a film evening with a film directly related to the objects of the organization. Entrance fees to the film showing were nominal, just enough to recover costs but there was a post film reception for which supporters paid $50 for a desert reception. The apportionment of the costs for the two aspects of the evening was done in a way which directly reflected what is now in CPS-028. That's a pretty good sign that they are getting it right. |
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| This is a must read document for any charity which raises funds. It can be found on the CRA web site at http://www.cra-arc.gc.ca/tx/chrts/plcy/cps/cps-028-eng.html#h10 |
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