Fundraising in Ontario
Arthur Drache, January 31, 2010
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| All readers are well aware of the federal rules with regard to fundraising which is managed indirectly through the disbursement requirement rules of the Income Tax Act. Last year the Charities Directorate of the CRA issued its detailed guidance on fundraising1 which applies to all Canadian registered charities. |
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| But it is worth reminding Ontario charities that they are also subject to the jurisdiction of the Ontario Public Guardian and Trustee's office. And we suspect that the vast majority of charities and even advisers are unfamiliar with the fact that the PGRT has a web site which is loaded with advice about the obligations on Ontario charities, replete with warnings. For those who operate in Ontario, familiarity with this site should be a high priority. |
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| Charities in Ontario should also be aware that the PGRT can play a key role in enforcing its own rules relating to charitable fundraising which are different from those of the CRA. Indeed, the PGRT was instrumental in moving against several charities involved in egregious fundraising techniques where the funds were not being used for charitable purposes . |
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| The PGRT posted its views on its web site a couple of months ago under the title Charitable Fundraising: Tips for Directors and Trustees which should be viewed by Ontario as complementary to the CRA rules. |
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| We'd like to quote a few paragraphs from the guidance which show that while there are similar views shared by the two regulators, there are subtle differences, most notably in that the PGRT is using common law rules and thus the precision of the disbursement quota rules is not a factor. |
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| "The Costs of Fundraising |
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| Donors expect most of the money they give to be used for charitable activities even if they recognise that a portion of their gift will be used for fundraising expenses. If charities spend too much on fundraising, public confidence in the charitable sector is diminished and the charity and its board may be exposed to legal consequences. |
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| Charities should monitor and document expenses throughout the campaign. They should regularly review the cost-effectiveness of their fundraising activities and should rethink any fundraising plan if donors are likely to consider the fundraising costs excessive. |
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| The courts have stated that fundraising costs must be reasonable in relation to the amount of funds raised. While the courts have not stated the maximum amount that can be spent on fundraising, the Income Tax Act disbursement quota provides, in part, that registered charities use at least 80% of official charitable receipts issued by the charity in the previous year for charitable purposes. This requirement gives some guidance as to what might be considered a reasonable proportion for administrative and fundraising costs. |
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| Duty to Account |
| Directors and trustees of charities are responsible as fiduciaries to the public for all donated funds. This includes all of the funds collected by commercial fundraisers. A charity should keep detailed records and ensure it receives a full and complete accounting from any commercial fundraisers it uses. Charities that raise funds outside of Ontario must keep a separate accounting of all of the donations and expenses for each campaign in each province. The Public Guardian and Trustee can require a charity to account for donations and related expenses of a fundraising campaign and can require information about fundraising appeals. If the Public Guardian and Trustee has serious concerns about fundraising expenses the charity may be asked to pass its accounts before the court. Directors and trustees can be personally liable for fundraising costs that are found to be unreasonable. |
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| Use of Commercial Fundraisers |
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| Commercial fundraisers may have expertise that some charities do not have in-house, but there are a number of things a charity should think about before hiring a fundraiser. Directors and trustees should make sure that any fundraising arrangement is consistent with the fundraising plan before signing a contract. They should consider the impact of the campaign on the reputation of the charity and the charitable sector as a whole. The costs of the commercial fundraiser together with the charity's own administrative costs must be reasonable. |
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| If the charity hires a commercial fundraiser, it should disclose that canvassers are paid and answer questions about their fees. Consideration should be given to ensuring that donor lists derived from fundraising campaigns remain the property of the charity. To avoid a real or perceived conflict of interest, a charity should not retain a commercial fundraiser in which one of the charity's directors or trustees has an interest. |
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| The courts can set aside fundraising contracts that are too expensive. The courts can also order the directors or the fundraisers to repay the fees in question. All agreements with commercial fundraisers should be in writing. |
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| Before signing a fundraising contract, directors and trustees are encouraged to review the checklist included at Appendix "A" [not included here - ed.]. |
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| To avoid the risks and negative publicity from excessive fundraising costs, directors and trustees should consider asking fundraisers to comply with a code of ethics. The Canadian Association of Gift Planners and the Association of Fundraising Professionals have developed codes of ethics that may be useful examples. |
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| Charities may also consider acting in accordance with the Ethical Fundraising and Financial Accountability Code prepared by Imagine Canada (contact information is found at the end of the Bulletin). |
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| Commercial fundraisers are agents of the charity and the charity and its directors or trustees are responsible for anything the fundraisers say to the public. This is another reason to choose commercial fundraisers carefully and to monitor the fundraising campaign at all times. |
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| Above all else, the charity's directors or trustees are responsible for ensuring that fundraising costs are reasonable and that statements made to members of the public are true and accurate." |
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| Again, we recommend that Ontario charities involved in fundraising familiarize themselves with the PGRT's views. While it is, in our recent experience, easier to deal with the PGRT when problems arise than with the CRA, the PGRT has powers which in many ways are greater than the CRA particularly with regard to potential liability of directors. Thus, keeping "onside" with PGRT is as important to Ontario charities as meeting the Income Tax Act rules. |
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| Becoming familiar with the overall material covered in the various posted documents is important for Ontario organizations. The advice is also worth heeding for non-Ontario organizations which are subject to their own Public Trustee jurisdiction even if most provinces are not as "activist" as their Ontario counterpart. |
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