New fundraising policy from the Canada Revenue Agency
Some of the highlights:
Ratio of fundraising costs to fundraising revenue
- Under 35% – Unlikely to generate questions or concerns.
- 35% and above – The CRA will examine the average ratio over recent years to determine if there is a trend of high fundraising costs. The higher the ratio, the more likely it is that there will be concerns and a need for a more detailed assessment of expenditures.
- Above 70% – This level will raise concerns with the CRA. The charity must be able to provide an explanation and rationale for this level of expenditure to show that it is in compliance; otherwise, it will not be acceptable.
Best practices
- Prudent planning processes.
- Appropriate procurement processes.
- Good staffing processes.
- Ongoing management and supervision of fundraising practice.
- Adequate evaluation processes.
- Use made of volunteer time and volunteered services or resources.
- Disclosure of fundraising costs, revenues, and practice (including cause-related or social marketing arrangements).
Areas of concern that could lead to further review
- Sole-source fundraising contracts without proof of fair market value.
- Non-arm’s length fundraising contracts without proof of fair market value.
- Fundraising initiatives or arrangements that are not well-documented.
- Fundraising merchandise purchases that are not at arm’s length, not at fair market value, or not purchased to increase fundraising revenue.
- Activities where most of the gross revenues go to contracted non-charitable parties.
- Commission-based fundraiser remuneration or payment of fundraisers based on amount or number of donations.
- Total resources devoted to fundraising exceeding total resources devoted to program activities.
- Misrepresentations in fundraising solicitations or in disclosures about fundraising or financial performance.
If you work in fundraising, this is a must-read! The whole policy is here.
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