Glossary: A

(1) | A (9) | B (5) | C (10) | D (11) | E (4) | F (5) | G (5) | J (2) | K (1) | L (3) | M (4) | N (2) | O (1) | P (6) | Q (2) | R (4) | S (76) | T (2) | U (2) | W (1)
  • Accountability

    The responsibility of a foundation/organization to publicly disclose information on their activities, particularly justification for financial activities and the decisions surrounding them. (Philanthropic Foundations Canada)

  • Accrual

    Accrual accounting is the method of recording transactions, where revenues and expenses show in the results for the period in which they were earned and/or incurred, whether or not cash has changed hands for the transaction.

  • Adjusted cost base

    Generally, the adjusted cost base is the amount originally paid for a property, plus the costs (such as legal fees or surveys) associated with the purchase, plus the cost of any improvements to the property.

  • Advantage

    An advantage is the total fair market value of all property, services, compensation, or other benefits that a donor receives or is entitled to receive in return for making a gift. The benefits may be contingent or receivable in the future, by either the donor or any person or partnership not dealing at arm's length with the donor.

    Determining the fair market value of an advantage is similar to determining the fair market value of a gift in kind. However, while only property is a gift in kind, all types of advantage (for example services, accommodation, use of property) must be valued.

    An advantage also includes any limited-recourse debt in respect of the gift. However, the calculation of an advantage does not include taxes such as GST, PST, or HST. As well, it does not include gratuities, unless they are included in the cost and are not discretionary.
    For more information, see Pamphlet P113, Gifts and Income Tax.

    (CRA : Charities Glossary)

  • Advocacy

    The act or process of defending or maintaining a cause or proposal. An organization may have advocacy as its mission (or part of its mission) to increase public awareness of a particular issue or set of issues. (from enVision.ca)

  • Allocating indirect costs

    Example Ways of allocating the cost
    A charity's newsletter promotes an event The newsletter's cost could be allocated based on ...
    • the number of pages used to promote the event compared to the total number of newsletter pages (for example, if a charity publishes an eight-page newsletter each month and uses one page to promote an event, then one-eighth of the cost of the newsletter could be recorded under“event promotion”), or
    • the number of words in the promotion compared to the total number of words in the newsletter, or
    • the staff time spent to write the promotion compared to the total staff time to write the newsletter.
    The charity's telephone system is used by staff to provide counselling services The phone system's cost could be allocated based on ...
    • the number of staff providing counselling compared to the total number of staff (for example,if a charity has ten staff members and two of them provide counselling services, then one-fifth of the cost of the phone bill could be recorded under “counselling services”), or
    • the staff time spent on counselling compared to the total staff time, or
    • the floor space of counsellors' offices compared to the charity's total floor space
    The executive director travels across the country, teaching education programs, visiting funders, and meeting with regional managers. The executive director’s travel cost could be allocated based on ...
    • the time the executive director spent on each activity (for example, if the executive director is away for three days and spends one day teaching, one day meeting with funders, and one day meeting with regional managers, then one-third of the cost of the travel bill could recorded under each of these activities), or
    • the direct costs incurred by each activity (for example, if the total direct costs of the education program were $30,000, fundraising direct costs were $5,000, and regional managers’ salary direct costs were $65,000, then education would be charged 30% of the travel, fundraising 5%, and the regions 65%). or
    • the revenue associated with each activity (for example, if the education program generated $50,000 in revenue, fundraising $75,000, and the regions $375,000, then education would be charged 10%, fundraising 15%, and the regions 75%).
    A laboratory is used sometimes by several researchers and is sometimes rented out to other organizations. The laboratory's cost could be allocated based on ...
    • the amount of time the lab is used in each of the activities (for example, if researchers from three different programs in the charity each use the lab one day a week, with the other two days rented out, one-fifth of the cost of maintaining the lab can be recorded under each of the three program areas, and two-fifths recorded as a cost of earning rental income), or
    • the number of researchers involved in each activity, or
    • the direct costs incurred for each activity (for example, if the lab's direct costs were $5,000 for program A, $25,000 for program B, $25,000 for program C, and $45,000 for the times when the lab is rented out, then 5% would be recorded for program A, 25% for B, 25% for C, and 45% as a cost of earning rental income).
  • Arm's length

    The term "at arm's length" describes a relationship where persons act independently of each other or who are not related. The term "not at arm's length" means persons acting in concert without separate interests or who are related.

    Related persons are individuals who are related to each other by blood, marriage or common law partnership, or adoption. Examples of blood relatives include grandparents, parents, brothers, sisters, and children. Examples of persons related by spousal relationship include the grandparents of a spouse, the parents of a spouse, the brothers and sisters of a spouse, the spouse of a child, and the spouse of a grandchild. Generally, in determining arm's length relationships, common law partners are treated in the same way as legally married spouses. Adopted children are treated in the same way as blood-related children.

    Related persons also include individuals or groups and the corporations in which they have a controlling interest. Persons related to these individuals or groups are also considered related to those corporations.

    For more information on arm's length, see Interpretation Bulletin IT-419, Meaning of Arm's Length.

    (CRA : Charities Glossary)

  • Artworks donated by the artist

    Artworks that are donated by the person who created them.

    Examples: Paintings, sculptures, jewellery, etc., produced by the artist. Artworks or cultural property donated by the artist are considered to be donated from the artist’s inventory. Inventory is normally valued at fair market value.

    In this case, the charity issues the tax receipt for the fair market value. However, the artist can choose to report a lower value for his or her tax purposes, if the cost of creating the property is less than fair market value. In this case, the value must be:

    • no less than the cost of the property to the donor; 
    • no less than the value of any advantage; 
    • and no more than fair market value.

    This rule lets artists choose how much income they recognize for tax purposes on the donation of the artwork.

    For further information see CRA's IT-504.

  • Associated charities

    Associated charities are two or more registered charities that have applied for and received this designation from us. Associated charities can pass funds among themselves without being affected by the usual limitation placed on gift making by charitable organizations.

    The Income Tax Act generally requires that charitable organizations spend no more than half their income as gifts to qualified donees, otherwise they will be re-designated as public foundations.

    For more information, see Asking for associated status.

    (CRA : Charities Glossary)

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