Glossary: S

(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)
  • Source document

    A source document is an original document that records and reflects a transaction between parties.

    Source documents that support the information in the governance documents and financial information include:

    • e-mails and handwritten memos,
    • supplier invoices,
    • expense reports and receipts,
    • paid cheques and credit card receipts,
    • petty cash chits,
    • major contracts entered into by the charity,
    • employment contracts,
    • work orders,
    • courier slips and bills of lading,
    • purchase orders, and
    • bank deposit slips.
  • Sponsorship

    Sponsorship occurs when a business makes a donation to a charity and in return receives advertising or promotion of its brand, products, or services.

    Generally, tax receipts cannot be issued for sponsorships. However, the cost of the sponsorship to the business is generally considered a tax-deductible business expense, which is typically as attractive to a business as a donation receipt.

  • Standard A10 Explained

    Definition: Stakeholders1
    A stakeholder is a person, group or organization that has a direct or indirect stake in the organization because he/she/it can affect or be affected by the objectives, actions and policies of the organization.

    Who are my organization’s stakeholders and why do we need to communicate with them? One of the primary tasks of nonprofit and charitable boards of directors is to communicate openly to its stakeholders, including its members and the broader community it serves.2 The effectiveness of an organization depends on maintaining positive relationships with its stakeholders and on meeting their expectations to the extent that this does not compromise the organization’s mission, values, or strategies.3

    An organization’s stakeholders may include:3

    • Members
    • Clients or participants
    • The most senior staff person
    • Employees
    • Volunteers
    • Individual donors
    • Partners
    • Funders
    • Business donors or sponsors
    • The broader community

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Standards Program Definitions,” Imagine Canada, May 2011.
    2. Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices,” Industry Canada, 2002.
    3. “‘Governance’ in Key Risks & What To Do About Them,” Imagine Canada, 2009.
  • Standard A11 Explained

    What are codes of ethics / conduct and why are they important? Codes of ethics or codes of conduct present the ethical principles that guide behaviour and decision-making within an organization. The purpose of the policy is to provide staff, volunteers and other interested persons with guidelines for making ethical choices in the conduct of their work. It may also outline how the organization intends to treat its volunteers, employees and clients. Principles may include, for example, acting with honesty, accuracy and integrity and respecting privacy and confidentiality.1

    The benefits of creating codes of ethics / conduct include:2

    • Establishing clear expectations for behaviour
    • Building a reputation for credibility
    • Strengthening organizational values
    • Discouraging unethical behaviour
    • Mitigating risks related to conflicts of interest and legal liability

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Standards Program Definitions,” Imagine Canada, May 2011.
    2. “Ethics and Nonprofits,” Deborah L. Rhode and Amanda K. Packel, Stanford Social Innovation Review, Summer 2009.
  • Standard A12 Explained

    What is a conflict of interest? Real or perceived conflicts of interest can occur when the personal interests of board members, staff, or volunteers are in conflict with the interests of the nonprofit or charitable organization with which he or she is affiliated. For the board, conflicts of interest might arise when a director:1

    • Has a personal interest in a proposed contract with the nonprofit organization
    • Has an interest in a proposed contract because he or she is an employee or stakeholder in the organization with which the nonprofit is contracting
    • Has an interest in a proposed contract because he or she is also a board member in the organization with which the contract is proposed

    What is a conflict of interest policy?2 A conflict of interest policy is a policy that requires that directors, officers, staff and volunteers act in the best interest of the organization and stipulates that they should not be controlled or restricted by any external entity or interest group. The policy (or related procedures) should require disclosure, review and decision on actual or potential conflicts in order to ensure that all conflicts of interest or the appearance of one, within the organization and the board are appropriately managed through disclosure, recusal or other means. The conflict of interest policy should ensure that no person benefits inappropriately, or appears to benefit inappropriately, from any transactions in which the organization is involved.

    Why is it important to have a conflict of interest policy? Directors of nonprofit or charitable corporations have a legal obligation to act in the best interests of their organization.1 As such, it is essential that members of a nonprofit or charitable board of directors understand their role and avoid any actions that could be construed as conflicts of interest.1 Section 98 of the Canada Corporations Act instructs directors to declare a conflict of interest as soon as it becomes apparent.1 In cases where legislation does allow contracts in which a director has a conflict of interest to be ratified, the director must declare his or her interest and abstain from voting on related matters. (Also see Standard B12.) Having a defined conflict of interest policy will help boards of directors navigate cases in which conflicts of interest arise.

    Conflict of interest policies should include:

    • Guidelines on what types of circumstances constitute a conflict of interest
    • Consequences for failing to disclose a conflict of interest

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices,” Industry Canada, 2002.
    2. “Standards Program Definitions,” Imagine Canada, May 2011.
  • Standard A13 Explained

    Why is it important to have a privacy policy? Protecting the personal information of nonprofit staff, volunteers, and clients fosters a strong reputation for integrity. This has become an essential part of a nonprofit’s accountability to its stakeholders, many of whom are increasingly concerned about how their personal information is stored, used, and transferred.1

    What government legislation does my organization need to comply with when creating its privacy policy? In 2004, the federal government initiated the Personal Information Protection and Electronic Documents Act (PIPEDA). PIPEDA applies to all nonprofits and charitable organizations that are conducting commercial activities, defined as “...any particular transaction, act or conduct or any regular course of conduct that is of a commercial character, including the selling, bartering or leasing of donor, membership or other fundraising lists. " In certain provinces, including Alberta, BC, and Quebec, provincial privacy legislation has been deemed “substantially similar” to PIPEDA, and should be followed instead.2 Organizations in Alberta can use the Protecting Personal Information: A Workbook for Nonprofit Organizations. (Government of Alberta, March 2010) to determine what should be included in their privacy policy. The workbook also contains a sample privacy policy template.

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Protecting Personal Information: A Workbook for Nonprofit Organizations,” Government of Alberta, March 2010.
    2. “Canada’s Federal and Provincial Privacy Laws for Nonprofits,” Blog by Tierney Smith for TechSoup Canada, June 9th, 2011.
  • Standard A14 Explained

    Why is it important to have a process for addressing complaints promptly? Every organization at one point or another will receive complaints. Instead of viewing complaints as a nuisance, they can be seen as an opportunity to consider the organization’s activities and to make changes that could improve programs, services, or operations. Providing simple and meaningful ways for external stakeholders to express complaints will strengthen your organization’s reputation by demonstrating that it takes their needs seriously.1 Addressing complaints promptly also helps avoid escalation and is a sound risk management practice.

    Why is it important for the board to be made aware of complaints received? Complaints that express dissatisfaction with an organization’s programs, services, or activities can inspire change, leading to improvements in an organization’s operations or ability to fulfill its mission.2 Reviewing complaints may also alert board members to risks they may not have considered. A complaints and compliments approach can allow both positive and constructive feedback to be captured and communicated to the board and other stakeholders.

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “The Eye of the Beholder: Managing Reputation Risk,” Carlye Christianson and Melanie Lockwood Herman, Nonprofit Risk Management Center.
    2. “Uncommon Sense,” Melanie Lockwood Herman, Nonprofit Risk Management Center E-News, April 27, 2011
  • Standard A15 Explained

    Why is it important for Level 3 organizations to have a whistleblower policy? Whistleblower policies and procedures protect individuals who discover that an organization is engaged in illegal practices or conduct that goes against an organization’s policies or other governing documents. Ensuring that “whistleblowers” who disclose illegal or unethical practices are protected from retaliation cultivates transparency and accountability in the workplace.1 Protecting whistleblowers also increases the likelihood that nonprofit or charitable organizations will be made aware of unethical or illegal conduct internally instead of from law enforcement, other regulatory bodies, or the media.1

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Whistleblower Protections in the Nonprofit Sector,” Jason M. Zuckerman, Nonprofit Risk Management Center.
  • Standard A16 Explained

    Why is it important for nonprofit and charitable organizations to hold at least two meetings with an unrestricted agenda? Board meetings are the most significant venue in which board members are made aware of and assess the activities of a charity or nonprofit.1 This standard recognizes that in order to govern effectively, the board of directors must hold at least two meetings in addition to meetings that address specific issues such as the appointment of officers.

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices,” Industry Canada, 2002.
  • Standard A18 Explained

    Why is it important for the boards of nonprofits and charities to consist of at least three members that are at arm’s length to each other and to the most senior staff person? The Canada Not-for-profit Corporations Act states that any soliciting corporation must have a minimum of three directors.1 Requiring directors to be at arm’s length from one another and to the most senior staff person and other management staff ensures that board members act in the best interests of the organization and avoid conflicts of interest. It also helps to maintain the diversity of the board, one of the board’s key responsibilities.2

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “‘Number of Directors’ in New Legislation Canada Not-for-Profit Corporations Act: The Directors,” Corporations Canada.
    2. Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices,” Industry Canada, 2002.
  • Standard A19 Explained

    Why is it important that board members of charitable and nonprofit organizations not receive financial compensation for their role as a director? This standard prohibits board members from receiving monetary compensation in return for their service as a director of the board. “In their capacity as a director” implies that board members may be paid for services they provide to the nonprofit or charitable organization in another role, for example as a consultant (although a director in this position must abide by all conflict of interest policies and procedures). In the case of charities that are registered under the Income Tax Act, certain provinces prohibit directors from receiving any remuneration in any capacity, as this is seen as an inherent conflict of interest.1 (Also see Standard B12).

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “‘Remuneration of Directors, Officers and Members’ in New Legislation Canada Not-for-Profit Corporations Act: The Directors,” Corporations Canada.
  • Standard A2 Explained

    Definition: Strategic Plan 1
    The strategic plan is a document that outlines the desired future for the organization and provides a roadmap that defines how the organization will achieve it. The roadmap contains broad directions as well as more specific ways they will be achieved. The plan usually addresses critical issues, opportunities and threats facing the organization and allocates appropriate resources to pursue the strategic directions.

    What is strategic planning and why is it important? Strategic planning, the process by which the board determines how the organization will accomplish its mission, is one of the primary duties of nonprofit and charitable boards of directors. 2  Strategic planning is an opportunity to explore an organization’s potential, test ideas, question outdated practices, and develop new and innovative strategies that challenge the status quo in pursuit of greater social impact. It allows the board to set priorities for action that shape decision making throughout the organization. 3

    The benefits of strategic planning include: 3

    • Identifying important issues (often by conducting a SWOT analysis)
    • Identifying potential resources
    • Developing a framework for action
    • Creating a clear plan that can be used in communications and marketing as well as in funding proposals
    • Developing a tool for managing change
    • Increasing creative thinking
    • Allowing the board to discover shared values
    • Building trust and respect among board members
    • Creating a positive organizational culture

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Standards Program Definitions,” Imagine Canada, May 2011
    2. Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices,” Industry Canada, 2002
    3. “Strategic Planning Workshop Presentation,” Cathy Brothers for Capacity Waterloo Region, Sept. 30th 2011.
  • Standard A20 Explained

    Why is it important to orient new board members? Orientation of new board members is an essential component of creating an effective board of directors.1 In order to govern a nonprofit or charitable organization, board members must be informed of the organization’s goals and activities and must also understand their role as board members, including their personal liability for the organization’s finances or actions.

    Orientation of new board members might include the following:

    • The organization’s letters patent
    • The organization’s bylaws
    • The organization’s recent annual reports
    • The organization’s policies and procedures
    • A document describing the role of the board of directors, such as the “Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices,” Industry Canada, 2002.
    • The role of the board in hiring, performance evaluation, compensation management, and firing, if needed, of ED/CEO.
    • The organization’s mission statement
    • The organization’s strategic plan or long-term goals
    • The programs and services offered by the organization
    • The organization’s administrative structure
    • The organization’s financial status, budget, and funding structure

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices,” Industry Canada, 2002.
  • Standard A21 Explained

    Why is it important to record board meetings and retain policies? Preparing and retaining proper minutes from board meetings is an essential part of a transparent and accountable governance process and serves to preserve a record of agenda items discussed, documentation reviewed, votes taken, and decisions made.1 Minutes from board meetings record organizational history and can play an important role in risk management by demonstrating that directors have exercised a reasonable standard of care in decisions made regarding the organization. Board minutes can also be a useful tool for orientation and training of new board members, employees, or volunteers. Similarly, policies guide practice within nonprofit and charitable organizations and must therefore be recorded and retained. All board members, staff, and volunteers of an organization should be familiar with the organization’s policies.

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “‘Governance’ in Key Risks & What To Do About Them,” Imagine Canada, 2009.
  • Standard A22 Explained

    Why is it important to have a succession plan for the board chair and committee chairs? The board of directors of a charity or nonprofit is responsible for board succession planning.1 Planning for succession to the positions of board chair and committee chairs minimizes disruption as directors leave or join the board and allows the board to ensure that important skills continue to be represented among its members and committees.2 Like planning for the succession of the Executive Director or other staff members, board succession planning increases the resilience of the organization and builds capacity among board members.

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices,” Industry Canada, 2002.
    2. Succession Planning for the Board,” Beth Deazeley, Feb. 2010.
  • Standard A23 Explained

    Why must the board consider development oppurtunities for potential board chairs and committee chairs?Providing developmental opportunities for board members is a valuable practice1 that represents an investment in individual board members, the effectiveness of the board as a group, and the impact of the organization in the community.2 Opportunities for development build the skills and experience of board members and help retain the right people on your organization’s board.2

    Effective opportunities for board development:2

    • Are pertinent for the individual director and for the board as a whole
    • Meet the needs of board members and of the organization
    • Advance the organization’s priorities
    • Are relevant for the board member outside the board room
    • Are convenient and cost-effective
    • Increase understanding of the organization’s mission, structure, and/or stakeholders

    Development opportunities for board members might include:2

    • Information sessions during meetings
    • In-house training and workshops
    • Board retreats
    • External workshops or conferences
    • Books, articles, and other learning resources
    • Distance education
    • Meetings focused on reflection and dialogue

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. National Study of Board Governance Practices in the Non-profit and Voluntary Sector in Canada,” Strategic Leverage Partners Inc., 2006.
    2. Board Building - Recruiting and Developing Effective Board Members for Not-for-Profit Organizations, A Self-Guided Workbook,” The Muttart Foundation and Alberta Culture and Community Spirit, 2008.
  • Standard A24 Explained

    Why does the board need to review its performance? Evaluating its own performance is a way for the board to build capacity and to demonstrate its commitment to ongoing learning and improvement. Although not a requirement for this standard, good practice suggests that time should be allocated during each board meeting to conduct a brief evaluation of the meeting in order to enhance effectiveness in the future. In addition, the board should evaluate its performance annually along with the performance of the board chair.1 The board should engage an external facilitator if board members have difficult or contentious relationships that may hinder their ability to conduct meaningful evaluations of themselves or their peers. Annual evaluations may also contain input from members or stakeholders.1

    Benefits of evaluating the board and its individual directors include:2

    • Recognizing the significance of the board’s role and of the commitment made by its directors
    • Ensuring that activities are accomplished and that board members receive enough support to fulfill their roles
    • Encouraging accountability by evaluating how effective the board is at its work
    • Providing recognition to board members, which may help with motivation and retention
    • Helping the board and individual directors to improve their performance
    • Creating a record of information that can be useful when recruiting new board members
    • Giving board members an opportunity to self-identify if their role on the board is not a good fit3

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices,” Industry Canada, 2002.
    2. Board Building - Recruiting and Developing Effective Board Members for Not-for-Profit Organizations, A Self-Guided Workbook,” The Muttart Foundation and Alberta Culture and Community Spirit, 2008.
    3. Lynn Chambers, Manager of the Standards Program at Imagine Canada, personal communication, September 2012.
  • Standard A3 Explained

    Definition: Most Senior Staff Person 1
    The person who reports to the board of directors and to whom any other employee of the organization reports either directly or indirectly. Common titles for the most senior staff person include President, Chief Executive Officer and Executive Director.

    Recruiting the most senior staff person: Hiring and monitoring the Executive Director or most senior staff person is one of the primary responsibilities of the Board of Directors of a nonprofit organization. 2 It is important to have processes in place for recruiting a new Executive Director to ensure that the best possible candidate is selected for the job and to avoid crisis as your organization transitions between one Executive Director and the next.

    Why is orienting the most senior staff person important? Effective orientation has been demonstrated to improve job performance as well as to instill a sense of commitment among new employees. 3

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Standards Program Definitions,” Imagine Canada, May 2011
    2. Hiring a Director for a Nonprofit Agency: A Step-by-Step Guide,” Kurt J. Jenne and Margaret Henderson, Popular Government, Spring 2000
    3. HR Management Standards: Second Edition,” HR Council for the Nonprofit Sector, 2011
  • Standard A4 Explained

    Why is a written job description important? The board of directors is responsible for monitoring the performance of the organization’s most senior staff person in order to ensure that the organization is functioning effectively. 1 A formal job description lists all the activities and competencies required for the most senior staff person’s position and creates a structure with which to assess individual performance. 2 Written job descriptions also provide a sense of professionalism when recruiting a new ED / CEO.

    Job descriptions usually include: 2

    • A list of the position’s duties, tasks, and responsibilities
    • A description of how the position advances the organization’s goals
    • A list of required experience and competencies
    • Any special requirements (for instance, a police check)
    • A list of key relationships to the organization’s stakeholders

    Why are annual performance objectives important? Level 2 and 3 organizations must develop annual performance objectives for their most senior staff person and conduct an annual performance review. Annual performance objectives should assess progress toward the nonprofit or charitable organization’s strategic plan 2 and measure success against annual work plans and the most senior staff person’s job description. 3

    Benefits of regular performance reviews of the Executive Director or most senior staff person include: 4

    • Increased understanding among board members of the role of the Executive Director and of day-to-day operations
    • Increased understanding of progress toward the organization’s mission
    • Ability to respond more effectively to shifts in the external environment including changes to funding and community needs
    • Enhanced communication between board members and the Executive Director
    • Ability to proactively address emerging challenges
    • Enhanced performance of the Executive Director

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices.” Industry Canada, 2002
    2. HR Management Standards: Second Edition,” HR Council for the Nonprofit Sector, 2011
    3. Performance Management for Executive Directors,” in HR Council for the Nonprofit Sector’s HR Toolkit. 
    4. Hiring and Performance Appraisal of the Executive Director,” The Muttart Foundation and Alberta Culture and Community Spirit, 2008
  • Standard A5 Explained

    The board is responsible for determining and reviewing the compensation package of the organization’s most senior staff person. When reviewing the most senior staff person’s total compensation package once per year, it is important that the board review all related expenses.

    Definition: Total Compensation Package1
    The sum total of all rewards (cash and other) that are provided to an employee, including: base salary, commission, bonus, car allowance, housing allowance, benefits, pension, etc.

    The HR Council for the Nonprofit Sector identifies three forms of compensation,2 all of which should be considered when reviewing the total compensation package of your organization’s most senior staff person:

    • Direct financial compensation consisting of pay received in the form of wages, salaries, bonuses and commissions provided at regular and consistent intervals
    • Indirect financial compensation including all financial rewards that are not included in direct compensation and can be understood to form part of the social contract between the employer and employee such as benefits, leaves, retirement plans, education, and employee services
    • Non-financial compensation referring to topics such as career development and advancement opportunities, opportunities for recognition, as well as work environment and conditions”

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Standards Program Definitions,” Imagine Canada, May 2011.
    2. Definitions from “Compensation Defined,” in the HR Council for the Nonprofit Sector’s HR Toolkit.
  • Standard A6 Explained

    Definition: Succession Plan1
    A succession plan sets out how potential departures of key personnel would be dealt with in the short-term and long-term through internal or external candidates. It could define key competencies, identify pools of talent and outline how current staff members are being developed to fill positions.

    What is succession planning and why is it important? A succession plan describes how an organization will respond to the expected or unexpected departure of their most senior staff person. Organizations may find it helpful to create two succession plans: one that reflects long-term planning and one for emergencies. Having an effective succession plan in place for the most senior staff person improves organizational resilience by:2 

    • Avoiding disaster should an Executive Director leave unexpectedly
    • Strengthening operations and building capacity within the organization by training staff, board members, and volunteers to perform aspects of the most senior staff person’s role
    • Building leadership competencies within staff and volunteers throughout the organization, strengthening the nonprofit sector as a whole and enabling organizations to achieve greater positive impact in the communities they serve

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Standards Program Definitions,” Imagine Canada, May 2011.
    2. Building Leaderful Organizations: Succession Planning for Nonprofits,” Tim Wolfred, 2008. Baltimore, Maryland: The Annie E. Casey Foundation
  • Standard A7 Explained

    What is risk? Risk is anything that could prevent a nonprofit from achieving its mission.1 An organization’s risks can be considered in terms of its four primary assets:1

    1. People (board members, volunteers, staff, clients/participants, donors, etc.)
    2. Property (buildings, facilities, equipment, contents, important papers)
    3. Income (grants, contributions, contracts, investment earnings)
    4. Goodwill (reputation, ability to raise funds, stature in the community, appeal to prospective volunteers / board members / staff)

    Definition: Operational Risks2
    Operational risks are risks arising from the organization’s people, systems, strategies and processes or from external events which have a negative impact on its assets, including physical, financial and human resources, programmatic content and material and its integrity and reputation. It also includes other categories such as fraud risks, legal risks, and physical or environmental risks.

    Definition: Strategic Risks2
    Strategic risks are associated with the strategic direction of an organization. Strategic risks are often a function of uncertainties that may be driven by government policy, competition, court decisions or a change in stakeholder requirements.

    Why is identifying and planning to minimize risk important? Assessing and mitigating the risks facing a nonprofit or charitable organization is one of the primary responsibilities of the board of directors.3 Every nonprofit faces risks, and risks can never be completely removed.4  What is most important is that your organization is aware of the risks involved in its programs and activities and that it takes reasonable action to avoid harm to its board members, volunteers, staff, clients, property, or reputation in the course of its operations.

    Effectively managing risk will help your organization to:

    1. Prevent or reduce harm to your people or damage to their property
    2. Prevent or reduce damage to your nonprofit’s reputation and public image
    3. Help you attract and maintain the confidence of your stakeholders
    4. Increase peace of mind
    5. Keep regulators happy
    6. Reduce the chance of a lawsuit
    7. Help obtain (or keep) strong insurance coverage at a competitive price
    8. Assist in clearly defining insurance needs, particularly as needs and activities change
    9. Save nonprofit resources by preventing loss of time, assets, income, property, or people
    10. Lessen the chance of disruptive investigation
    11. Inform decision-making
    12. Reduce uncertainty by knowing what could happen
    13. Risk management can be a valid defense in a lawsuit
    14. Risk management can be a valid defense in a lawsuit even if an employee or volunteer did not follow your policy (by demonstrating that your organization took reasonable steps to mitigate risks)

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Key Risks & What To Do About Them,” Imagine Canada, 2009.
    2. “Standards Program Definitions,” Imagine Canada, May 2011.
    3. Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices,” Industry Canada, 2002.
    4. Developing a Risk Management Strategy: Five Steps to Risk Management in Nonprofit and Charitable Organizations,” Karen Six and Eric Kowalski, Imagine Canada, 2005.
  • Standard A8 Explained

    Why is it important to review insurance coverages? Insurance protects your organization’s people and property from injury, loss, or damage incurred in the course of your organization’s operations. This standard seeks to ensure that nonprofit and charitable organizations possess adequate insurance coverages based on their programs, services, and other activities. Board members need to be familiar with their organization’s insurance policies in order to protect their organization and themselves from risk.

    What kind of insurance does my organization need? The amount and kind of insurance an organization needs to purchase depends on the programs and / or services the organization offers as well as the kind of activities it conducts.1 Boards should consider whether their insurance policies are sufficient given their organization’s mission and operations, and should be familiar with any limitations of their policies.2 Limitations can include exclusion of coverage for sexual or physical abuse, limitations related to the geographic area covered by the policy or limitations regarding who is covered by the policy.2 Most general liability insurance policies only cover claims made in the context of an organization’s operations. Nonprofit and charitable organizations should also consider obtaining additional directors’ and officers’ liability insurance to protect against claims involving board decisions or actions.2 Board members need to understand their organization’s insurance policies as they could be held personally liable if the organization is unable to meet its financial obligations.

    1. Insurance for Voluntary Organizations: Things to Consider,” Insurance Bureau of Canada, 2007.
    2. Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices,” Industry Canada.


  • Standard A9 Explained

    What governing documents does my organization need to comply with? The operations of nonprofit and charitable organizations in Canada are governed by documents including:1

    • The statute under which the organization is incorporated
    • The organization’s letters patent
    • The organization’s bylaws
    • The organization’s governance or policy manuals, if applicable

    Why is it important to be in compliance with these governing documents? By law, the letters patent and bylaws constitute a contract between a nonprofit or charitable organization and its members.1 Board members can be held personally liable if their organization fails to act in accordance with its governing documents.1 Establishing and following a process at the board level to ensure that the organization acts in accordance with its governing documents mitigates this risk and protects the organization from liability. If the organization wishes to undertake activities that are beyond the scope of its letters patent, it must create supplementary letters patent that include these amendments.1

    From "Accreditation Preparation Workbook Section A: Board Governance,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. Primer for Directors of Not-for-Profit Corporations: Rights, Duties, and Practices,” Industry Canada, 2002.
  • Standard B1 Explained

    Definition: Financial Statements1
    The statements of the financial activities of the organizations, normally including:

    • a balance sheet, which shows assets, liabilities and equity at year-end;
    • a statement of income, which shows the results of operations for the year;
    • a statement of retained earnings, which summarizes changes in retained earnings during the year;
    • a statement of cash flows, which shows operating, investing, and financing activities, and how these activities affect the cash position; and,
    • notes to financial statements, which are an integral part of financial statements, and which provide additional explanations and details concerning financial statement items.

    Why is it important to complete annual financial statements? Overseeing the financial affairs of a nonprofit or charitable organization is one of the most important roles of the board of directors, and financial statements are the main avenue of communication about the organization’s financial status.2 For the board, financial statements present information that is essential when making strategic decisions about the future of the organization.3 They typically consist of the four basic financial reports outlined above, accompanied by year-end comments from the auditor, including any notes. Financial statements can also serve as important communication tools which the organization can use to share pertinent financial information with its stakeholders.

    Tip: Because the quality of your organization’s financial statements depends on the quality of the information collected regularly throughout the year, it may be helpful to engage an accountant to set up statements to make sure the format is correct and that staff know what information needs to be tracked.

    From "Accreditation Preparation Workbook Section B: Financial Accountability & Transparency,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Standards Program Definitions,” Imagine Canada, May 2011.
    2. A Guide to Financial Statements of Not-for-Profit Organizations: Questions for Directors to Ask,” The Canadian Institute of Chartered Accountants, 2012.
    3. “Financial Responsibilities of Not-for-Profit Boards: A Self-Guided Workbook,” The Muttart Foundation and Alberta Culture and Community Spirit, 2008.
  • Standard B10 Explained

    Definition: Annual Report1
    An annual report is a comprehensive report on the organization’s activities throughout the preceding year. The annual report should give stakeholders information about the organization’s activities and financial performance. The annual report usually includes the financial statements of the preceding year, comments on the activities of the past year and outlook for the future.

    Why is it important to make your organization’s annual report publicly available? Annual reports can be an important component of a charity or nonprofit’s communication to its stakeholders and can help develop an organization’s reputation for accountability and transparency both financially and in its operations.2

    The Canadian Institute of Chartered Accountants suggests that effective annual reports should answer the following questions:2

    1. What are the organization’s mission and vision?
    2. What strategies do the organization employ to achieve the mission and vision?
    3. What were the organization’s annual goals and how did actual performance compare to these goals?
    4. What risks and opportunities face the organization?
    5. What were the organization’s financial and nonfinancial highlights for the year?
    6. What fundraising methods did the organization use and what were the outcomes?
    7. What does the organization seek to accomplish in the coming year?
    8. What is the governance structure of the organization?

    Why is it important to make your organization’s financial statements publicly available? Increasingly, community members, donors, funders, and other stakeholders are taking an active interest in the financial practices of charitable and nonprofit organizations.2 Making financial statements publicly available demonstrates financial accountability and transparency to stakeholders. Level two and three organizations that are required to have an independent audit or review engagement (see Standard B2.) must make any notes by a licensed public accountant available along with their financial statements.

    Why is it important for organizations to make a list of their board members publicly available? Members of a nonprofit or charity’s board of directors are responsible for overseeing all activities of the corporation. Stakeholders and members of the community therefore have a right to know the names and contact information of all board members.3 Nonprofits and charities are obliged to report any changes to the board of directors, including the election or appointment of a new director, the resignation or removal of a director, or a change in the residential address of a board member within 15 days of the change by submitting Form 4006 – Changes Regarding Directors to Corporations Canada.3 Standard B10 ensures that nonprofits and charities also make this information publicly available so that stakeholders are able to contact board members.

    Why is it important for charities to make their registration number (BN) assigned by the Canada Revenue Agency (CRA) available on their website? Every registered charity in Canada is assigned a unique registration number which includes a business number, program identifier, and reference number. This number is an important component of a charity’s legal identification.

    Why is it important for charities to make the public portion of their most recent Registered Charity Information Return (form T3010) as submitted to CRA available on their website? The public portions of the T3010 provide essential information about a charity’s financial activities including revenues, expenses, and compensation levels of its 10 highest paid employees. Providing easy access to this information by including it on your organization’s website demonstrates financial transparency and accountability to stakeholders and the broader community. The Canada Revenue Agency publicizes portions of the T3010s submitted by all Canadian charities online in their Charities Listing. Organizations can provide a link to this information on their websites in order to comply with this standard.

    From "Accreditation Preparation Workbook Section B: Financial Accountability & Transparency,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Standards Program Definitions,” Imagine Canada, May 2011.
    2. Improved Annual Reporting by Not-For-Profit Organizations,” The Canadian Institute of Chartered Accountants, 2011.
    3. “Report Changes Regarding Directors,” Your Reporting Obligations Under the Canada Not-for-profit Corporations Act, Industry Canada.
  • Standard B11 Explained

    What information on compensation is required by CRA in the T3010? The T3010 asks registered charities in Canada to disclose the salary ranges for its 10 highest compensated, permanent full-time employees. Charities are asked to disclose the number of employees whose salaries fall within the following range: $1-$39,999, $40,000-$79,999, $80,000-$119,999 and so on to $350,000 and over. This standard asks that all nonprofits accredited through Imagine Canada make this information publicly accessible even though they do not submit a T3010 to CRA. All Canadian charities must submit a T3010, which can be publicly accessed on CRA’s Charities Listing.

    Why should organizations make information on compensation levels accessible to its stakeholders? Individual donors, corporations, foundations and governments increasingly want to understand the operating costs and expenses of charitable and nonprofit organizations. Similarly, the media has become increasingly interested in compensation levels for charities and nonprofits in Canada.1 Disclosing information on compensation levels is an important component of an organization’s financial accountability and transparency.

    From "Accreditation Preparation Workbook Section B: Financial Accountability & Transparency,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. Statement on Employee Compensation in the Charitable and Nonprofit Sector,” Imagine Canada, February 2012.
  • Standard B12 Explained

    Why is it important for organizations to disclose details of the purpose and amount of payments made to board members or companies in which board members have an interest? Standard A19 of Section A: Board Governance states that no member of the board is entitled to receive, either directly or indirectly, any salary, wages, fees, commissions or other amount for services rendered to the organization in their capacity as a director. “In their capacity as a director” means that board members may be paid for services they provide to the nonprofit or charitable organization in another role, for example as a consultant. However, disclosing the amount and purpose of these payments is an essential component of financial transparency for nonprofits and charities.

    Paying a board member or an organization in which a board member is an important stakeholder, for instance an owner, partner, or senior manager, can appear to be a significant conflict of interest. Perceived or actual conflicts of interest can damage your organization’s reputation and impact perceptions of the nonprofit sector as a whole. Your organization’s conflict of interest policy (see Standard A12.) will set out the process to follow for directors who have an interest in one of the organization’s contracts. Disclosing the details of payments for products or services made to board members or companies in which board members have an interest demonstrates to stakeholders that your organization is following its conflict of interest policy and will help to build your organization’s reputation for ethical financial practices.

    Note for provincially incorporated charities: Certain provinces prohibit directors from receiving any remuneration in any capacity, as this is seen as an inherent conflict of interest.1

    What does the Canada Not-for-profit Corporations Act say about the compensation of board members? The Canada Not-for-profit Corporations Act allows directors to receive reasonable remuneration for their expenses or services to the corporation.

    From "Accreditation Preparation Workbook Section B: Financial Accountability & Transparency,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “‘Remuneration of Directors, Officers and Members’ in New Legislation Canada Not-for-Profit Corporations Act: The Directors,” Corporations Canada.
  • Standard B13 Explained

    What are considered fundraising activities? The CRA considers any activity that involves asking for support to be fundraising, unless it satisfies The Substantially All Test.1

    The Substantially All Test: If substantially all (90% or more) of an activity is not asking for support, the CRA recognizes that this activity would have occurred regardless of asking for support. Costs for these activities do not need to be considered fundraising costs.

    Example: The Substantially All Test is Met:2 The executive director of a charity gives a speech about a charity's research findings to a group of stakeholders with an interest in the research. The speech concludes with contact information and a brief invitation to learn more about the charity's work, or if audience members choose, make a donation. In this case, the substantially all test has been met and none of the costs of the speech (for example, the executive director's time and travel) have to be treated as fundraising expenditures.

    Example: The Substantially All Test is Not Met: A charity’s initial or home page on its Web site is used extensively to solicit donations or provide information on giving opportunities. Program and other information about the charity only appear after this material. The prominence of the fundraising materials relative to the other content means it will be considered to represent more than 10% of the activity. In this situation the “substantially all test” is not met.2

    Pro-rated allocation of costs to fundraising and other expenditures: The CRA recognizes that some activities represent both fundraising and other costs, for instance management/administration expenses. In order for expenses to be pro-rated, the charity must be able to demonstrate that less that 90% of the activity in question advances the organization’s fundraising goals.2 To decide whether it is possible to pro-rate expenses, CRA advises charities to separate fundraising from other content and consider:2

    • the proportion of charitable, fundraising, management/administrative, or political content within the activity;
    • the resources devoted to charitable, fundraising, management/administrative, or political content (employee and volunteer time, financial, and property); and 
    • the prominence of the fundraising content in the activity.

    Why do costs associated with fundraising activities need to be disclosed? By law, all registered charities must report all costs related to fundraising on their T3010. The Canada Revenue Agency states that charities must be transparent regarding their fundraising costs, revenues, and practices, warning that failure to accurately disclose this information may indicate that fundraising activities have been illegal or deceptive.2

    What types of expenses need to be disclosed? The following table3 from Imagine Canada indicates the kinds of activities that must be recorded as fundraising costs. This is a useful tool for helping you to know what sorts of fundraising costs need to be disclosed.

    Type of activity Amount to record as fundraising costs
    Fundraising activities (any activity that includes asking for support, unless you can show that the activity would still have taken place without asking for support), including:
    • planning, researching, or preparing to ask for support;
    • profile raising, donor stewardship, and donor recognition; and
    • sales of goods or services (except as part of a related business).
    All costs must be recorded as fundraising costs

    Activities that include asking for support but that would still have taken place without asking for support, where:

    • "substantially all" of the activity is not fundraising;
    • the "four-part" test is met.
    • No costs need to be recorded as fundraising costs. 
    • A portion of the costs need to be recorded as fundraising costs.
    Activities that would not have taken place without asking for support but that include charitable activities designed to prompt an action or change a behaviour. A portion of the costs need to be recorded as fundraising costs.
    All other activities that include asking for support. All costs must be recorded as fundraising costs.

    From "Accreditation Preparation Workbook Section B: Financial Accountability & Transparency,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “What activities are fundraising?” Imagine Canada’s Charity Tax Tools.
    2. “Fundraising by Registered Charities,” Canada Revenue Agency, April 20th 2012.
    3. “Recording fundraising costs,” Imagine Canada’s Charity Tax Tools.
  • Standard B2 Explained

    Definition: Audit1
    An audit is the highest level of assurance that can be provided on financial statements. An audit provides reasonable assurance that the entity’s financial statements present fairly its financial position, financial performance and cash flows in accordance with the applicable financial reporting framework.

    Definition: Review Engagement1
    A review engagement consists primarily of enquiry, analytical procedures and discussion. This type of engagement is useful when an organization does not need audited financial statements, but management or third parties (e.g., banks, granting agencies, etc.) want some assurance that the financial statements are plausible.

    Audit vs. a Review Engagement1
    The chartered accountant’s objective in an audit is to express an opinion on the financial statements; in a review engagement, the objective is to determine whether the financial statements are plausible in the circumstances. ‘Plausible’ is used in the sense of being worthy of belief, which is a moderate level of assurance.

    Why is it important to have financial statements audited? An audit provides an opportunity to demonstrate financial accountability and transparency by allowing an external auditor to review the organization’s books and records to ensure that the information reported in the financial statements is accurate.2

    Note: Provincial legislation may require nonprofit and charitable organizations with revenues under $1 million to have their financial statements audited by an independent licensed public accountant. Nonprofits and charities must ensure that they comply with all applicable legislation.

    When reviewing the audited statements, boards of directors may wish to ask the following questions:

    • Did the auditor require any significant changes to management’s year-end financial information before approving the financial statements and issuing their report?
    • Did the auditor uncover any weaknesses in internal controls or accounting policies?
    • Did the auditor have any concerns about the organization’s financial activities based on the financial statements?
    • Did management make significant estimates in the financial statements that the auditor was concerned about?
    • Did the auditor uncover any issues that would cause him or her to issue a qualified report?
    1. “Standards Program Definitions,” Imagine Canada, May 2011.
    2. A Guide to Financial Statements of Not-for-Profit Organizations: Questions for Directors to Ask,” The Canadian Institute of Chartered Accountants, 2012.
  • Standard B3 Explained

    Why is it important for financial statements to be received and approved by the board within 6 months of year end? Nonprofit and charitable boards of directors are responsible for overseeing their organization’s financial affairs. While directors do not need to have a lot of expertise related to finance, they do need to know how to read and understand the financial information presented to them by staff.1 This standard ensures that boards of directors will receive, review and approve the organization’s financial statements before they must be submitted to CRA within six months of year-end (see Standard B4).

    1. A Guide to Financial Statements of Not-for-Profit Organizations: Questions for Directors to Ask,” The Canadian Institute of Chartered Accountants.
  • Standard B4 Explained

    Definition: Registered Charity Information Return (T3010)1
    The annual information form required by Canadian Revenue Agency (CRA) annually by all charities.

    Why is it important to file the T3010 on time? Filing the T3010 is required by law for all Canadian charities. The board of directors must make certain that their organization complies with all relevant legislation, and are responsible for ensuring that the T3010 is filed accurately and on time.2 The T3010 contains financial information as well as information about your organization’s governance, programs, and political or business activities.3 If you do not file your Registered Charity Information Return (T3010), CRA will revoke your organization’s charitable status. As CRA makes pubic a list of all organizations that have had their charitable status revoked,3 this will negatively impact your organization’s reputation and may discourage funders and donors from supporting your organization in the future. CRA also makes the information available on the T3010 public, so failing to provide this information is a missed opportunity to communicate with your organization’s stakeholders. Increasingly, granting agencies, corporations, and individual donors are considering this information as they decide which organizations to fund.3

    See also : Ten Questions Directors of Charities Should Ask About the T3010

    How do I file the T3010? See “Reporting and Receipting,” for detailed instructions on how to file the T3010 form.

    Information for nonprofits: Nonprofit organizations are required by law to file “Corporation Income Tax (T2) Return,” within six months of year-end. Please visit the Canada Revenue Agency for details on how to submit the T2.

    From "Accreditation Preparation Workbook Section B: Financial Accountability & Transparency,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. Standards Program Definitions,” Imagine Canada, May 2011.
    2. 10 Questions Directors of Charities Should ask About the T3010,” blog by Lisa Hartford for Imagine Canada, September 4th 2012.
    3. The In’s and Out’s of Reporting to CRA,” William Harper, CA for William Harper Associates, December 2009.
  • Standard B5 Explained

    What is an annual budget and why does the board need to review it regularly? A budget is a financial plan that reflects an organization’s broader strategic and operational plans.1 Essentially, an organization’s budget is a tool to help it accomplish its mission. The annual budget is the board’s most important tool to ensure that their organization is handling funds and assets responsibly and effectively.2 By approving and monitoring the annual budget, nonprofit boards ensure responsible stewardship of the organization’s financial resources.1 Remember that each board member, not only the Treasurer, shares a responsibility to effectively manage the organization’s financial resources and could, in some circumstances, be held personally liable for the organization’s debts.2

    An annual budget can be an effective tool for monitoring your organization’s financial activities if the following 5 criteria are met:2

    • The budget is be prepared thoughtfully
    • The budget is prepared and / or approved by the board
    • The time periods covered by the budget correspond to the time periods of the organization’s financial statements
    • The financial statements are prepared in a timely fashion and are compared to the budget (preferably right on the statements)
    • The board discusses and is prepared to take action in cases where a comparison of financial statements to budgets shows a significant discrepancy

    Board members may wish to ask some of the following questions during the budget review and approval process:

    • What assumptions guide the budget’s estimates of revenues and expenditures for the coming year?
    • Are there significant differences between this year and last year’s budget? What accounts for these differences?
    • What are the plans for staff compensation for the coming year?
    • What changes to programs and services are reflected in the budget?
    • Does the budget align with the strategic plan?
    • What different scenarios have been considered when preparing the budget?
    • Do we have a cushion to guard us against unanticipated or adverse events?

    From "Accreditation Preparation Workbook Section B: Financial Accountability & Transparency,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. A Guide to Financial Statements of Not-for-Profit Organizations: Questions for Directors to Ask,” The Canadian Institute of Chartered Accountants, 2012.
    2. Financial Responsibilities of Not-for-Profit Boards: A Self-Guided Workbook,” The Muttart Foundation and Alberta Culture and Community Spirit, 2008.
  • Standard B6 Explained

    Definition: Statutory Remittances1
    Legally required payments to government (e.g., tax, EI, CPP).

    What kinds of statutory remittances could my organization be required to pay? Statutory remittances could include tax deductions from staff salaries, employment insurance premiums, and Canada Pension Plan contributions.2 They may also include workers’ compensation, EHT (Employer’s Health Tax), and any other legally required payments to government.

    Why is it important for the board to be assured that all statutory remittances have been paid? Failure to submit statutory remittances is one of the most frequent reasons for lawsuits against charities and nonprofits in Canada. Directors of nonprofit and charitable organizations that fail to submit all legally required payments to government can be held personally liable for these amounts plus the interest accrued.2 However, if a director can demonstrate that they took reasonable precautions to ensure that all statutory remittances were made, they may not be held liable.2 Applying this standard ensures that your organization will remain in good standing with government authorities and protects your board members from personal liability.

    From "Accreditation Preparation Workbook Section B: Financial Accountability & Transparency,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Standards Program Definitions,” Imagine Canada, May 2011.
    2. “Chapter 3: Liability of Directors” in the “Primer for Directors of Not-for-profit Corporations: Rights, Duties and Practices,” Industry Canada, 2002.

    Additional resources:

  • Standard B7 Explained

    What are fundraising activities? The CRA defines fundraising as “any activity that includes a solicitation of present or future donations of cash or gifts in kind, whether the solicitation is explicit or implied.”1

    Why do nonprofit and charitable organizations need to ensure that their fundraising activities are cost-effective? Donors want to know that most of the money they donate to nonprofits and charities is going to the cause they care deeply about. When fundraising costs are perceived to be too high, public confidence in the organization and in the charitable sector as a whole are at stake.2

    What is considered cost-effective fundraising? CRA uses the ratio of fundraising costs to fundraising revenues to assess the cost-effectiveness of a charity’s fundraising activities. The higher the ration, the more likely CRA is to require additional justification for fundraising expenses.3 The fundraising ratio is a global calculation for the entire fiscal year. For charities, this can be calculated by dividing fundraising expenses by fundraising revenue using the charity’s T3010 as follows:3

    1. add the revenue amounts from lines 4500 (receipted donations) and 4630 (fundraising revenue not reported in 4500); and,
    2. divide the total expenditure amount on line 5020 (fundraising expenses) by the sum of lines 4500 and 4630.

    The following table summarizes CRA’s approach to the fundraising ratio:

    Ratio of costs to revenue over the fiscal period CRA Approach
    Under 35% Not likely to generate questions or concerns.
    35% to 70% CRA will look at the average fundraising ratio over recent years to see if there is a trend of high fundraising costs. The higher the ratio, the more likely it is that CRA will be concerned and will look at expenditures in more detail.
    Above 70% This will raise concerns with the CRA. The charity must be able to provide an explanation and rationale for this level of expenditure on fundraising to show that it is in compliance with CRA guidelines

    CRA recognizes that because the charitable sector is so diverse, organizations may have legitimate reasons for higher fundraising ratios for particular events or fiscal periods. Assuming that they are not engaging in illegal or deceptive fundraising practices, the CRA recognizes that the following may impact an organization’s fundraising ratio:

    • Small charities may have higher fundraising ratios if they have smaller constituencies
    • Causes with limited appeal, for example, a little-known disease or the rehabilitation of violent offenders
    • Donor development programs where revenues may not be realized until years later
    • Gaming activities

    From "Accreditation Preparation Workbook Section B: Financial Accountability & Transparency,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. Cost of Fundraising Questions and Answers,” The Association of Fundraising Professionals and Imagine Canada, February 17th 2012.
    2. Charitable Fundraising: Tips for Directors and Trustees,” Ministry of the Attorney General, Queen’s Printer for Ontario, 2008-2010.
    3. “Fundraising by Registered Charities,” Canada Revenue Agency, April 20th 2012.
  • Standard B8 Explained

    Definition: Investable Assets1
    Sums of money owned by the organization that are available for investing for terms likely extending beyond one year.

    Definition: Investment Policy1
    A policy that provides guidelines on where and how investable assets can be invested.  The investment policy usually includes statements on level of risk to be taken, who is delegated to take what decisions on sale or purchase of assets, use of investment managers, amount of equity or fixed income, etc.

    Why is it important to have an investment policy? Directors of nonprofit and charitable organizations can face serious liability risks resulting from improper investment of an organization’s funds.2 Having an investment policy will ensure that funds are invested appropriately in order to advance your organization’s strategic objectives and protect the board of directors from liability.

    Directors may be liable if they fail to:2

    • determine and comply with the investment power in the letters patent or special act creating the charitable corporation;
    • determine and comply with specific investment powers contained in agreements accompanying a gift, such as a last will and testament of a donor in making a testamentary gift or a gift agreement by a donor in giving a perpetual endowment;
    • determine and comply with the applicable statutory investment power that applies in a particular province in relation to investments made in that province, typically found in provincial trust legislation;
    • invest in accordance with the standards of a prudent investor where the provisions of the trust legislation apply, including any mandatory investment criteria required by the Act;
    • develop and implement an investment plan as required by applicable trust legislation; and,
    • undertake investment decision making them-selves, or in provinces that permit delegation of investment decision making, such as Ontario, to ensure that an appropriate agency agreement is in place appointing a qualified investment manager and that there is careful selection and monitoring of the investment manager chosen.

    The investment policies of nonprofit and charitable organizations should:

    • be developed with the advice of a financial professional or be reviewed by legal counsel
    • define general objectives (preserve and protect the assets; achieve aggressive growth)
    • delegate day-to-day asset management to an independent finance committee or a professional manager
    • set asset allocation parameters (include diversification)
    • describe asset quality (itemize quality ratings for stocks, bonds, or short-term reserves based on your risk tolerance)
    • define the investment manager's accountability (include risk in transactions, social responsibility, reporting requirements, and coverage of cash flow needs)
    • establish a system for regular review of the policies

    From "Accreditation Preparation Workbook Section B: Financial Accountability & Transparency,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

    1. “Standards Program Definitions,” Imagine Canada, May 2011.
    2. “Chapter 3: Liability of Directors” in the “Primer for Directors of Not-for-profit Corporations: Rights, Duties and Practices,” Industry Canada, 2002.

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