Fundraising activities

The Canada Revenue Agency (CRA) recognizes that fundraising is necessary for many charities but expects that charities will not devote excessive resources to fundraising activities. CRA provides guidance about what it considers to be excessive, about what activities it considers to be fundraising and about how charities should determine fundraising costs.

What activities are considered to be fundraising?

According to the Canada Revenue Agency (CRA), any activity that includes asking for support is fundraising, unless a charity satisfies one of these tests:

  • the "substantially all" test, or the 
  • four-part test.

Planning, researching, or preparing to ask for support, along with related activities such as profile raising, donor stewardship, and donor recognition, are considered fundraising activities. Sales of goods or services, except as part of a related business activity, are also fundraising. Fundraising includes activities carried out by the charity itself and activities carried out on its behalf by employees, suppliers and volunteers.

"Support" includes both cash and in-kind donations. Recruiting, asking for, managing and recognizing volunteer support are not considered to be fundraising activities however.

Requesting funds from governments, foundations or other registered charities, and operating a related business are not considered to be fundraising.

"Substantially all” test

"Substantially all" generally means "90% or more". This test is usually based on the portion of the activity's content that relates to asking for support and the resources that are devoted to the activity. CRA also considers the relative prominence of the fundraising portion of the activity.

Four-part test

CRA considers that an activity would have been done even without asking for support if all of these four questions are answered "no":

1. Was the main objective of the activity fundraising?

Generally, the main objective of an activity is the one to which the most resources are directed. It can be difficult to tell whether content is charitable or fundraising in nature. For example, a story of a child living on the streets may be told in either context -- to raise funds or to explain the social issue that the charity is addressing. To help decide, CRA looks to see if there is a clear objective to the activity other than fundraising.

2. Did the activity include ongoing or repeated requests, emotive requests, gift incentives, donor premiums, or other fundraising merchandise?

Ongoing, repeated, or emotional requests for support, or the presence of incentives or other fundraising items, suggest that the primary focus of an activity is fundraising.

3. Was the audience for the activity selected because of its ability to give?

The audience of an activity will often reflect the purpose of an activity. For example, a brochure mailed to wealthy neighbourhoods when the charity's programs are available to all (or, particularly, poorer) neighbourhoods suggests that fundraising is the main objective.

4. Was commission-based compensation derived from the number or amount of donations?

Where an activity includes paying commissions or other results-based compensation related to funds raised, then the entire activity is considered to be fundraising.

Activities that are not allowed

Regardless of other requirements, the Canada Revenue Agency (CRA) prohibits certain types of fundraising (see Section F).

Other factors affecting CRA's assessment of fundraising

The CRA looks at several factors besides the fundraising ratio to assess a charity's fundraising performance. In assessing whether there is a problem, CRA decides in each charity's case how much weight it gives to each of these factors:

  • "best practices" that CRA considers will lower the risk of unacceptable fundraising;

  • how the size of the charity impacts fundraising efficiency;

  • causes with limited appeal, which may create particular fundraising challenges

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.

Recording fundraising costs

Costs of fundraising activities must be recorded as fundraising costs (with one exception, below). Any activity that includes asking for support is fundraising, unless the charity satisfies one of two tests that the Canada Revenue Agency (CRA) specifies. According to CRA, these tests indicate whether the activity would still have taken place without asking for support.

For the following types of activities, you must record a portion of the cost as a fundraising cost:

  • activities that include asking for support, but that would still have taken place without asking for support, where the "four-part" test is met; and

  • activities that would not have taken place without asking for support (and so are fundraising activities) but that include charitable activities designed to prompt an action or change a behaviour (and so are exceptions to the general rule).

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