Glossary:

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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 who 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:

• Directors and officers liability in the employment context (2010, Lang Michener LLP). 
• Avoiding director's liability in troubled economic times (2009, Carters Professional Corporation)

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:

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.

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.

Why is it important to honour donors’ and prospective donors’ requests to limit the frequency or means of contact or to discontinue contact if requested? Alberta’s Charitable Fundraising Act (Section 50) states that if a person requests to not receive further solicitations or to be removed from donor lists, charitable organizations and fundraising businesses are obliged to comply with the individual’s requests.¹ In spite of this, the 2012 Cygnus Donor Survey found that only a quarter of Canadian donors were fully satisfied with how organizations complied with their requests for reduced solicitations. This has serious implications; 58% of all surveyed donors and two thirds of those over the age of 65 said that they drastically reduced their giving or stopped giving altogether to organizations who they felt asked for support too often.² Relationships are the foundation of an organization’s ability to fundraise effectively, and if requests regarding when, how, and how often donors wish to be contacted are not respected, this will negatively impact relationships and affect future fundraising efforts.

Why do organizations need a policy on donor requests? Developing a policy on donor requests will help your organization’s staff and volunteers to understand how and how often to contact established and potential donors. Setting expectations for staff, volunteer, and third-party fundraisers will ensure that donors are treated with respect and that your organization’s values are evident in its fundraising practices. For instance, your policy on donor requests could include the process the charity uses to ensure that someone who requests to be removed from a list is actually removed.

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

1. Charitable Fundraising Act, Province of Alberta, Alberta Queen’s Printer, November 1st 2010.
2. “Thousands of Canadian Donors Share Actions, Opinions,” Janet Gadeski, Charity Info, July 13th 2012.

Definition: Finder’s Fees¹
A fee paid to a third party for bringing together two or more people or companies in a business transaction, as in the borrowing or lending of money. In the fundraising context, a finder’s fee refers to the payment of a fee to a third party that is contingent upon obtaining a donation.

Definition: Commissions¹
A payment based on the dollar value of a transaction. In the fundraising context, it refers to remuneration based on a percentage of funds raised.

Definition: Percentage Based on Contributions¹
Compensation based on a percentage of funds raised.

Why is it important for nonprofit and charitable organizations not to pay finder’s fees, commissions, or percentage compensation based on contributions to their fundraisers? CRA is adamant that fundraising should not deliver more than incidental private benefit to those involved.² The Association of Fundraising Professionals insists that finders’ fees, commissions for fundraising activities, and percentage based contributions run counter to the nonprofit sector’s philanthropic values, inviting abuses of charitable funds for personal gain and placing undue risk on the reputation of the sector as a whole.³ The AFP cites six reasons why fundraisers should not be paid finders’ fees, commissions, or percentage based compensation:³

1. These incentives create an environment in which it is easy for personal self-gain to be favoured over charitable purpose 
2. Knowing that a commission will be paid to a fundraiser can negatively impact donor trust in the organization and can place undue pressures on donors to contribute 
3. People’s self-interest inherently favours immediate results, which may not take into account a donor’s best interests 
4. Organizations are strengthened by involving volunteers in fundraising, and paying commissions, finder’s fees, or percentage based compensation can discourage professional fundraisers from cultivating volunteer capacity within an organization 
5. These vehicles of compensation can reward fundraisers without cause, as would be the case if a large, unsolicited donation was made in a person’s will. Fundraising is a cumulative, long-term process and large donations are seldom the result of a single person’s efforts 
6. There are a wide variety of vehicles for charitable giving and a fundraiser who is paid on commission or on a percentage basis may favour certain options over others that may be better for the donor or for the organization over the long-term.

In addition, Imagine Canada’s Ethical Code Program, a precursor to the Standards Initiative, prohibited the use of finder’s fees, commissions, and percentage based compensation with the following rationale:⁴

• Charities, because they operate for the public good, receive unique rights and tax exemptions. Percentage-based compensation can incur excessive private benefit to fundraisers, undermining the contract that charitable organizations make with society
• These practices can damage the reputation of the sector by creating the perception that large percentages of a donation are going to fundraisers. Donors may choose not to give if they feel their donation is going to an individual as opposed to the cause 
• Effective fundraising depends on cultivating long-term relationships, while finder’s fees, commissions, and percentage based compensation favour seeking immediate funds 
• These mechanisms can place too much pressure on donors 
• Determining payment in advance recognizes the valuable work of fundraisers regardless of the financial return

Instead of receiving finder’s fees, commissions, or percentage based on contributions, fundraisers should be compensated according to their experience, expertise, and time.⁵

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

1. “Standards Program Definitions,” Imagine Canada, May 2011.
2. “Fundraising by Registered Charities: Guidance,” Canada Revenue Agency, April 20th 2012.
3. “Professional Compensation: A Position Paper,” AFP Ethics Committee, Association of Fundraising Professionals, Revised October 2001.
4. “Ethical Code Handbook,” Imagine Canada, February 2011.
5. “Association of Fundraising Professionals Code of Ethical Principles and Standards,” Association of Fundraising Professionals, 2004.

Why is it important that anyone seeking or receiving funds on behalf of the organization:

a. act with fairness, integrity, and in accordance with all applicable laws – Volunteers, employees, and contracted third parties engaged in fundraising should conform to all standards in Section C of Imagine Canada’s Standards program to ensure they are acting with fairness and integrity. The Association of Fundraising Professionals’ Guidelines to the Code of Ethical Principles and Standards is another helpful resource for those seeking to act with fairness and integrity, outlining best practices and including examples of ethical and unethical conduct in fundraising.

Which laws may apply to those seeking or receiving funds on behalf of a nonprofit or charitable organization? The Canada Revenue Agency’s “Fundraising by Registered Charities: Guidance” presents the legal principles related to CRA’s regulation of charities under the Income Tax Act. The Province of Alberta’s Charitable Fundraising Act also applies to charities operating in Alberta.

b. cease contacting a prospective donor who states that he/she does not wish to be contacted – If an individual requests that he or she no longer be contacted, nonprofit and charitable organizations are required by law to respect his or her requests. (Alberta’s Charitable Fundraising Act states that if a person requests to not receive further solicitations or to be removed from donor lists, charitable organizations and fundraising businesses are obliged to comply with the individual’s requests.¹) Organizations that fail to do so risk damaging relationships with individuals who may choose to support your cause again in the future but who are unlikely to do so if your organization does not respect their requests to cease contact. (Also see Standard C1.)

c. disclose immediately to the organization any actual or apparent conflict of interest or loyalty – The Association of Fundraising Professionals’ Guidelines to the Code of Ethical Principles and Standards compels fundraisers to disclose to the organizations on behalf of which they are seeking funds any conflict of interest including any interests they or a family member have in a potential vendor firm or formal relationships they have with donors or potential donors.² Although the Code is intended to apply to the members of the Association of Fundraising Professionals, it presents best practices that can serve to guide any volunteer, employee, or third party engaged in fundraising for a charity or nonprofit. (See also Standard A12.)

d. not accept donations for purposes that are inconsistent with the organization’s mission – Accepting donations that are contrary to an organization’s mission can prevent nonprofits and charities from accomplishing their strategic goals or achieving their intended impacts. In order to ensure that they do not attract donations that are contrary to the organization’s mission, the Association of Fundraising Professionals has set the expectation of its members that all solicitation materials accurately describe the organization’s mission and the intended use of funds.²

How do organizations ensure that staff and volunteers (including board members) are meeting this standard? Evidence that the organization is meeting this standard may include a description of how individuals who fundraise on behalf of the organization are trained or how they are made aware of the organization’s fundraising policies.

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

1. Charitable Fundraising Act, Province of Alberta, Alberta Queen’s Printer, November 1st 2010.
2. “Association of Fundraising Professionals Code of Ethical Principles and Standards,” Association of Fundraising Professionals, 2004.

What does “appropriate fundraising policies” mean? While all nonprofit and charitable organizations in Canada depend on some form of fundraising, Imagine Canada recognizes that Canada’s nonprofit sector is incredibly diverse and that organizations have differing needs with regards to fundraising and fundraising policies. Level three organizations are required to have a gift acceptance policy, a policy on the treatment of restricted or designated gifts, and naming and endowment policies. In order to ensure the relevance of the organization’s fundraising policies, all boards are required to review their fundraising policies at least once every three years.

Why is it important for charitable and nonprofit organizations to have:

a. a gift acceptance policy – A gift acceptance policy presents guidelines that assist staff and volunteers when fundraising and accepting gifts on behalf of a charitable or nonprofit organization.¹

Gift acceptance policies help organizations to:²

• fundraise and manage gifts received
• manage risks and comply with all legal obligations 
• manage donor relations 
• improve operations related to the administration of gifts by staff and volunteers

Gift acceptance policies should include:¹

• The organization’s mission and the purpose of the gift acceptance policy
• Stipulations on when legal council should be sought
• Clear distinctions between the kinds of gifts that can be accepted by staff as opposed to those that require approval from leadership
• A list of the kinds of gift restrictions that are acceptable to the organization
• A statement describing the form and disposition of gifts accepted
• A description of how the organization administers gifts
• A description of the legal or professional services and fees that will be needed to complete the gift
• A statement describing how gifts will be reported, counted, and valued by the organization
• A description of the types of gifts that will not be accepted (for instance, some gifts-in-kind or gifts from certain industries)³

b. a policy on the treatment of restricted or designated gifts – Many donors wish to ensure that the funds they donate to a charity or nonprofit are used for a particular purpose, leading donors to place restrictions on the use of their gifts.⁴ Restricted or designated gifts must be used for the purposes for which they were donated unless the charity obtains legal authorization or permission from the donor or the donor’s legal designate.⁵ As such, restrictions create legal and administrative obligations for charities, which must be followed in order for the charity to remain in good standing with CRA and the community it serves.⁴ Your organization’s policy on the treatment of restricted or designated gifts provides a code of conduct related to the acceptance of restricted gifts and protects the organization from the potential legal consequences and/or undue administrative burden that could be incurred if it accepted a gift that included restrictions that were not in its best interests or that it would not be able to carry out due to its mission or strategic direction.

Before accepting a restricted or designated gift, organizations should consider whether:⁴

• The restrictions are compatible with the organization’s mission 
• The organization has the capacity to make use of the gift given its restrictions
• Administrative requirements will not consume too many of the organization’s resources

As such, policies on the treatment of restricted or designated gifts should include:

• A stipulation that acceptance of any restricted gift be approved by senior management or by the board of directors⁴
• Advice on how the terms of the gift will be documented.⁴
• A stipulation that all agreements to accept a restricted gift be reviewed by a legal professional prior to acceptance of the gift.

c. a naming policy – Offering opportunities to high-level donors to associate their name with an aspect of your organization can inspire large gifts from individuals who desire public recognition.⁶ Associating donor names with your organization can also increase the credibility of a program and potentially attract other major donors to your cause.⁶ There are many opportunities to recognize donors through naming, and organizational policies governing this process will assist staff to communicate these opportunities to donors as well as to implement them when they receive significant contributions. It is important to remember that recognition mechanisms should not be changed or withdrawn arbitrarily once they are agreed upon.⁵ An organization’s donor recognition or gift acceptance policies can include stipulations on recognition time limits or procedures that will be followed if the original form of recognition becomes untenable in the future.⁵

d. an endowment policy – An endowment can be defined as: “[A] long term gift to a charity, normally to be held for at least ten years, that is either set aside for a particular purpose, such as a scholarship, or for the general charitable purposes of the charity. Some endowments are directed to be held in perpetuity, while others are to be held for a fixed number of years…Once the endowment period has expired (except where the donor directs that the endowment be held in perpetuity) the entire endowment can be disbursed by the charity.”

While endowments tend to be thought of as tools for large organizations, mid-sized organizations can benefit significantly from establishing an endowment, which can be used to secure the long-term financial stability of the organization. Organizations that do not have endowments could consider the threshold at which they would consider establishing one and could include this in their gift acceptance policy.

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

1. “Why You Need Gift Acceptance Policies: How Thoughtful Planning About Non-Cash Gifts Can Improve Your Donor Relationships,” Katherine Swank, Blackbaud, Inc., June 2008.
2. “Considerations in Developing Gift Acceptance Policies,” Karen J Cooper, Carters Professional Corporation and Bruce R. Hill, Consultant at the 18th Annual National Canadian Association of Gift Planners Conference, April 14th 2011.
3. Final point from Karen Alebon, Manager, Ethical Code Program at Imagine Canada, Personal communication November 2012.
4. “Endowed and Restricted Gifts: What the Gift Planner Needs to Know,” Terrance S. Carter of Carter & Associates and M. Elena Hoffstein and Edgar A. Frechette of Fasken Martineau DuMoulin LLP, May 1st 2003.
5. “Ethical Code Handbook,” Imagine Canada, February 2011.
6. “Creating a Planned Giving Program: A Legacy Building Plan for Small to Medium Community Based Organizations,” Niagara Community Foundation, 2006.

Why must organizations conducting face-to-face fundraising ensure that they:

a. provide verification of the affiliation of the person representing the organization – Individuals may be suspicious of face-to-face fundraising efforts such as door-to-door solicitation, worrying that it could be fraudulent. To avoid this perception, fundraisers conducting face-to-face fundraising should carry valid personal identification along with identification of the organization on behalf of which they are seeking funds.¹

b. secure and safeguard any confidential information, including credit card information, provided by donors – Under PIPEDA, the Personal Information Protection and Electronics Documents Act, all organizations in Canada are responsible for safeguarding the private information they collect from clients, donors, or participants.² Organizations are obliged to protect personal information using security safeguards including physical measures such as storing information in locked filing cabinets, organizational measures such as staff training and confidentiality agreements, and technological measures such as passwords and encryptions.² Organizations that engage staff or volunteers to conduct face-to-face fundraising must ensure that individuals are trained to understand the importance of protecting confidential information as well as the organization’s mechanisms and policies for ensuring that personal information is secure.

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

1. “Face-to-Face Fundraising Guidelines Canada,” Association of Fundraising Professionals.
2. “The Protection of Personal Information by Charities and Not-For-Profit Organizations: A National Perspective,” M. Jasmine Sweatman, The Philanthropist, 19 (4): 2004.

Definition: Cause-related marketing¹
Cause-related marketing (sometimes called social marketing) is a venture with a non-charitable partner to promote the sale of items or services on the basis that a portion of the revenues will be directed to a charity or charities.

Why is it important for charities and nonprofits that have entered into a cause-related marketing agreement to disclose in all related materials how the organization benefits from the sale of products or services and the amounts payable under the arrangement? Cause related marketing can benefit both businesses and charities, helping businesses to establish trust with their customers by associating their brands with social responsibility while creating revenue for a charity or cause.² Increasingly, the media and the general public are critical of for-profit companies that raise funds for charities and nonprofits, arguing that too much money goes to the business and not enough to the cause itself.

Being transparent about the details of cause-related marketing agreements can help nonprofits and charities avoid accusations of unethical dealings with businesses that assist them to raise funds. An essential component of transparency is being clear with customers about what social benefit an individual’s purchase of a product or service actually accrues.² Being upfront about how third-party organizations benefit from the sale of products or services and the minimum or maximum amounts payable helps the public understand the social benefit of their purchase.

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

1. “Standards Program Definitions,” Imagine Canada, May 2011.
2. “Cause Marketing: 10 Cautionary Principles for Nonprofits,” Gayle L. Gifford, Cause & Effect, Inc. 2008.

Why should organizations refrain from selling their donor lists? PIPEDA, the Personal Information Protection and Electronics Documents Act, allows for the selling, bartering, or sharing of fundraising or donor lists as long as consent is obtained from all individuals prior to the lists changing hands.¹ Imagine Canada, however, requires nonprofit and charitable organizations to meet a higher standard than that required by law, prohibiting organizations from selling their donor lists.

When an organization sells its donor list, it relinquishes control over the data and risks having the information used for a purpose other than that for which it was collected. An organization’s donor list is an asset of the charity or nonprofit, and relinquishing control over the list could be seen as a breach of the directors’ legal responsibility to protect the assets of the organization. In renting donor lists, on the other hand, organizations are able to set the terms of the rental agreement and retain more control over the use of the data. If renting or exchanging donor lists, organizations operating in Alberta must adhere to the province’s Personal Information Privacy Act (PIPA), which classifies bartering or leasing of membership, donor, or other fundraising lists as “commercial activities.”¹

What is the Canadian Marketing Association Code of Ethics and Standards of Practice?² The Canadian Marketing Association Code of Ethics and Standards of Practice presents guidelines for the conduct of marketing professionals across Canada. The code applies to all CMA member organizations regardless of sector or marketing medium, and provides a set of ethical principles and best practices to be followed by Canadian businesses in order to ensure that marketing activities are carried out with integrity. Although written in a for-profit language, the code also applies to nonprofit and charitable organizations.

What does the Canadian Marketing Association Code of Ethics and Standards of Practice say about renting donor lists?² The Code states that all marketing must be conducted in accordance with PIPEDA, the Personal Information Protection and Electronics Documents Act, (see Board Governance Standard A13.). It advises marketers to rent lists only to organizations that have signed a contract to abide by all relevant Canadian privacy laws and that agree to use CMA’s Do Not Contact Service, which allows individuals to limit the frequency of marketing offers they receive by mail.

Why must nonprofit and charitable organizations honour donors’ requests to be excluded from rented lists? Section J, Protection of Personal Privacy in the Canadian Marketing Association Code of Ethics and Standards of Practice states that individuals must be informed of the uses to which personal information will be put at the time of collection and that personal information shall not be used or disclosed for other purposes without consent. While individuals are free to opt-out of receiving solicitations at any time, at least once every three years they must be presented with “an easy-to-see, easy-to-understand and easy-to-execute opportunity to decline further marketing use of their name or other information.”

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

1. “The Protection of Personal Information by Charities and Not-For-Profit Organizations: A National Perspective,” M. Jasmine Sweatman, The Philanthropist, 19 (4): 2004, p. 308.
2. Canadian Marketing Association Code of Ethics and Standards of Practice

Why must organizations honor donors’ requests to remain anonymous? Donors may have many legitimate reasons for wishing to remain anonymous, and it is essential that nonprofits respect these requests. A study conducted by The Chronicle of Philanthropy found that only 10 months after the recession hit in 2008, the percentage of anonymous gifts over a million dollars increased dramatically (nearly 20% of all gifts over $1 million were made anonymously compared to only 3-5% over the previous 10 years).¹ In times of recession when the donor pool gets smaller, individuals may wish to remain anonymous to avoid attracting greater pressure from charities or because they feel uncomfortable making a public display of wealth when so many are in financial crisis. Donors may also wish to remain anonymous if they are supporting a cause for the first time or if they feel they may not be able to contribute in future years.¹

Indiana University’s Center on Philanthropy found that donors most often cite avoiding solicitation from other charities and keeping donations secret from friends and family as the most common reasons for wishing to remain anonymous.¹ Ensuring that donors’ wishes to remain anonymous are honoured is an important way for nonprofits and charities to form relationships with donors that are based on mutual respect and trust.

Nonprofits and charities will honour donors’ requests to remain anonymous both in terms of:²

1. The amount of their contribution and;
2. Having their name publicly released as a supporter of the organization

In certain cases, accepting an anonymous donation could be risky for a charity and should be considered carefully. For instance, the source or amount of a donation may be perceived to affect the independence of the charity. In these cases the organization may seek to negotiate the terms of public disclosure with the donor.²

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

1. “Anonymous Giving Gains Popularity as the Recession Deepens,” Ben Gose, The Chronicle of Philanthropy, April 30th 2009.
2. “Ethical Code Handbook,” Imagine Canada, February 2011.

Definition: Planned Gift¹
A planned gift is any major gift, made in lifetime or at death, as part of a donor’s overall financial and/or estate planning.

Why must organizations encourage donors to seek independent advice before conferring a Planned Gift or a gift that could significantly affect a donor’s financial position? Most fundraising professionals are not trained lawyers or financial experts. As such, though they might provide useful advice about the implications of a donation, it is good practice to refer clients to other professionals who are able to provide sound legal or financial council.² Cultivating trusting relationships is an essential component of effective fundraising, and charities must ensure that they do not pressure potential donees who could be elderly or inherently trusting and thus vulnerable to manipulation.³ Organizations should respect a donor’s ability to make decisions regarding their estates while encouraging them to seek council from close family members and estate planning professionals.³

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

1. “Standards Program Definitions,” Imagine Canada, May 2011.
2. “Association of Fundraising Professionals Code of Ethical Principles and Standards,” Association of Fundraising Professionals, 2004.
3. “Creating a Planned Giving Program: A Legacy Building Plan for Small to Medium Community Based Organizations,” Niagara Community Foundation, 2006.

What is a gift-in-kind? A gift-in-kind is a gift of any property excluding cash. Gifts-in-kind could include gifts of real property (land or buildings), personal use property (an item used in a personal rather than a business context, for example clothing), intangible property (investments), or intellectual property (patents, licenses).¹ In order to issue an official income tax receipt for a gift-in-kind, an organization must first determine the fair market value of the gift, as well as the advantage the donor received for making the gift.² “Determining the Value of Gifts” in the Gifts & Receipting section of Imagine Canada’s Charity Tax Tools contains tools, tips, and examples to help you ascertain the value of gifts-in-kind.

For Charities: Why must charities issue official income tax receipts for monetary gifts and gifts-in-kind? Charities must issue official income tax receipts for all gifts. In order to qualify as a “gift,” a donation must be voluntary and involve a transfer of property (cash, land, stocks, clothing, etc). In order to be eligible for a tax receipt, a gift must be able to be valued and must “enrich the charity.”³ Issuing improper or incomplete donation receipts is illegal under the income tax act and can incur consequences from CRA,⁴ impacting an organization’s charitable status as well as its reputation in the broader community.

What must be included on an official income tax receipt? To be acceptable to CRA, official income tax receipts must include:⁵

• a statement that the receipt is an official receipt for income tax purposes;
• the name and Canadian address of the charity that are on file with the CRA;
• the charity's charitable registration (business) number;
• the serial number of the receipt (all receipts must be numbered);
• the place where the receipt was issued;
• the date the donation was received;
• the date on which the receipt was issued if it differs from the date of donation;
• the full name and address of the donor;
• the eligible amount of the gift;
• the signature of an individual authorized by the charity to sign receipts; and
• the name and Web site address of the Canada Revenue Agency (https://www.canada.ca/en/revenue-agency.html).

Receipts for gifts-in-kind must also contain:⁵

• a brief description of the property transferred to the charity; and
• the name and address of the appraiser (if the property was appraised).

For Nonprofits: Why should nonprofit organizations make it clear to potential donors that they cannot issue Official Income Tax receipts? The general public may not be aware of the difference between a registered charity and a nonprofit organization. As such, they may assume that they are able to receive an Official Income Tax receipt from a nonprofit, and their decision to donate may be influenced by this assumption. In order to avoid misleading potential donors, nonprofits must make it clear that they cannot issue income tax receipts for donations.

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

1. “Gifts in Kind” in Gifts & Receipting, Imagine Canada Charity Tax Tools, 2009.
2. “Determining the Value of Gifts” in Gifts & Receipting, Imagine Canada Charity Tax Tools, 2010.
3. “Is a gift eligible for a receipt” in Gifts & Receipting, Imagine Canada Charity Tax Tools, 2010.
4. “Fundraising by Registered Charities: Guidance,” Canada Revenue Agency, April 20th 2012.
5. Excerpted from: “Information included on a receipt” in Gifts & Receipting, Imagine Canada Charity Tax Tools, 2010.

Why is it essential that all fundraising activities conducted by or on behalf of charitable or nonprofit organizations:

a. be truthful – The Association of Fundraising Professionals’ Donor Bill of Rights states that any donor to a charitable or nonprofit organization has the right to “ask questions when making a donation and to receive prompt, truthful, and forthright answers.”¹ In addition, CRA may deem any untruthful statements made in the course of fundraising to constitute “deceptive fundraising,” which can lead to legal sanctions or the revocation of charitable status.²

b. accurately describe the organization’s activities – Donors want to know how their funds will be used, and being able to demonstrate the relationship between your organization’s activities and its impact in the community fosters increased understanding, engagement, and trust between your organization and its donors.

c. disclose the organization’s name – CRA states that organizations must not misrepresent the charity which will receive solicited donations.² As such, all fundraising activities must clearly present the name of the organization that will receive the funds being collected.

d. disclose the purpose for which funds are requested – The Association of Fundraising Professionals’ Donor Bill of Rights states that any donor to a charitable or nonprofit organization has the right to “be informed of the organization’s mission, of the way the organization intends to use donated resources, and of its capacity to use donations effectively for their intended purpose.”¹ In addition, Alberta’s Charitable Fundraising Act 9(1) states that organizations must make information on how donations will be spent available to any person who requests it.³ Understanding why funds are being requested, both in terms of the impact an organization seeks and the specific activities that will be undertaken to achieve this impact helps donors to make informed choices regarding which organizations to support.

e. disclose the organization’s policy with respect to issuing Official Income Tax receipts including any policy on minimum amounts for which a receipt will be issued – Disclosing your organization’s policy with respect to issuing Official Income Tax receipts is a good practice as it avoids misleading donors who may believe they will be able to claim a gift that in reality they will not be able to claim. If your organization, for example, only issues Official Income Tax receipts for donations over $50, being clear and upfront with potential donors about this policy helps to avoid misunderstanding, which can be damaging to relationships and negatively impact future fundraising efforts.

f. disclose, upon request, whether the individual or entity seeking donations is a volunteer, employee or contracted third party – CRA requires that all fundraising organizations disclose whether those soliciting funds are internal staff, volunteers, or third-party fundraisers. Potential donors also have a right to know how fundraisers are compensated and what percentage of charitable funds will go to charitable work.²

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

“A Donor Bill of Rights,” Association of Fundraising Professionals.
“Fundraising by Registered Charities: Guidance,” Canada Revenue Agency, April 20th 2012.
Charitable Fundraising Act, Province of Alberta, Alberta Queen’s Printer, November 1st 2010.

Why is it essential for organizations not to make claims that cannot be upheld or that are misleading? To develop a robust donor base, an organization must represent its activities truthfully. Making claims that cannot be upheld or that are misleading is unethical and can damage an organization’s reputation, making it extremely difficult to attract the resources it needs to make an impact in its community. Donors who find that organizations they have contributed to were unable to follow through on their promises are unlikely to support the organization in the future.

Making misleading claims can also incur consequences from CRA if the organization is found to be acting contrary to public policy or to be violating provincial consumer protection legislation or the federal Competition Act.¹ CRA could also see misleading claims as evidence of “deceptive fundraising,” which can result in legal sanctions including the revocation of charitable status.¹ To avoid misleading potential donors, The Association of Fundraising Professionals requires its members to accurately disclose the organization’s mission and the use of solicited funds on all fundraising materials.²

Examples of misleading claims:

a. It would be misleading for an organization working to cure cancer to suggest that by reaching their fundraising goal, they will be able to cure the disease. The organization cannot guarantee this kind of outcome. When discussing the impact of donations, organizations must not guarantee outcomes that are beyond the organization’s control.

b. It would be misleading to state that all donors who contribute over $200 will be invited to a special reception to thank them for their donation and then neglect to host such a reception.

c. An organization that already has significant reserve funds but launches a new fundraising campaign that gives the impression that the organization is in desperate need of funds is misrepresenting the financial status of the organization. CRA could consider this to be an example of “deceptive” fundraising.¹

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

1. “Fundraising by Registered Charities: Guidance,” Canada Revenue Agency, April 20th 2012.
2. “Association of Fundraising Professionals Code of Ethical Principles and Standards,” Association of Fundraising Professionals, 2004.

What does it mean for an organization to “exploit its beneficiaries”? Exploiting beneficiaries in order to attract donations can involve depicting individuals in a way that upholds stereotypes, is demeaning, or that disregards a person’s dignity.¹ A UK study by the Center for Charitable Giving and Philanthropy found that the beneficiaries of charities are concerned about the way they are represented, wishing to be depicted in fundraising campaigns without organizations resorting to the use of “stereotypes, clichés or prejudices.”¹

Why is it important for organizations to be sensitive in describing those they serve and to fairly represent their needs and how these will be addressed? Nonprofit and charitable organizations exist to serve their beneficiaries. When organizations represent those they serve using images, graphics, and text, they influence not only donors’ desire to give, but also their understandings of complex social issues and of the individuals the organization serves.¹ A UK study that explored the way homeless people felt about depictions of homelessness in fundraising campaigns found that beneficiaries favoured storytelling about individuals in need as well as images aimed at inciting empathy and “a recognition of common humanity” as opposed to eliciting guilt or pity as a motivation to give.¹

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

1. “User Views of Fundraising: A Study of Charitable Beneficiaries’ Opinions of Their Representation in Appeals,” Beth Breeze and Jon Dean, Center for Charitable Giving and Philanthropy, 2012.

Why is it important for all fundraising materials to include an organization’s address or other contact information? Fundraising materials including print or e-mail solicitations must include the organization’s address and / or other contact information to ensure that individuals who wish to learn more about the organization or to make a donation are able to contact the organization. CRA states that organizations must not misrepresent the charity which will receive solicited donations.¹ Without contact information, fundraising materials may appear suspect and individuals may doubt the validity of a nonprofit or charity distributing such materials.

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

1. “Fundraising by Registered Charities: Guidance,” Canada Revenue Agency, April 20th 2012.

Why is it important to have written HR policies? HR policies detail your organization’s expectations of its staff and ensure that employees are treated ethically and in compliance with all applicable legislation. HR policies also help to formalize your organization’s unique work culture, implement best practices, and ensure that decisions and actions taken by management are fair and consistent.¹

What kinds of HR policies does my organization need? Common HR policies include policies addressing:¹

• Employee information 
• Performance management 
• Hiring 
• Holidays and vacation 
• Hours of work
• Leaves of absence 
• Overtime 
• Termination 
• Health and Safety

What legislation does my organization need to comply with? Nonprofit and charitable organizations must comply with legislation related to:¹

• Employment / labour standards 
• Occupational health and safety 
• Human rights 
• Labour relations
• Privacy of personal information

From "Accreditation Preparation Workbook Section D: Staff Management,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

1. "HR Management Standards: Second Edition,” HR Council for the Nonprofit Sector, 2011.

Why is it important to assess the performance of each employee at least annually? Assessing an employee’s performance helps ensure that they are accomplishing the goals of their position, contributing to the strategic direction of the organization, and acting in alignment with your organization’s culture.¹ Effective performance assessments offer meaningful feedback to employees and can contribute to the creation of a positive work environment.² Performance assessments can play a role in succession planning and can enable management to intervene if a staff member is encountering challenges. Performance assessments help ensure that any issues are identified and addressed before they negatively impact the organization as a whole or jeopardize the individual’s employment.³

What should be included in a performance review?³

• An assessment of how the employee contributes to your organization’s operational and strategic plans 
• Mechanisms for encouraging performance excellence 
• A way to determine and address aspects of performance that could be improved 
• Identification of personal or professional development needs 
• Opportunities for promotion or other work assignments if applicable 
• Description of work or career goals 
• Consideration for increases in compensation

From "Accreditation Preparation Workbook Section D: Staff Management,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

1. “Human Resources Q & A: Making Performance Management Easy,” Kathline Holmes, Charity Village, August 8th 2011.
2. “Trends & Issues: The Art of Performance Management, Nonprofit Style,” The HR Council for the Nonprofit Sector, 2010.
3. “HR Management Standards: Second Edition,” HR Council for the Nonprofit Sector, 2011.

Why is it important to assess the development needs of all fulltime employees and to develop plans to address any gaps? Ongoing professional development helps employees improve their performance in their roles and build the skills they need to advance.¹ In a job market in which nonprofits compete with the public and private sector for qualified employees, opportunities for learning and development become an important part of employee attraction and retention strategies.²

The benefits of offering professional development opportunities include:³

• Increased ability to meet organizational goals 
• Increased productivity 
• Increased motivation 
• Decreased need for supervision in well-trained staff
• Training employees can be part of an organization’s succession planning efforts 
• An environment of continuous learning promotes effective responses to challenge and change 
• Staff can more effectively contribute to new initiatives 
• Improved attraction and retention of employees

The HR Council for the Nonprofit Sector suggests that development plans address the following categories of learning:¹

• Essential – skills that are required to perform effectively in the employee’s role, including learning that addresses performance issues or that prepares a person to take on new responsibilities
• Enhancement – learning that will benefit an employee in their current or future role within the organization
• Career Development – learning that is desired by the staff member but that may not provide direct benefits to the organization

For level 3 organizations: Why is it essential for staff with supervisory roles to be provided with opportunities to develop these skills? Managing and supervising staff is a distinct skill set that must be actively developed.¹

Management skills include:¹

• How to motivate and engage others
• How to work together to set goals
• How to assess an employee’s performance
• How to delegate tasks and manage work

From "Accreditation Preparation Workbook Section D: Staff Management,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

1. “HR Management Standards: Second Edition,” HR Council for the Nonprofit Sector, 2011.
2. “Factors Affecting Working and Learning,” Learning, Training and Development, in the HR Council for the Nonprofit Sector’s HR Toolkit.
3. “Getting Your Organization Ready for Employee Training and Development,” Learning, Training and Development, in the HR Council for the Nonprofit Sector’s HR Toolkit.

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.

Why is it important to identify critical positions and to develop succession plans for these positions? A succession plan describes how an organization will respond to the expected or unexpected departure of critical staff members. Being strategic about whom you hire is essential in the nonprofit sector, especially in small organizations where every individual has a significant impact on the overall effectiveness of the organization.² Having a succession plan in place for critical positions promotes resilience within your organization and helps to mitigate against the disruptions that occur during employee transitions.³

The HR Council for the Nonprofit Sector recommends that if possible, succession plans should seek to develop talent from within your organization.⁴ Ongoing learning and professional development activities can then be tailored to enable staff members to take on new roles or responsibilities in the case of the departure of a key staff person.⁴

Benefits of succession planning include:³

• Ensuring that your organization can continue to deliver services in the event that a key employee leaves 
• Developing a pool of people who have the skills and abilities to move into newly vacated roles 
• Promoting alignment between your organization’s vision and its human resources strategy, helping your organization accomplish its strategic goals 
• Improving attraction and retention among employees who see opportunities for advancement within your organization 
• Establishing a reputation for investing in employees and ensuring that they feel valued

From "Accreditation Preparation Workbook Section D: Staff Management,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

1. “Standards Program Definitions,” Imagine Canada, May 2011.
2. “Building a Talent Pipeline,” The Bridgespan Group, 2010.
3. “Succession Planning,” in the HR Council for the Nonprofit Sector’s HR Toolkit.
4. “HR Management Standards: Second Edition,” HR Council for the Nonprofit Sector.

Why is it essential for organizations to have a formal process to manage workplace conflicts? Workplace conflicts arise in all organizations, and having a formal process in place helps employees resolve emerging conflicts quickly before they escalate into larger problems.¹ Conflict management processes that allow employees to go beyond their immediate supervisor boost employee morale and avoid the losses that can be incurred if conflicts are not addressed in a timely manner.²

Without a formal process to manage workplace conflicts, issues can lead to employee dissatisfaction, loss of productivity, a decrease in quality of work or service to clients, increased stress and employee turnover, and/or litigation against your organization.³ Workplace conflicts pose additional risks to organizations that depend on volunteers, as volunteers often have many commitments and are unwilling to tolerate a tense environment.⁴

What should a conflict resolution policy include? Conflict resolution policies outline the steps that should be taken to resolve a conflict and may provide for mediation in the case that the problem cannot be resolved by affected employees directly.¹ Conflict resolution policies may institute a formal open door policy in which employees can report emerging issues, or a formal complaint process.¹ In addition, conflict resolution policies should always include a statement to the effect that employees are protected against retaliation as a result of using the conflict resolution process.²

From "Accreditation Preparation Workbook Section D: Staff Management,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

1. “HR Management Standards: Second Edition,” HR Council for the Nonprofit Sector, 2011.
2. “Sample Policies on Common HR Topics: Conflict Resolution,” HR Policies & Employment Legislation, HR Council for the Nonprofit Sector.
3. “Conflict at Work,” Workplaces That Work in the HR Council for the Nonprofit Sector’s HR Toolkit.
4. “How to Effectively Manage Conflict,” Jack Shand, Charity Village, December 5th 2011.

Why do HR management policies need to be made accessible to all employees? In order for HR management policies to be implemented effectively, they must be thoroughly understood by all staff. Ideally, the behaviours and actions outlined in your HR management policies become part of your organization’s work culture.

Policies can be made accessible by posting them online or by ensuring that every employee has a copy. However, accessibility also requires that policies be easy to understand and written in a language that is familiar to your employees.¹ Special care should be taken to ensure that your policies are accessible to people with disabilities.¹

How should HR management policies be made available to all employees? Employees are often made aware of HR management policies as part of their orientation to a new position in the organization and when policies change or are updated. They may be given a copy of all policies or directed to where they can access them online.¹

From "Accreditation Preparation Workbook Section D: Staff Management,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

1. “HR Management Standards: Second Edition,” HR Council for the Nonprofit Sector, 2011.

Why is it important to review HR management policies once every three years? HR management policies stipulate how employees are expected to work and act as part of your organization.¹ Reviewing these policies regularly and revising them if necessary ensures that your organization’s policies incorporate any changes in relevant legislation and that they continue to reflect best practices in HR management.¹

When reviewing your organization’s HR management policies, keep the following questions in mind:²

• Have there been any changes in legislation that impact this policy?
• How effective has this policy been since it was implemented?
• What kinds of feedback have you received about this policy from staff?
• Is the policy accomplishing what it was created to accomplish?

From "Accreditation Preparation Workbook Section D: Staff Management,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

1. “HR Management Standards: Second Edition,” HR Council for the Nonprofit Sector, 2011.
2. “Step 8: Policy Review and Update,” Developing HR Policies in the HR Council for the Nonprofit Sector’s HR Toolkit.

Definition: Compensation Policy¹
A compensation policy documents the organization’s philosophy and direction with regard to rewarding its employees.

Why is it essential to have a compensation structure that fairly evaluates and compensates the value of each position? Your organization’s compensation structure reflects and influences its work culture.² The HR Council for the Nonprofit Sector suggests that compensation structures consider both internal and external equity and that all salary ranges be reviewed at least every two years or when there are significant changes to an employee’s job description.² Although nonprofit organizations have traditionally paid lower salaries than private companies, trends toward increasing professionalism in the sector require organizations to offer competitive salaries and benefits packages in order to attract and retain employees with the right skills and expertise.³ In developing competitive compensation packages for employees, nonprofits and charities should consider the salaries of comparable positions in other nonprofit organizations, the public sector, and the private sector. It is important to remember that compensation involves much more than cash, including health benefits, pension, vacation, professional development opportunities, flex time, working hours,² and cost of living adjustment.⁴

From "Accreditation Preparation Workbook Section D: Staff Management,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

1. “Standards Program Definitions,” Imagine Canada, May 2011.
2. “HR Management Standards: Second Edition,” HR Council for the Nonprofit Sector, 2011.
3. “Compensation: The Inside Scoop on Nonprofit Payrolls,” Julie Stauffer, Charity Village, August 15th 2011.
4. In Fort McMurray, Alberta, certain nonprofit staff positions qualify for a cost of living adjustment depending on the source of funding.

Why is it important for all employees to have written job descriptions? A formal job description lists all the activities and competencies required for a position and creates a structure with which to assess individual performance.¹ A comprehensive and thoughtfully written job description is an essential communication tool that can help your organization recruit the best person for the job by clearly outlining the opportunities the role has to offer as well as what is required to succeed in the job.² In addition to assisting with recruitment and selection, job descriptions play an important role in employee orientation, training, supervision, compensation, and performance management.³ They can also act as a legal defense if an employee is terminated for performing inadequately in his or her role. ³

Job descriptions usually include:¹

• 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

From "Accreditation Preparation Workbook Section D: Staff Management,"  Katharine Zywert, Social Prosperity Wood Buffalo at the University of Waterloo, 2013.

1. “HR Management Standards: Second Edition,” HR Council for the Nonprofit Sector, 2011.
2. “Nonprofit Job Description Toolkit,” The Bridgespan Group, 2012.
3. “Job Descriptions,” Getting the Right People, in the HR Council for the Nonprofit Sector’s HR Toolkit.