Standard B7 Explained

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

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

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

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

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

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

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

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

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

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


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