You’ve set up a charitable organization and obtained your registered charity number (RC number). Now it’s time to learn about the legal provisions that govern your fundraising. To manage your organization properly, here are the main points you need to know.
Federal legal requirements
All registered charities are constituted and governed under the Canada Not-for-profit Corporations Act and Part I of the Income Tax Act. Under this legislation, registered charities are required to use their resources for the charitable purposes for which they were set up.
The Canada Revenue Agency (CRA) acknowledges that fundraising activities are important. These activities allow registered charities to develop and to accomplish their charitable purposes.
However, the CRA’s position is that fundraising is not a charitable purpose in itself. Registered charities may use a reasonable portion of their resources for fundraising; they may not make fundraising their main activity.
Public interest and transparency
Under the federal legal requirements, fundraising is acceptable provided it is not:
- “delivering a more than incidental private benefit (a benefit that is not necessary, reasonable, or proportionate in relation to the resulting public benefit)”. A tax credit for a charitable donation is considered to be a reasonable benefit;
- “illegal or contrary to public policy”. For example, it is illegal for a registered charity to sell fundraising lottery tickets to minors;
- “deceptive”. Registered charities are expected to operate transparently, and not to seek benefits from the public or from potential donors fraudulently;
- “an unrelated business”. For a hospital, managing a parking lot, cafeteria or gift shop is considered to be a related business. These facilities complement the hospital’s basic programs for patients, significant others and employees.
Other legal requirements to bear in mind
Registered charities must comply, not only with federal legislation, but also with the provincial or territorial legislation and the municipal bylaws governing their place of business and sector of activity.
The ÉDUCALOI Internet site sets out a number of rules that may affect you.
- In Quebec, organizations that issue official tax receipts to Quebec residents for charitable donations must complete and file an annual information return with Revenu Québec.
- An organization that collects GST and QST must remit these taxes to the appropriate governments.
- Some sectors of activity, such as hospitals, schools and daycare centres, are subject to specific health and safety rules.
- Managing a charity’s activities places obligations on its directors and officers.
Beyond legalities: ethics
Every activity designed to provide support to disadvantaged persons or bring about positive change in society must reflect the values and expectations of the community as a whole. It must extend not only to the beneficiaries of the cause but also to the organization’s employees and volunteers. All these persons expect that registered charities operating in their communities will exemplify the values of honesty, fairness, integrity, transparency, mutual support and co‑operation.
Thus it is vital to ensure:
- that fundraising has specific objectives, and that the funds raised are used to achieve these objectives;
- that the organization oversees fundraising, in accordance with the legislation governing charities and the organization’s own policies and regulations;
- that fundraising takes into account the opinions and advice of its network of directors, volunteers, partners and donors.
Four main points
- Registered charities must comply with the legal requirements of all levels of government.
- The CRA authorizes fundraising, provided that fundraising does not become the registered charity’s main activity.
- Registered charities may operate related businesses that complement their charitable programs.
- Registered charities must demonstrate honesty, transparency and integrity in all aspects of their operations.
What are registered charities’ main responsibilities to their donors? To be law‑abiding, and to exemplify values that bring people together.