A. INTRODUCTION
The Ontario Public Guardian and Trustee
(“OPGT”) recently released a bulletin entitled “Charitable
Fundraising: Tips for Directors and Trustees,” (the “Bulletin”)
that provides helpful information to directors and trustees
of charities in Ontario on conducting charitable fundraising.
The Bulletin reminds directors and trustees of Ontario-based
charitable organizations that a poorly conducted fundraising
program not only damages the reputation of the individual
charity, but also brings harm to the sector as a whole,
as well as possibly exposing directors and trustees to personal
liability. It is interesting to note the Bulletin was posted
only a month after Canada Revenue Agency (“CRA”) published
its Guidance on Fundraising.
Charities in Ontario should therefore make a point of reading
the CRA Guidance along with this Bulletin.
In essence, the Bulletin reminds charities
that they cannot conduct fundraising activities as a charitable
purpose in their own right; charities must be open and transparent
about their fundraising activities; costs are to be reasonable
and accurately recorded; and directors and trustees in Ontario
have a fiduciary duty with regard to their charitable assets,
as well as being in compliance not only with the Income
Tax Act, but also with the Trustee Act (Ontario)
and the regulations under the Charities Accounting Act
(Ontario).
B. BRIEF OVERVIEW
1.
Deliberations about Planning
and Cost
The
Bulletin reinforces the notion that in order to be successful
in a fundraising campaign, directors and trustees should
carefully plan their campaign based on defensible business
decisions. The OPGT recommends that directors and trustees
prepare a budget and a written plan of action before embarking
on a fundraising campaign. In setting out a written plan,
directors and trustees are also encouraged to give special
attention to the method they will select for their campaign,
as some methods may be inappropriate given the image of
the charity, while others may require a permit or license
such as a charitable gaming event.
The
Bulletin suggests that charities review the cost-effectiveness
of their campaigns on a regular basis to ensure that expenses
are reasonable in relation to the revenue they provide,
as required by the courts. While the Bulletin states that
the disbursement quota under the Income Tax Act can
be used as a guideline concerning what are reasonable fundraising
costs, the Bulletin fails to mention that the new CRA Guidance
on Fundraising is actually the better guideline that should
be used by charities. The Bulletin goes on the explain that
should charities in Ontario fail to keep proper accounts
of their fundraising activities, the OPGT can ask that their
accounts be passed before the court should the OPGT become
concerned.
2.
Comments on Commercial Fundraising
Arrangements
Where
a charity is considering the use of a commercial fundraiser,
the Bulletin provides a useful appendix listing factors
for charities to consider before signing a contract with
a commercial fundraiser, which directors and trustees should
review. The Bulletin explains that fundraising contracts
that are unreasonable may be set aside by the courts and
fundraising contract fees may be ordered to be repaid by
either the directors or the fundraisers. The Bulletin indicates
that the fundraising costs, combined with the charity’s
administrative costs, must be reasonable and the fact that
the fundraiser is receiving a fee and its quantum should
be disclosed. As well, the board of directors or trustees
must not have an interest in the commercial fundraiser in
order to avoid a conflict of interest.
The
Bulletin explains that commercial fundraisers are agents
of the charity and the charity and its directors or trustees
are responsible for anything the fundraisers say to the
public. In order to avoid liability in this regard, the
Bulletin recommends fundraisers comply with a code of ethics,
and provides as an example the codes developed by the Canadian
Association of Gift Planners or the Association of Fundraising
Professionals.
3.
Fundraising for a Special
Purpose
A charity that fundraises
for a special purpose must use those funds only for the
stated purpose and must be keep them separate from the charity’s
operating funds. The Bulletin also recommends that the charity
should provide for an alternative purpose for the funds,
and that such alternative purpose should be disclosed to
potential donors.
4.
Misleading Representations
in Solicitations for Charitable Funds
Organizations that are
not charities registered under the Income Tax Act and
do not have the ability to issue receipts must not make
any misleading statements to the contrary in their solicitations.
In addition, where the charity is not going to issue a receipt
for amounts below a set minimum, this must also be clearly
communicated to potential donors in their fundraising materials.
C. CONCLUDING COMMENTS
Taken together with the recent
CRA Guidance on Fundraising, the tips on fundraising provided
by the OPGT provide a useful resource for directors and
trustees in Ontario to ensure their fundraising practices
are done in accordance with both federal and provincial
requirements. Directors and trustees can spare their charity
significant headaches by ensuring that their fundraising
costs will not be subject to court review after investigation.
It is not only poorly managed campaigns that can damage
the reputation of the good work many do in the sector, but
also regulatory crackdowns of a few bad charities that unfortunately
can encourage the misconception that public funds are vulnerable
to abuse by charities.
