I am a board member of a nonprofit with registered charity status, and donations have fallen over the last 5 years and are $0 in the current year. The society portion of the organization continues to operate successfully. What are the implications of this — are there issues for the organization to deal with? Are there policies, rules or legislation that apply when there are no donations coming in?
Your question is more about "non-fundraising" but worth featuring because I'm sure your charity is not alone. There is a difference between donations which are eligible for a charitable tax receipt and other revenues which may not be receipted but still help pay the bills. For instance, grants from charitable foundations, or other registered charities like United Way and a number of religious organizations, may be a significant source of funds but don't require a charitable tax receipt. This income is counted on a separate line in Canada Revenue Agency's T3010 and should still be tracked as "unreceipted" gifts to assist the finance person completing the forms and ensure these donors are being stewarded properly. Similarly, if the organization is generating income through a related business, that too could enhance the bottom line without there being any donation (see CRA's policy statement).
Changes in fundraising activities may be the result of new leadership. One board and/or the organization's staff felt it was important to actively fundraise or at least pursue charitable status and yet today, the team has other priorities. You mentioned the organization is still operating successfully which indicates it's not spiralling into a deficit position. If the charity has become inactive however, it may be worth wrapping up its operations; this final measure would require voluntary revocation through the CRA where all remaining property is transferred to another "eligible donee" (primarily Canadian registered charities).
Regardless of how active or inactive the charitable organization is, you cannot avoid filing your annual T3010 within six months of your fiscal year end or you risk revocation for failure to file.
Issues arising from zero donations
- Does the organization want to continue as a registered charity with the added obligations to Canada Revenue Agency?
- Does decreased income limit the programs and services available or have alternative revenues been found?
- Are you ignoring established relationships with your existing donors?
- Are you prepared to lose donors whose relationships are not being stewarded?
- Can your charity afford to replace those donors at the acquisition rate of $1.20 to $1.50 to get a $1.00 donation (compared to the average cost of renewal at 20-25 cents)?
No voluntary donations indicate that when a charity stops asking, these revenues dry up. Depending on your mission, some clients and families are so grateful for the services they receive that the occasional "thank you gifts" arrive. But is there enough income to continue functioning effectively on a balanced budget?
I can understand the dilemma of where to put your efforts and energy. There is certainly nothing wrong with no donations as long as the board has secured other sources of revenue to offset expenditures. However, if it's a general disdain for fundraising that is at the crux of the issue, your charity (and all its programs and services) will be jeopardized by this passive approach. On the other hand, if the board has a very clear strategic plan that articulates the charity's future, necessary budget and how revenues and expenses will be balanced, I'd be less concerned.
Relevant policies, rules or legislation
First and foremost, as a Canadian registered charity, the board has legal obligations to the Income Tax Act through Canada Revenue Agency. CRA Charities Directorate has an ongoing commitment to improve its effectiveness and in the process, has updated its website significantly. There are two distinct sections: Charities (everything you ever wanted to know about keeping your charitable status) and Donors (how to make ethical and informed giving decisions).
The Charities section is especially interesting for board members (particularly if you aren't aware of your legal obligations!) There is a toolbox for directors, officers and volunteers that provides checklists, important links, a resource manual for maintaining charitable status, worksheets and sample official donation receipts.
Operating a Registered Charity includes an informative list of links including Keeping Adequate Books and Records, which is an obligation that cannot be overlooked.
You can also find most of CRA's policies for charities but they still recommend that you use the "search" feature if you're unable to locate a particular topic.
In addition to the Income Tax Act, charities must also be compliant with provincial or territorial requirements. For details, select your province or territory. These reporting requirements will depend on where your charity is based and conducts its business.
Another way that Canada Revenue Agency is strengthening its communications and services to registered charitable organizations has been through their Charities Partnership and Outreach Program. This initiative has funded numerous projects across Canada where you can find amazing tips and tools, attend workshops, listen to live or archived webinars and much more!
Unfortunately there isn't a central website that will bring you to all the funded projects so I'm going to provide links that are well worth exploring. I'll admit my bias toward the Charity Law Information Program (CLIP) because I've been involved with it from the start. Watch for the upcoming release of an interactive elearning tool for your board and chief executive called "Legal and Ethical Compliance for Charity Boards" that I authored with Mark Blumberg and Linda Mollenhauer. If you subscribe to CLIP's online bulletin (at the above address) you can be one of the first to hear when and how it's available.
Be sure to check out each of the sites that have been part of the Charities Partnership and Outreach Program. You'll find all kinds of resources that will help your registered charity understand its legal compliance obligations. While all the projects are at arm's length from CRA, the Charities Directorate reviews and approves the content (at the time it is published).
Current active projects include:
Cynthia Armour is a freelance specialist in fundraising and governance. A Certified FundRaising Executive (CFRE) since 1995, she volunteers as a subject matter expert with CFRE International. She works with boards and senior staff to ensure that strong leadership will enhance organizational capacity to govern and fundraise effectively. Contact Cynthia directly at 705-799-0636, e-mail email@example.com, or visit www.elderstone.ca for more information about her services.
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Disclaimer: Advice and recommendations are based on limited information provided and should be used as a guideline only. Neither the author nor CharityVillage.com make any warranty, express or implied, or assume any legal liability for accuracy, completeness, or usefulness of any information provided in whole or in part within this article.