Clearly, charities rely on fundraising in order to fund their activities and the CRA acknowledges this dependency as necessary for the sustainability of the charitable sector. At the same time CRA expects charities to be transparent and operate within specific legal parameters.
While the CRA does provide guidance on what is appropriate fundraising, it also explicitly defines what is not acceptable fundraising.[13] This is especially important to understand for potential donors and sponsors
who are entering into relationships with specific charities:
- a purpose of the charity (a collateral, non-charitable purpose)
- delivering a more than incidental private benefit (a benefit that is not necessary, reasonable, or proportionate in relation to the resulting public benefit)
- illegal or contrary to public policy
- deceptive
- an unrelated business
Charities must report fundraising revenue and expenditures on their annual return. The fundraising ratio is a key measure that CRA uses to assess the fundraising activities of a charity. This ratio is calculated by adding up tax receipted gifts and non-tax receipted fundraising and then dividing total by the total fundraising expenditures. It is commonly believed that a ratio under 35% is unlikely to raise questions by CRA but if over 35% the opposite is possible. Should a ratio hit upwards of 70% CRA reacts like a 4 alarm fire. It is no secret that charities may try to move a portion from non tax-receipted gifts to the non tax receipted fundraising to lower the ratio or they may transfer sponsorship monies and income from cause related campaigns.
Is it any wonder then that there is a public perception that these charities, especially the larger ones, seem to be fundraising machines, existing more for the purpose of fundraising than supporting patients?
Total expenditures on fundraising
About 40% of organizations (399) reported total fundraising expenditures of $301,555,342 or 22.61% of total expenditures. The ratio for the patient-focused sector is 41% (301,555,342 / (495,853,772+225,618,043)), somewhat higher than the CRA test but dramatically higher than the broad sector which reported a ratio of 12.6%. This can be explained in part by the huge sums of government funding the government related charities receive, thus relieving them of a great deal of dependency on fundraising.
Chart 14: Ratio of fundraising costs to revenue
The patient-focused charities however are far more dependent on fundraising than the broad sector and appear to invest heavily in it. Is it any wonder then that there is a public perception that these charities, especially the larger ones, seem to be fundraising machines, existing more for the purpose of fundraising than supporting patients? We must assume that the CRA has considered this matter and has recognized the great disadvantage that these organizations suffer and that they likely compare organizations against their peers rather than the broad sector when assessing fundraising expenditures.
What fundraising tools are organizations employing?
There is a definite trend towards donating online in Canada.
Online giving grew to $144.8 million in 2017, a 17% increase from the year before, compared to a 6% increase in total giving in Canada. As for the devices people use, donations from mobile users are outpacing donations from desktop users.
All this speaks to the fundraising tactics charities use. Although over 16% of our groups still use collection plate and boxes, the trend to online activity is discernible with almost 30% of groups reporting fundraising activity on the internet.
The old standards of targeted corporate donations and fundraising dinners/galas were reported by 38% and 35% of groups respectively. With the rising trend in corporate social responsibility, it is unusual that cause-related marketing was reported by so few, only 7.57%.
As the technology trends continue, expect to see the “Mail Campaigns” increasingly turn into “e-Mail” campaigns.
Table 9: Fundraising tool utilization
| Tool | Number of Groups | % of Groups |
|---|---|---|
| 2500 Advertisements/print/radio/TV commercials | 236 | 23.51% |
| 2510 Auctions | 196 | 19.52% |
| 2530 Collection plate/boxes | 167 | 16.63% |
| 2540 Door-to-door solicitation | 27 | 2.69% |
| 2550 Draws/lotteries | 223 | 22.21% |
| 2560 Fundraising dinners/galas/concerts | 357 | 35.56% |
| 2570 Sales | 212 | 21.12% |
| 2575 Internet | 297 | 29.58% |
| 2580 Mail campaigns | 236 | 23.51% |
| 2590 Planned-giving programs | 125 | 12.45% |
| 2600 Targeted corporate donations/sponsorships | 389 | 38.75% |
| 2610 Targeted contacts | 245 | 24.40% |
| 2620 Telephone/TV solicitations | 56 | 5.58% |
| 2630 Tournament/sporting events | 258 | 25.70% |
| 2640 Cause-related marketing | 76 | 7.57% |
| 2650 Other | 228 | 22.71% |
| 2660 Specify_____________________ | 219 | 21.81% |
Most popular “Other” event fundraisers
Examination of this category shows disease-related charities used a wide variety of event fundraising approaches. However, Walk-A-Thons top the list by a wide margin with 73 organizations reporting using this tactic. Overall, the category of sports events dominates this type of fundraising. However, gaming is an old standby with consistent revenues and a tried and true tradition. With online and virtual gaming gaining steam expect charities to respond with new and innovative gaming offerings for the public. It is gratifying to see events directly tied to organizational purpose with Patient Conferences reported by 5 groups.
Table 10: Most popular other event fundraisers
| Sports | Walk-A-Thon | 73 |
| Run | 8 | |
| Swimathon/Safeway Cards | 2 | |
| Activités | 2 | |
| Marathon | 2 | |
| Skating Fund Raiser | 1 | |
| Bike | 1 | |
| Bowling | 1 | |
| Dragon Boat Races | 1 | |
| Motorcycle Ride | 1 | |
| Night At Races | 1 | |
| Sledge Hockey | 1 | |
| Wheelchair Relay | 1 | |
| Gaming | Bingo | 13 |
| Casino | 7 | |
| Raffles | 3 | |
| Provincial Navada | 2 | |
| Gaming | 1 | |
| Donations | Donations | 4 |
| Bottle Deposit, Return It Recycling | 4 | |
| Membership Dues | 3 | |
| Memorials | 3 | |
| Social Media | 2 | |
| Website | 2 | |
| Donations For Use Of Equipment | 1 | |
| Member Donations | 1 | |
| Misc Events | Events | 9 |
| Festivals | 2 | |
| Car Shows | 2 | |
| Meetings and Conferences | Patient Conference | 5 |
| Information Sessions | 1 |
Charities that paid external fundraisers
Almost 10 years ago CBC ran a story headlined “Charities paid $762M to private fundraisers”.[14] This expose detailed how Canadian registered charities paid $762 million to third-party fundraisers between 2004 and 2008. In more than 200 cases, more than 50% of the donations were paid to external fundraisers. Their report found that less than 1% of charities hired external fundraisers. Among our patient-focused charities, 70 reported using external fundraisers, 7% of our total.
Gross revenue collected by external fundraisers
Two important questions were raised by the CBC investigation: how much revenue do these fundraisers actually generate, and, are they operating ethically. While we do not have the capacity to make a judgement on the ethical relationships patient groups have with external fundraisers, we can defer to CRA’s perspectives on the subject. CRA guidance stipulates that a charity must:
- Demonstrate that the cost is an investment that will reduce costs at a later stage
- Make an assessment of fair market value for services
- Has measures in place to control costs
- Be transparent and disclose costs to the public
Gross revenue from using external fundraisers was $64,144,394. Only 47 organizations reported such revenue which represents 4.69% of total revenue earned by this sector. On face value it appears that this is a fairly significant source of revenue in light of the small number of charities that engage in it.
Table 11: Top 10 earners of revenue by external fundraisers
| Organization | Amount | % of Total | Aggregate Total % |
|---|---|---|---|
| Canadian Cancer Society | $32,130,842 | 50% | 50% |
| Heart and Stroke Foundation of Canada | $17,487,430 | 27% | 77% |
| The Canadian Council of the Blind | $2,107,718 | 3% | 81% |
| The Arthritis Society | $1,851,619 | 3% | 84% |
| Canadian Liver Foundation | $1,581,844 | 2% | 86% |
| The Canadian National Institute for the Blind | $1,516,676 | 2% | 88% |
| Western Institute for the Deaf and Hard of Hearing | $1,108,149 | 2% | 90% |
| Fondation Quebecoise du Cancer Inc. | $1,106,074 | 2% | 92% |
| Canadian Down Syndrome Society | $1,088,600 | 2% | 94% |
| Shine Through the Rain Foundation | $680,849 | 1% | 95% |
Amounts paid to external fundraisers
At the end of the day, are these fundraisers worth their price? The total paid by 46 groups is $12,853,744 which represents less than 1% of total expenditures. Given the nature of fundraising campaigns operating over extended periods of time, it is quite possible that the apparent profit from these engagements of more than $51.3 million may be somewhat inflated. This is likely accounted for due to the calendar year nature of campaigns conflicting with fiscal reporting periods, making a profit of 80% a very attractive outcome. More analysis of previous and subsequent reporting periods is required to be more accurate. With that in mind this is still a promising outcome and the sector as a whole could benefit from a deeper understanding of how to spread and scale an ethical professional fundraising collaboration.
The sector as a whole could benefit from a deeper understanding of how to spread and scale an ethical professional fundraising collaboration.