Fundraising 101: Key Insights for Canadian Charities

Fundraising is not just a task but a lifeline for Canadian charities, keeping them afloat and enabling them to carry out their noble missions.

According to the Canada Revenue Agency (CRA), fundraising encompasses any activity that solicits donations, whether in cash or in-kind.

This broad definition includes everything from direct appeals for cash to selling goods and services. However, not every revenue-generating activity falls under this umbrella.

What Is Fundraising?

At its core, fundraising means raising money to support a charitable cause or mission. It could involve asking individuals, businesses, or governments to donate, or organizing events or campaigns to generate funds.

In simple terms, what is the meaning of raise funds? It means collecting money to support a goal in this case, helping a cause that matters.

Fundraising can include:

Writing donation appeals
Hosting events like walk-a-thons or silent auctions
Applying for grants
Selling merchandise
Running digital campaigns

What Qualifies as Fundraising?

At its core, fundraising involves asking individuals or organizations for financial support. The CRA’s definition casts a wide net, covering various direct and indirect activities.

For instance, a direct fundraising effort might involve volunteers going door-to-door in a neighbourhood and asking residents for donations.

Conversely, an indirect activity could include the research and planning that precedes such a campaign, like analyzing neighbourhood demographics to target the most promising areas.

Even though planning doesn’t directly generate funds, it’s a crucial part of the fundraising process, highlighting the interconnected nature of fundraising activities.

Each step, from planning to execution, plays a vital role in the fundraising campaign’s success, underscoring the charity’s unity and collaboration.

The CRA’s Position on Fundraising

One of the challenges of fundraising for charities is the lack of clear guidelines in the Income Tax Act about what activities are allowed.

While the Act doesn’t list specific fundraising activities, it does impose restrictions on how charities can utilize their resources. Charities must adhere to these regulations when conducting fundraising efforts.

The CRA’s guidance clarifies compliance, emphasizing that all fundraising activities must align with the requirements outlined in the Income Tax Act. This ensures that charities maintain accountability and transparency in their fundraising practices.

Key Messages from the CRA Guidance

The CRA guidance on fundraising highlights several important points for charities:

Compliance with the Income Tax Act: Charities must ensure that their use of resources in fundraising activities adheres to the regulations outlined in the Act.
Identifying Unacceptable Fundraising Practices: Section F of the guidance details ways charities can inadvertently violate the Income Tax Act through fundraising efforts. Section G outlines indicators of unacceptable practices.
Reporting Requirements: Appendix B provides guidance on reporting fundraising costs on Form T3010, the Registered Charity Information Return. Accurate reporting is essential for maintaining transparency and compliance.
Best Practices: Appendix C suggests best practices for charities to minimize the risk of engaging in unacceptable fundraising activities. While these practices are recommendations rather than strict requirements, they can significantly enhance a charity’s fundraising strategy.

What Is the Main Purpose of Fundraising?

The main purpose of fundraising is to help your charity continue doing its work. Most charities rely on fundraising to pay for services, staff, programs, supplies, and outreach. Without fundraising, many charities would not survive.

But it’s not just about money; fundraising also spreads awareness, builds a community of supporters, and gets people involved.

What Is a Fundraising Campaign?

A fundraising campaign is a focused effort to raise money for a specific goal over a certain period of time. Think of it like a mission with a clear target.

For example:

A campaign to raise $50,000 for new school computers
A holiday food drive to collect donations before December 31
A month-long challenge where supporters donate for every kilometre walked

Good campaigns include a clear message, a plan to reach donors, and updates along the way.

Tips for a Strong Campaign:

Set a clear goal
Share a compelling story
Use social media, email, and community events
Thank donors publicly and privately

What Is Peer-to-Peer Fundraising?

Peer-to-peer fundraising (sometimes called P2P) is when your supporters raise money for your cause by asking their friends, family, or coworkers to donate.

Example: A student runs a 5K and asks people to sponsor them by donating to your charity. That student becomes a mini-ambassador for your cause.

So, what is peer to peer fundraising? It’s when your community helps you fundraise by reaching out to their networks. It’s powerful because it spreads your message further and builds trust people are more likely to give when someone they know asks.

What Is a Case for Support in Fundraising?

Your case for support is one of the most important tools in fundraising. It’s the main message you use to show potential donors:

What your organization does
Why it matters
What impact will a donation make
Why you need funds now

A strong case for support makes people want to give. It should be emotional, clear, and honest.

What is a case for support in fundraising? It’s the “why” behind your ask. It gives donors the information and inspiration they need to take action.

What Is Stewardship in Fundraising?

Stewardship is how you take care of your donors after they give. It includes:

Saying thank you promptly
Sending updates on how their gift is being used
Inviting them to events or volunteer opportunities
Making them feel part of the mission

What is stewardship in fundraising? It’s the ongoing relationship with donors, showing them their gifts matter. Good stewardship builds loyalty and increases the chances that they will give again.

What Is the CRA Definition of Fundraising?

The Canada Revenue Agency (CRA) has strict rules for registered charities when it comes to fundraising. According to the CRA:

“Fundraising is any activity that includes a solicitation of present or future donations of cash or non-cash gifts, or the sale of goods or services to raise funds.”

This includes:

Asking for donations by phone, mail, or online
Holding events like galas, raffles, or auctions
Selling items (t-shirts, cookies, etc.) to raise money

The CRA wants to make sure your fundraising:

Is legal and truthful
Uses donations in a way that supports your mission
Doesn’t spend too much on expenses

For example, if you spend $90 to raise $100, the CRA may question whether your fundraising is too costly.

You can read the full CRA guidelines here.

What Makes Fundraising in Canada Unique?

Fundraising in Canada comes with responsibilities. Unlike some other countries, registered charities in Canada must follow CRA rules closely. Some unique points include:

Tax receipting: Only registered charities can issue official donation receipts for tax purposes.
Transparency: CRA may review your fundraising spending, especially if your costs are high.
Public trust: Canadians expect honesty and accountability. Being open about how donations are used builds long-term trust.

Best Practices for Successful Fundraising

Start with a plan: Don’t wing it. Set goals, budgets, and timelines.
Know your audience: Speak directly to the people most likely to care.
Tell a good story: Use emotion and real examples to connect.
Make it easy to give: Offer online donation options and clear instructions.
Track everything: Use spreadsheets or software to stay organized.
Say thank you: This is a must. Every donor should feel appreciated.
Follow up: Share results and updates so people know their gift made a difference.

Summary

Fundraising is vital for Canadian charities, helping them secure the support they need to operate and achieve their goals. The Canada Revenue Agency defines fundraising broadly, covering everything from asking for donations directly to planning related activities. It emphasizes the importance of following regulations for transparency and accountability.

With a strong case for support, good stewardship, creative campaigns like peer-to-peer fundraising, and full knowledge of CRA’s definition of fundraising, your organization can raise the funds you need to grow your impact across Canada.

Disclaimer: The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers should seek tailored legal advice in relation to their personal circumstances.

At Northfield & Associates our expert teams guidance on compliance requirements. Our team understands Canadian law and can help ensure your organization follows proper procedures.

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