Fundraiser's Receipt Book: CRA Guidelines & Resources

1. The Charities File: On Board Fundraiser’s Receipt Book

2. Module Overview The purpose of this module is to provide a registered charity’schairs of fundraising committees, events or campaigns with general informationneeded to understand Canada Revenue Agency’s new fundraising guidelines, its requirements for receipting, the limits of providing recognition gifts to donors, calculating the Fair Market Value of donations as well as other information and resources related to fundraising activities and receipting.

3. Fundraising Activities Fundraising is not an inherently charitable activity • As a registered charity your day-to-day activities must be the delivery of your charitable programs (i.e. food bank, day care program, etc.) • All resources (including volunteers) must primarily be used to deliver your programs. • Fundraising can also have an impact on the Disbursement Quota (DQ) • The DQ is the amount a charity must spend on charitable activities, it is based on the charity’s previous fiscal years’ activities As a guide, ensure that at least 80% of your resources are devoted to the delivery of charitable activities.

4. Fundraising Activities Evaluation Grid Fundraising Costs vs. Fundraising Revenue

5. Small and Rural CharitiesFundraising Checklist If your total revenue* is less than $100,000 and you can answer Yes to all the questions in either Part I or Part II below, you will generally satisfy CRA’s requirements related to your fundraising activities. or * As a guide use Box 4700 from your previous fiscal year’s T3010 Information Return

6. Fundraising Activities • Charities may choose to raise funds through lotteries, bingos, and charity casinos. • In addition to following CRA’s guidelines, registered charities should contact the relevant provincial, territorial, and municipal government departments before engaging in these activities, to obtain any necessary permissions, permits, or licenses. • A charity must be aware of their Registered Charity Information Return (T3010B) reporting requirements • Fundraising committees can assist in meeting this requirement by tracking their activities and any compensation paid to fundraisers

7. Allowable Fundraising Activities • Registered Charities may also conduct fundraising through a Related Business. Provided that it is a commercial activity, i.e., revenue-generating, that is: • related to a charity's purposes, and • substantially run by volunteers. • For more information on Related Business please see Info Sheet 5 Related and Unrelated Business. • Fundraising to disburse funds to Qualified Donees (that are not registered charities) • For more information on Qualified Donees please see Info Sheet 9 Qualified Donee

8. Fundraising Methods to Avoid • Below are some of the fundraising methods you should avoid, specifically: • Commission-based compensation or other compensation based on the number or dollar amount of donations • To operate an unrelated business • Sole sourced fundraising agreements without proof of due diligence in obtaining the best price available • Activities where most of the gross revenues go to a contracted non-charitable party An unrelated businessis a commercial activity, i.e., revenue-generating, that is not either related to a charity's purposes, or substantially run by volunteers.

9. What is a gift? • A gift (donation) is the voluntary transfer of property without the donor expecting to receive anything in return. To qualify as a gift, all three of the following conditions must be met: • The donation, either in the form of cash or a gift-in-kind, is given by a donor to a registered charity. • The donation is given voluntarily; the donor must not be obligated to make the donation, for instance as the result of a larger contract or a court order. • The donor is making the donation without expecting anything in return. No benefit of any kind may be provided to the donor or to anyone designated by the donor as a result of a gift. A gift-in-kind can be art supplies for a day-care program, canned food for a food bank, etc. The donation of services does not qualify as a gift

10. Use Receipting Practices that Respect CRA Guidelines • The total value of receipted donations received by a charity is the critical factor in the calculation of the Disbursement Quota for a charity • There are clear expectations about receipting practices • CRA provides specific direction for charities • Split-receipting is required when the donorreceives an advantage

11. Does the donation qualify as a Gift? • Admission fees • Purchase of goods • Loose collection • Pledges • Gifts of little or no value • Purchase of lottery/raffle ticket • Payments to specific beneficiaries An official receipt cannot be issued for: • Services – unless this two step process is followed • The service-provider issues an invoice which the charity pays • The service-provider would make a cash donation to the Charity for the same amount • Membership fees • Unless they give the donor no more than the right to vote or receive the charity’s reports

12. Establishing Fair Market Value (FMV) • Generally, if the FMV of the property is less than $1,000, a member of the registered charity, or another individual, with sufficient knowledge of the property may determine its value. • The person who determines the FMV of the item should be competent and qualified to determine the value of the property being donated. • If the FMV is expected to be more than $1,000, CRA strongly recommends that the property be professionally appraised by a third party (that is, someone who is not associated with either the donor or the charity). • If the property is appraised, the name and address of the appraiser must be included on the official donation receipt.

13. General Receipting Guidelines • Prepare all official receipts in duplicate • Retain copies of all receipts issued • Ensure official receipts are individuallyand sequentially numbered • Make sure each receipt has an authorized signature • Retain copies for two years (except for receipts issued for ten year gifts) • Receipts must contain all the required information, otherwise they may be disallowed at the local filing office

14. Receipts must include the following information: The charity’s name, address, BN/Registration # Date donation received Total amount received by charity Who it was donated by, address of donor Date receipt issued, location receipt issued Authorized signature of charity Listing of CRA charities website Some receipts (Split Receipting) must include other elements if they involve Non-cash gifts and Valued Added Benefits that the donor received. The Eligible Amount of Gift for tax purposes Description of property Value of Advantage Appraised by, and Address of Appraiser Components of a Valid Receipt

15. Situations Involving Split Receipting • Occurs when a donor receives a benefit or an advantage (i.e. tickets, t-shirt, mug, etc.); in this situation the receipt reflects the total amount of the donation less the value of the benefit or advantage Donation - Value of Advantage* (gift to donor) = Eligible Amount of the gift (receipted amount) Example A $100.00 - $15.00 = $85.00 Example B $100.00 - $9.00 = $100.00 All three values must be included on the receipt

16. Two Types of Advantages There are two types of advantages: • Advantages linked to the object of the fundraising activity • These advantages include items or services that are integral to the fundraising activity. i.e. Gala (meal cost), Golf tournament (golf cart, golf fees, meal),Fundraising concert admission price of concert ticket • These advantages must be calculated at their FMV and subtracted from the donation amount. • Complimentary items – subject to “de minimis threshold” • The value of the advantage must be determined and is subject to the “de minimis threshold” calculation. De minimis threshold” is the lesser of 10% of the value of the donation given or $75; whichever is less (i.e. the value of the advantage in Example A is greater than 10%; therefore the receipted amount is adjusted accordingly. In Example B the advantage is less than 10%; therefore the receipted amount is not adjusted)

17. Is the Gift Eligible for a Receipt? • CRA has established an “intention to make a gift threshold” • This test is used to determine whether the donor made the gift because of the advantage or with a benevolent intention • The amount of the advantage cannot exceed 80% of the Fair Market Value (FMV) of the donation • To qualify for a tax receipt the donation must meet this test • For example, a donor gives a gift of $40.00 in return the charity gives the donor a pair of hockey tickets valued at $35 as a thank you • The “intention to make a gift threshold” is 80% of $40.00 = $32.00 • The FMV of the tickets exceeds the threshold; therefore no receipt can be issued

18. Receipting for Gifts in Kind and Non-Cash Gifts Gifts in Kind or non-cash gifts • artwork • land and buildings • equipment • publicly traded securities • certified cultural • ecological property A contribution of service - time, skills or efforts • is not property and, therefore, does not qualify as a gift or gift-in-kind Note: a charity can pay the individual’s or business’s invoice providing the service; who can in turn donate all or part of the amount back to the charity as long as it is done voluntarily Establish Fair Market Value before receipting any gift-in-kind • receipt can be only for eligible amount

19. Sample Receipt – Cash Gift Receipt number must be sequential and unique The “Total amount received by charity” and “Value of advantage” are used only when the donor receives an advantage (i.e. tickets, t-shirt, mug, etc.). Note: If a receipt is voided; the number cannot be re-used. Your records must show that the receipt number was voided. All non-highlighted text are mandatory for each Cash Gift receipt

20. Sample Receipt – Non Cash Gift Receipt numbers must be sequential and unique The “Total amount received by charity” and “Value of advantage” are used only when the donor receives an advantage (i.e. tickets, t-shirt, mug, etc.). Note: If a receipt is voided; the number cannot be re-used. Your records must show that the receipt number was voided. All non-highlighted text are mandatory for each Non Cash Gift receipt

21. Utilize professional advice for complex issues Challenging to understand some issues • Capital gains, capital gains pool, capital gains reduction • Disbursement Quota • Enduring property (bequests, planned giving) • Types of gifts (specific, exempted) • Gifts in Kind • Loan backs (reduction of Fair Market Value) • Non-qualified investments and securities Registered Charities must meet their DQ

22. In Conclusion • Further clarification of the topics covered during the workshop can be found in: • The accompanying notes • Associated Info Sheets and Checklists • The Charities File website http://thecharitiesfile.ca/ • Charity Central http://www.charitycentral.ca/site/ • CRA’s Policy on fundraising by Registered Charities http://www.cra-arc.gc.ca/tx/chrts/plcy/cps/cps-028-eng.html