Unacceptable fundraising: illegal or contrary to public policy - Segment 4
Alright now we're going to move on to slide, unacceptable fundraising 3, illegal or contrary to public policy. A charity cannot, of course, carry out illegal fundraising activities. This would mean fundraising that violates a statute or law, whether provincial, federal or municipal. For example, charities must register before they fundraise in some provinces. A charity that carried out fundraising in violation of those requirements would be engaging in illegal fundraising. Also, fundraising that involves issuing donation receipts improperly is unacceptable. For example a charity that issued receipts for an inflated value so that donors were getting a receipt back for an amount that exceeded what they actually gave would be a form of unacceptable fundraising.
Now we're going to move on to the next slide, "Contrary to Public Policy." Fundraising that is contrary to public policy will generally take two forms. The first is fundraising that fails to comply with legislation or some equally compelling public pronouncement evidencing public policy. For example, making a fundraising solicitation that does not comply with Canadian Radio-television and Telecommunications Commission directives or telemarketing rules or other established government policy may be considered contrary to public policy. However, fundraising can also be contrary to public policy where a charity enters into a contract where third party fundraisers are permitted to keep 70% or more of all funds raised without this information being disclosed to the public. There have been a few court cases that have found such arrangements are unacceptable because they resulted in harm to the public interest.
We're going to move to the next slide, "Section G: Indicators of Fundraising that is Contrary to Public Policy." A fundraising activity that sees most of the gross revenues go to a for-profit fundraising professional or company is an indicator of fundraising that is contrary to public policy. Again, there could be a reasonable explanation for the arrangement, but even if it is not an indicator of fundraising that is contrary to public policy, it could also be an indicator of unacceptable private benefit. Commission-based fundraising can be a concern for the CRA, although it is not offside in itself. The CRA is concerned specifically about situations where commission-based fundraising results in excessive private benefit to the fundraiser. This can be an indicator of both unacceptable private benefit and fundraising that is contrary to public policy. It would technically be possible to use commission-based fundraising in a way where it does not constitute unacceptable fundraising. The charity would likely have to have sufficient safeguards in place to ensure the fundraiser did not receive more compensation than exceeded market rates for the work that has been completed.
We're going to move on to the next slide, which is a scenario. Here is an example of a situation that might be of concern to the CRA. A charity is registered with a third party fundraiser, a telemarketer, to raise funds on the charity's behalf. In this case, as with the second example in our discussion on collateral purposes, the charity spends the vast majority of its funds on its charitable activities. However, it also has a fundraising contract where the fundraiser is retaining the majority of the money without this fact being disclosed to the public. This arrangement would likely be considered contrary to public policy by the CRA. Although the charity would not likely be considered to have fundraising as a collateral purpose, it could still be carrying out unacceptable fundraising as being contrary to public policy.
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