May
Getting Started with a Charity
Posted under Charities, |
Photo by Rich Tatum "I've Got the Whole World in My Hand"
Getting Started with a Charity
The Hard Questions that You Need to Ask:
How much of the funds raised go to the field and how much are consumed by your organisation?
Over the last year how did you spend your funds?
Over the last year what did your organisation do to raise funds?
Over the last few years how much did you spend to raise those funds?
Did members of your organisation personally volunteer to raise funds and if so what did they do to bring in the money?
Where Can I Look For A Charity?
• Friends and Family, Co workers
• Online Charity Directories:
www.mtdn.com
www.charitynavigator.org/
CRA Charity Listings (Canada)
http://www.cra-arc.gc.ca/tax/charities/online_listings/menu-e.html
Search for Revenue Agencies in your Country to find particulars:
These governmental websites can provide you with the following information:
• Learn more about a charity's financial information (assets, liabilities, income, and expenditures) before making a donation
• Find out more about the activities of a registered charity
• Find out how to contact a charity
• Determine whether a charity is registered under the Income Tax Act and therefore eligible to issue official donation receipts for income tax purposes
THINGS YOU SHOULD KNOW ABOUT CHARITIES
CHARITIES SHOULD ONLY ENGAGE IN ALLOWABLE ACTIVITIES
A registered charity must be created for charitable purposes and must devote its resources (funds, personnel, and property) to charitable activities.
Four general categories of charitable purposes (must fall within one or more of the following categories):
• The relief of poverty
• The advancement of education
• The advancement of religion
• Other purposes beneficial to the community in a way the law regards as charitable
A registered charity is generally allowed to carry out its charitable purposes both inside and outside their country as governed by their country of origin in only two ways:
1. By carrying on its own charitable activities
2. By gifting to qualified donees
Furthermore a registered charity must maintain direction and control over its activities (whether carried out by the charity, or by an agent or contractor on its behalf) and must not engage in prohibited political activities or unrelated business activities
• If working through intermediaries such as an agent, a contractor,or any other non-qualified donee, the charity must be able to demonstrate that it retains direction and control over the use of it resources. (For example, the charity could enter into a formal written agreement with the intermediary body)
• Do not engage in any activities that may directly or indirectly support or facilitate an act of terrorism
• Do not engage in any prohibited political activities, such as supporting or opposing a political party or candidate for public office
• Gift only to qualified donees (EX other registered charities)
• Engage in only related business activities that accomplish or promote the charity's purposes, if the charity is designated as a charitable organization or a public foundation
• Do not engage in any business activities if the charity is designated as a private foundation
Charities should limit using charity resources for social activities and fundraising activities which are generally not considered charitable
Social Activities
As a rule, social activities are not charitable at law
However, a registered charity that is established for exclusively charitable purposes can devote some of its resources to social activities as long as:
o The activities are held to raise funds for its charitable purposes and are not so frequent to be considered as a primary purpose themselves; or
o The activities are incidental to the charity's charitable purposes.
Generally, a registered charity should not devote more than 10% of its resources (funds, personnel, and property) to social activities.
**A registered charity that engages in frequent social activities is putting its registered status in jeopardy for failing to devote its resources to charitable activities.
Fundraising activities
Fundraising is not a charitable activity. A registered charity can raise funds to support its charitable purposes, but:
o If the fundraising activity becomes the primary emphasis of the charity, then it is not operating for exclusively charitable purposes; and
o If a substantial portion of the charity's revenues is devoted to the fundraising activity, it is not considered to be devoting its resources to charitable activities.
**Spending excessive amounts on fundraising could also result in the charity not meeting its disbursement quota (spending requirement).
**A registered charity that engages in fundraising as a primary activity, or that devotes a substantial portion of its revenue to fundraising activities, is putting its registered status in jeopardy.
Lotteries, bingos, charity casinos, etc.
Charities may choose to raise funds through lotteries, bingos, and charity casinos
In addition to following the guidelines above, registered charities should contact the relevant provincial, territorial, and government departments before engaging in these activities, to obtain any necessary permissions, permits, or licenses.
KEEPING ADEQUATE BOOKS AND RECORDS
A registered charity must keep adequate books and records in the official language of the country of origin, for a prescribed time period, kept on file with the Country's Revenue Agency
EX. Canada Revenue Agency (CRA)
General Requirements (country to country specifics may vary)
• Copies of official donation receipts (other than for 10-year gifts)
o usually kept for a minimum of two years from the end of the calendar year in which the donations were made
• All records concerning 10-year gifts
o kept for as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked
• Minutes of meetings of the directors/trustees/executives
o Usually kept for as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked or, in the case of a corporation, for two years after the day the corporation is dissolved
• Minutes of meetings of the members
o Usually kept for as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked
• All governing documents and bylaws
o kept for as long as the charity is registered and for two years after the date the registration of the charity is revoked
• General ledgers or other books of final entry containing summaries of year-to-year transactions and the vouchers and accounts necessary to verify the entries
• Financial statements, source documents, and copies of Registered Charity Information Returns
o usually kept for six years from the end of the last tax year to which they relate or, if the charity is revoked, for two years after the date of revocation. Source documents may include items such as invoices, vouchers, formal contracts, work orders, delivery slips, purchase orders, or bank deposit slips.
DONATION RECEIPTS 101
A registered charity may only issue official receipts for donations that legally qualify as gifts (In most cases, a gift is a voluntary transfer of property without valuable consideration to the donor).
An official receipt must contain all the information specified in your country's Income Tax Act.
Mandatory Componenets of Donation Receipts
Gifts of cash:
• A statement that it is an official receipt for income tax purposes
• The name and address of the charity as on file with the Governmental Revenue Agency
• The charity's registration number
• The serial number of the receipt
• The place or locality where the receipt was issued
• The day or year the donation was received
• The day on which the receipt was issued if it differs from the day of donation
• The full name and address of the donor
• The amount of the gift (under proposed legislation) the value and description of any advantage received by the donor (under proposed legislation) the eligible amount of the gift
• The signature of an individual authorized by the charity to acknowledge donations
Non-cash gifts (gifts in kind), these additional elements:
• The day on which the donation was received (if not already indicated)
• A brief description of the property transferred to the charity the name and address of The appraiser (if property was appraised under proposed legislation) in place of the amount of the gift mentioned above, the deemed fair market value of the property
Note For gifts in kind, the eligible amount of the gift cannot exceed the deemed fair market value of the item. An appraisal is recommended for items valued at $1,000 or more.
A registered charity cannot issue receipts for the following:
• Gifts of services provided to the charity (services do not qualify as gifts)
• On behalf of another organization or charity
• In a name other than the name of the true donor
What if I receive something in return for making a donation?
When a registered charity provides you with something of value in return for making a donation, this is considered a benefit, which is called an advantage.
The advantage generally reduces the eligible amount of your donation for income tax purposes and will be indicated on your receipt.
Example
You donate $1,000 to the Anytown Ballet Company, which is a registered charity. In gratitude, the company provides you with three ballet tickets worth $50 each, for a total value of $150. These tickets are considered an advantage of $150. The eligible amount of your donation for calculating your tax credit is therefore $850 ($1,000 - $150).
LEARN AND CONFIRM
• Confirm that a charity that claims to be registered
• Confirm that you will receive an official donation receipt if you want to claim a tax credit. Remember that tax receipts must meet specific requirements as per your country's government
• Ask the charity what activities your donations will support
• Make sure you know who you are donating to. Sometimes fraudulent charities use names that are similar to well-known and respected charities
• Beware of schemes that promise you tax savings greater than your cost, thus allowing you to "profit" from donating to a registered charity
• Ask yourself: Am I satisfied that my donation will support the work of a legitimate charity?
• Write cheques payable to the charity, not an individual, or make sure that your online payments are secure
• Refuse to donate if there are signs of fraud, such as inappropriate pressure to give immediately or being offered a receipt for more than you actually donate
• Report fraud
Suggestions
• Put together a proposal and with that in hand contact the person in charge of fund raising. Professionalism is paramount in order to be taken seriously
• Find a program that the charity already has in mind or an event that is on their schedule and suggest how you can help with your art
• Start by being a volunteer if at all possible. It let's you build a relationship with the people who are responsible for the Charity and allows you to make a more educated decision on whether this is a Charity that you would truly like to support
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By Melanie Chung
