ONTARIO PUBLIC GUARDIAN AND TRUSTEE PROVIDES TIPS …

1 CHARITY LAW BULLETINNO. 176 SEPTEMBER 29, 2009 Editor: Terrance S. CarterToll Free / Sans frais: 1-877-942-0001 Main Office / Bureau principal211 Broadway, Box 440 Orangeville, ONTARIO , Canada, L9W 1K4 Tel: (519) 942-0001 Fax: (519) 942-0300 OttawaOffice / Bureau d Ottawa70 Gloucester StreetOttawa, ONTARIO , Canada, K2P 0A2 Tel: (613) 235-4774 Fax: (613) 235-9838 Mississauga Office / Bureau de Mississauga2 Robert Speck Parkway, Suite 750 Mississauga, ONTARIO , Canada, L4Z 1H8 Tel: (905) 306-2791 Fax: (905)306-3434 Carters Professional Corporation / Soci t professionnelle CartersBarristers, Solicitors & Trade-mark Agents / Avocats et agents de marques de commerceONTARIO PUBLIC GUARDIAN AND TRUSTEE PROVIDES TIPS ON CHARITABLE FUNDRAISINGBy Terrance S. Carter*A.

2 INTRODUCTIONThe ONTARIO PUBLIC GUARDIAN and TRUSTEE ( OPGT ) recently released a bulletinentitled Charitable Fundraising: Tips for Directors and Trustees, (the Bulletin ) thatprovides helpful information to directors and trustees of charities in ONTARIO on conducting charitable Bulletinreminds directors and trustees of ONTARIO -based charitable organizations that a poorly conducted fundraising program not only damages the reputation of the individual charity, but also brings harm to the sector as a whole, as well as possiblyexposing directors and trustees to personal liability. It is interesting to note the Bulletin wasposted only a month after Canada Revenue Agency( CRA )published its Guidanceon in ONTARIO should therefore make a point of reading the CRA Guidance along with this Bulletin.

3 In essence, the Bulletin remindscharitiesthat theycannot conduct fundraising activities as a charitable purpose in theirown right; charities must be open and transparent about their fundraising activities; costs are to be reasonable andaccurately recorded; and directors and trusteesin Ontariohave a fiduciary duty with regard to their charitable assets, as well as beingin compliance not only with the Income Tax Act, but also with the TRUSTEE Act( ONTARIO )andthe regulations underthe Charities Accounting Act( ONTARIO ). *Terrence S. Carter, , , Trade-Mark Agent, is the managing partner of Carters Professional Corporation, Orangeville, ONTARIO , authorwould like to thank Ryan Prendergast, student-at-law, for assisting in the preparation of this bulletin.

4 1 The full Bulletincan be foundonline at: , posted in July commentary, see Terrance S. Carter, Revised CRA Guidance on Fundraising: Improved but Still Challenging in Charity Law BulletinNo. 169 (June 25, 2009), online: PAGE 2 OF 4No. 176, September 29, 2009B. BRIEF about Planningand CostThe Bulletinreinforcesthe notion that in order to be successful in a fundraising campaign, directors and trustees should carefully plan their campaign based on defensible business decisions. The OPGT recommends that directors and trustees prepare a budget and a written plan of action before embarking on a fundraisingcampaign. In setting out a written plan, directors and trustees are also encouraged to give special attention to the method they will select for their campaign, as some methods may be inappropriate giventhe image of the charity, while others may require a permit or license such as a charitable gaming Bulletinsuggests that charities review the cost-effectiveness of their campaigns on a regular basis to ensure that expenses are reasonablein relation to the revenue they provide, as required by the courts.

5 While the Bulletin states that the disbursement quota under the Income Tax Actcan be usedas a guidelineconcerning what are reasonable fundraising costs, the Bulletin fails to mention that thenewCRA Guidanceon Fundraising is actuallythe better guideline that should be usedby charities. The Bulletin goes on the explain that should charities in ONTARIO fail to keep proper accounts of their fundraising activities, theOPGT can ask that their accounts be passed before the court should the OPGT on Commercial Fundraising Arrangements Where a charity is considering the use of a commercial fundraiser, the Bulletinprovides a useful appendix listing factors for charities to consider before signing a contract with a commercial fundraiser, which directors and trustees should review.

6 The Bulletin explains that fundraising contracts that are unreasonable may be set aside by the courts and fundraising contract fees may be ordered to be repaid by either the directors or the fundraisers. The Bulletin indicatesthatthe fundraising costs,combined with the charity s administrative costs, must be reasonable and the fact that the fundraiser is 3 Ibid. at p. 2. 4 Ibid. at p. 3 OF 4No. 176, September 29, 2009receiving a fee and its quantum should be disclosed. As well, the board of directors or trustees mustnot have an interest in the commercial fundraiser in order to avoid a conflict of Bulletin explains that commercial fundraisers are agents of the charity and the charity and its directors or trustees are responsible for anything the fundraisers say to the order to avoid liabilityin this regard, the Bulletinrecommends fundraisers comply with a code of ethics, and PROVIDES as an example the codes developedby the Canadian Association of Gift Planners or the Association of Fundraising for a Special PurposeA charity that fundraises for a special purpose must use those fundsonly for the stated purpose and must be keepthem separate from the charity s operating funds.

7 The Bulletin also recommends that the charity should provide for an alternative purpose for the funds, and that suchalternative purpose should be disclosed to potential Representations in Solicitations for Charitable FundsOrganizations that are not charities registered under the Income Tax Actand do not have the ability to issue receipts mustnot make any misleading statements to the contrary in their solicitations. In addition, where the charity is not going to issue a receipt for amounts below a set minimum, this must alsobe clearly communicated to potential donors in their fundraising p. more information on special purpose funds, reference should be made to Terrance S. Carter, Donor-Restricted Charitable Gifts: A Practical Overview Revisited II available online at: 4 OF 4No.

8 176, September 29, 2009C. CONCLUDING COMMENTST aken together with the recent CRAG uidance on Fundraising, the tips on fundraising provided by the OPGT provide a useful resource for directors and trustees in ONTARIO to ensure their fundraising practices are done in accordance withbothfederal and provincial requirements. Directors and trustees can spare their charity significant headachesby ensuring that their fundraising costs will not be subject to court reviewafter investigation. It is not only poorly managed campaignsthat can damage the reputation of the good work manydoin the sector, but also regulatory crackdownsof a few bad charitiesthat unfortunately can encouragethe misconceptionthat PUBLIC funds are vulnerable to abuseby :This is a summary of current legal issues provided as an information service by Carters Professional Corporation.

9 It is current only as of the date of the summary and does not reflect subsequent changes in the law. The summary is distributed with the understanding that it does not constitute legal advice or establish a solicitor/client relationship by way of any information contained herein. The contents are intended for general information purposes only and under no circumstances can be relied upon for legal decision-making. Readers are advised to consult with a qualified lawyer and obtain a written opinion concerning the specifics of their particular situation. 2009 Carters Professional CorporationN:\NEWSLETTERS\BULLETINS\CHAR ITYLAWBULLETIN\2009\no176- PGT (613) 235-4774 Mississauga (905) 306-2791 Orangeville (519) 942-0001 Toll Free: 1-877-942-0001 Carters Professional Corporation / Soci t professionnelle CartersBarristers, Solicitors & Trade-mark Agents / Avocats et agents de marques de commerc