Are you on the right page? Line by line allocation of fundraising expenses for the T3010

Transcription

1 Are you on the right page? Line by line allocation of fundraising expenses for the T3010 1

2 Why are we focused on fundraising expenses? CRA released its Guidance on Fundraising in 2009 Provided guidelines for charities with respect to their fundraising practices Outlined best practices, practices of concern, and prohibited practices Provided extensive examples and clarifications for charities to reference The Fundraising Ratio was introduced in this document Provided a measurement of fundraising effectiveness Calculated by comparing a charity s fundraising revenue and expenses Fundraising Expenses from Line 5020 / Fundraising Revenues from Lines CRA provided charities with targets for compliance Fundraising Ratio should be below 35% The correct reporting of Fundraising Expenses on the T3010 is important in determining your charity s Fundraising Ratio and is the focus of this presentation 2

3 Note: This presentation is designed for charities using Schedule 6 Charities report Fundraising expenses differently dependent on criteria established by the CRA Must complete Section D Shorter Financial Smaller Larger Must complete Schedule 6 Detailed Financial Charities are required to complete Schedule 6 if any of the following criteria exist: The charity s revenue exceeds $100,000 The amount of assets not used in charitable programs exceeds $25,000 The charity has permission to accumulate funds during the fiscal period The concepts covered are similar, but some reporting lines are different for smaller charities 3

4 Charities report expenses in a two step process Expense 1st Must report on one of expense lines 4800 to 4920 Total of all expenses are reported on Line 4950 then Re-categorize into one of these SUMMATIVE LINES (the 5000 series lines) 5000 Charitable Purposes 5010 Administration and Management 5020 Fundraising 5030 Political 5040 Other expenses 4

5 We will focus on expense reporting lines The following expense reporting lines tend to have significant fundraising related costs: Line 4800 Advertisement and Promotion Line 4880 Compensation Line 4860 Professional and Consulting Fees (if relevant) Line 4920 Other expenses Other expense reporting lines often require a charity to determine what % of costs should be allocated to fundraising. These lines are: Line 4810 Travel and Vehicle Line 4840 Office supplies and expenses Line 4850 Occupancy costs Line 4870 Education and Training We will look at each reporting line in more detail 5

6 Expense Line 4800 Advertisement and Promotion Amounts paid to draw attention to your charity and its programs, including advertising and promotion costs related to fundraising activities. Specific examples include: Distributing information via media (cost of newspaper, radio, TV ads) Marketing brochure to profile fundraising campaign Postage related specifically to fundraising mailer Meals and entertainment, seminars, and presentation booths 6

7 Considerations with Line 4800 Reference the Substantially All and Four Part test Marketing materials can have an incidental element of fundraising messaging without the related costs being allocated as a fundraising expense Record labour expenses related to creating a fundraising advertisement on other reporting lines If the ad was prepared as part of a staff responsibility, report the expense on line 4880 (Compensation) If the ad was prepared by contract personnel, report the expense on line 4860 (Professional and Consulting Fees) Include hard costs required to host a fundraising event on this line The cost of food, beverages, entertainment and swag for a gala would be considered an advertisement and promotional expense We have a handout with more specific information about this reporting line 7

8 Expense Line Compensation Compensation includes all forms of salaries, wages, bonuses, commissions, fees, honoraria, etc., plus the value of any benefits given to employees. Compensation expenses would include the staff time required for fundraising related activities such as: Researching fundraising options Planning, organizing, and implementing fundraising events Contacting/following up on potential attendees, sponsors, and donors Creating marketing and promotional materials 8

9 Considerations with line 4880 Use strategies to pro-rate compensation expenses to fundraising Most staff perform various functions, including fundraising Should track time spent on fundraising activity to determine what percentage of compensation should be allocated to fundraising Use this ratio to pro-rate other expense categories Use % of compensation cost for fundraising to determine the % of occupancy costs (line 4850) that should be allocated to fundraising Note: If a charity incurred expenses for compensation of employees, they must also complete and submit Schedule 3, Compensation We have a handout with more specific information about this reporting line 9

10 Expense Line 4860: Professional and Consulting Fees Amounts paid for legal, accounting, and/or fundraising consulting fees are reported on this line According to Perspectives on Fundraising report, very few charities in Canada use external fundraisers (< 1%) If a charity does use an external fundraiser, it must fill out additional information on the T3010, including Schedule 4, Information about Fundraisers We have a handout with more specific information about this reporting line 10

11 Expense Line 4920: Other expenses Includes all other expenses not reported on lines Can include: Costs of producing and selling goods and services your charity does not use, produce, or sell in the context of its charitable work Premiums paid to maintain life-insurance policies that donors have given to your charity (must also be included on Line 5020 Fundraising) Costs of rental property your charity does not use to operate its charitable programs or administration (must also included on Line 5020 Fundraising) Note: This line is where your charity would report its expenses for the sale of goods and services for fundraising - E.g. cost of bingo and lottery prizes, cost of chocolate bars that were sold Your charity must provide a description of the expense on Line Helps CRA to understand what the expense is and provides an opportunity to educate your charity is the expense should have been allocated to another line.

12 Tracking other expense lines by function Expense reporting lines that might require separate tracking categories include: Line 4810: Line 4840: Line 4850: Line 4870: Travel and vehicle Office supplies and expenses Occupancy costs Education/training staff/volunteers Separate and track expenses in these reporting lines by function Expenses for charitable programs Expenses for administration/management Expenses for fundraising 12

13 Allocating fundraising expenses in other expense lines Separate tracking will ensure all fundraising expenses in other reporting line categories are recorded Required to accurately complete Line 5020, Total of all Fundraising Expenses Consider how to allocate expenses which apply to more than one function Must be fair and consistent Example: Office supplies might be used for charitable programs or administration and management as well as fundraising activities. Supplies strictly used for fundraising activities would be considered a fundraising expense (envelopes to mail invitations to an event) Supplies that are general (e.g. print cartridges) should be pro-rated based on some reasonable allocation percentage (e.g. 30% of photocopies are for fundraising, so this ratio could be used to allocate fundraising expenses for general office costs) 13

14 Line 5020: Total Fundraising Expenses This line is used to report the total of all fundraising expenses incurred by your charity for the fiscal year. Add up all expenses from lines 4800 to 4920 that are designated as fundraising and report this total on Line 5020 This reporting line is also used to calculate your charity s Fundraising Ratio. Fundraising Expenses (Line 5020)/ Fundraising Revenue (Lines Line 4630) Charities need to pay special attention to the accuracy of their reporting on line 5020 studies have found significant errors in the accuracy of the data reported on this line. We have a handout with more specific information about this reporting line 14

15 Considerations with Line 5020 Do you know what is considered a fundraising expense? Are you clear on what is a fundraising activity and thus what expenses must be considered fundraising expenses? Have you tracked fundraising expenses in each expense category so you can easily identify them? Have you included all fundraising expenses on your T3010? Have you included staff compensation costs for fundraising related activities? Have you allocated a percentage of multi-function activities as fundraising? Have you transferred the fundraising information from your Financial Statements to the T3010 accurately? Check accuracy of data transferred from your Financial Statement to the T3010 Ensure fundraising expenses on your Financial Statements are transferred to Line 5020 Total Fundraising Expenses 15