Understanding Charities’ Fundraising Costs

When it comes to registered charities, a common question among donors is how much they spend on fundraising and administration. The answer isn’t straightforward; some charities indeed need to spend more than others on these areas, but it’s essential to understand the context and reasoning behind these expenditures.

No one charity is exactly the same. Similarly, their fundraising spending differs due to various factors, including the size of an organization and the type of work they do. Here’s a closer look at charity fundraising expenses and administrative costs and the role you play in influencing them as a donor.

Transparency in charity spending

In Canada, transparency in charitable spending is mandatory. All Canadian registered charities have to publicly share their financial information in annual filings to the Canada Revenue Agency (CRA). This includes details on how much they spend on fundraising, management, and administration. You can easily access some of this data through Charitable Impact‘s free Impact Account. By visiting a charity’s profile page through the account, you can see their yearly expenses, revenues, and admin costs, and gain a clearer picture of how your donations are being used.

What influences charity fundraising and admin costs?

Here are some of the factors that may influence a charity’s spending on fundraising and administration:

• New vs. established charities: New charities may need to spend more on marketing and outreach to attract donors than larger, more established charities with a dedicated donor base, such as religious institutions like churches, mosques, or temples.
• Type of charity: Charities addressing urgent or widespread issues, such as health concerns, may spend more on fundraising compared to community-based organizations.
• Fundraising methods: The methods used for fundraising also impact costs. For example, direct mail campaigns, events, and online advertising all come with different expense levels.

CRA’s guidelines on charity fundraising costs

When it comes to fundraising and admin expenses for Canadian registered charities, the CRA provides detailed guidelines on what can be considered acceptable levels. Here are some key takeaways from CRA’s policies:

Fundraising ratios

The CRA measures whether a charity’s fundraising expenditures are reasonable by calculating its fundraising ratio, which is gathered by dividing fundraising expenditures by fundraising revenue. In general, this ratio can help the CRA determine if a charity might be spending too much and require further scrutiny.

• Under 35%: Usually, a fundraising ratio under 35% does not raise concerns with the CRA. Charities within this range are considered to be managing their fundraising expenses effectively.
• 35% and above: When a charity’s fundraising ratio reaches or exceeds 35%, the CRA may investigate further to determine if the charity has consistently high fundraising costs over several years. Higher ratios could indicate issues with how funds are being spent.
• Above 70%: A fundraising ratio exceeding 70% is a red flag. In such cases, the CRA requires charities to provide a detailed explanation and justification for their high expenditure levels. This is to ensure they’re not engaged in unacceptable fundraising practices, such as providing more than incidental private benefits or engaging in deceptive practices.

The role you play in influencing charity fundraising costs

As a donor, you play an important role in influencing fundraising costs. If charities have to actively seek out donations, their fundraising and admin expenses will naturally be higher. By becoming a proactive donor, you can help reduce these costs. Encouraging others to do the same can further minimize the need for extensive fundraising efforts.

Here are some tips on how you can become a proactive donor:

• Regular donations or scheduled gifts: Set up regular donations or monthly scheduled gifts to your preferred charities through planned giving or using an Impact Account. This helps them plan their budgets and reduces the need for extensive fundraising campaigns.
• Spread the word: Advocate for the causes you support and encourage your network to donate proactively.
• Research and engage: Use resources like Charitable Impact to research charities and understand their financial practices. Engage with charities to learn more about their needs and how you can support them effectively.

Make a meaningful impact by donating proactively 

Understanding how much charities spend on fundraising and administration can be helpful when it comes to making informed giving decisions. By donating proactively and intentionally, you enable charities to concentrate on their missions rather than on raising funds. To explore any Canadian registered charity’s past revenues and expenses, visit our charity profile list. You can also check out our online resources to learn more about planned giving and create a personalized giving strategy to start making a difference today.