F7. Is there a limit on how much our registered charity can spend on fundraising?
Yes, there certainly is. Your charity's stated purpose when you registered must always be your main focus of time and resources. To ensure that this emphasis is maintained, you must calculate your "disbursement quota" each year. This calculation determines how much of your receipted donations you must spend on your charitable purpose in the coming year and at the same time, how much you must limit your spending to on fundraising, administrative, and other indirect costs.
The disbursement quota includes two types of spending requirements based on:
- the receipted income (donations) during a fiscal year
- the assets the charity holds that are not used in its charitable activities.
The disbursement quota balance regarding receipted income is 80 to 20 per cent:
- at least 80 per cent must be spent on charitable expenditures
- no more than 20 per cent can be spent on non-charitable expenditures, including administrative and fundraising costs
Regarding the charity’s assets, the charity needs to spend annually
- at least 3.5 per cent of the average value of the assets that the charity holds that are not used for charitable activities.
Fundraising expenditures are ineligible for use toward meeting disbursement quota obligations. Spending excessive amounts on fundraising could result in your charity not meeting its disbursement quota. See Disbursement Quota FAQs.
A registered charity cannot engage in fundraising as a primary activity. Devoting a substantial portion of your revenue to fundraising activities also puts your registered status in jeopardy. Making fundraising a primary activity and/or spending most of your revenue on fundraising could potentially lose you your ability to function as a registered charity.
Registered charities that have major shortfalls in their charitable spending over a number of years risk losing their charitable status. They also risk losing their status if fundraising costs are excessive, particularly if the charity is not able to show that such costs would decline in future years.
Information on the Annual spending requirement (disbursement quota)