"Cultivating trust through ethical fundraising practices is the cornerstone of sustainable philanthropy, ensuring that every contribution makes a meaningful impact towards our shared vision of a better world." - Nexus Elevate Nonprofit Solutions

In the realm of philanthropy and nonprofit endeavors, ethical fundraising practices serve as the bedrock upon which trust and credibility are built. For nonprofit organizations in Canada, adhering to a robust code of ethics not only fosters donor confidence but also ensures the integrity of the sector as a whole. In this blog post, let’s dive into the essential elements of ethical fundraising in Canada, drawing from the guidelines provided by the Association of Fundraising Professionals (AFP) and Canada Revenue Agency (CRA), while also exploring additional considerations crucial for nonprofit professionals.

The Foundation: AFP's Code of Ethical Principles

The Association of Fundraising Professionals (AFP) lays down a comprehensive framework of ethical principles guiding fundraising professionals worldwide. In Canada, as elsewhere,  these principles form the cornerstone of ethical fundraising practices.

Here are some key tenets:

• Mission Alignment: Fundraising efforts must not only align with the organization's mission - ensuring that donors' contributions are directed towards fulfilling the stated objectives - but also uphold the highest standards of ethical conduct. This includes ensuring that fundraising activities are consistent with the organization's values and objectives.

• Donor Privacy and Confidentiality: AFP emphasizes the importance of respecting donor privacy and confidentiality. Fundraising professionals must handle donor information with the utmost care and discretion, ensuring that it is not shared or used for purposes beyond those consented to by the donor. Respecting the privacy and confidentiality of donors is paramount and this needs to be clearly stated to donors how this is done at your organization. Personal information should be handled with care and used only for the purposes consented to by the donor.

• Transparency and Accountability: Transparency in fundraising practices is paramount. AFP recommends that organizations provide clear and accurate information to donors regarding how their contributions will be used and the impact they will have. Fundraisers should also be accountable for their actions and decisions, openly addressing any concerns or inquiries from donors. Nonprofits are accountable to their donors, beneficiaries, and the public. Transparency in financial reporting and program outcomes builds trust and confidence. Donors and the community should have easy access to your financial and impact reporting.

• Fair and Respectful Treatment of Donors: AFP's code emphasizes the need for fundraisers to treat donors with fairness, honesty, integrity and respect. This includes refraining from using undue pressure tactics or manipulative techniques to solicit donations. Fundraisers should strive to build genuine relationships with donors based on trust and mutual respect. It is also important to ensure that donors are fully informed about the impact of their contributions.

• Avoidance of Conflicts of Interest: Fundraising professionals must act in the best interests of their organizations and avoid conflicts of interest that may compromise their integrity or impartiality.  This includes disclosing any personal or professional relationships that could influence fundraising decisions or actions.

• Compensation and Commission: AFP explicitly states that fundraising professionals should not accept compensation or commissions based on a percentage of funds raised or enter into contracts that are based on a percentage of funds raised. This practice, known as percentage-based compensation, is considered unethical as it can incentivize fundraisers to prioritize their own financial gain over the interests of the organization and its donors. This statement encapsulates AFP's stance on percentage-based compensation and aligns with the broader ethical principles of the organization: “This practice is inconsistent with the integrity of the fundraising process and can create conflicts of interest by incentivizing fundraisers to prioritize personal financial gain over the best interests of the organization and its donors.”

Legal Compliance: Navigating Canada Revenue Agency (CRA) Guidelines

In addition to ethical principles, nonprofit organizations in Canada must also adhere to specific fundraising regulations outlined by the Canada Revenue Agency (CRA).

Here are some key CRA guidelines:

• Registered Charity Status: Nonprofits must adhere to CRA regulations to maintain their registered charity status. This includes ensuring that fundraising activities are conducted in compliance with tax laws and regulations, such as issuing accurate donation receipts and using funds for charitable purposes as defined by the Income Tax Act. Nonprofits must maintain their registered charity status by complying with CRA regulations regarding fundraising activities, including the issuance of tax receipts and the allocation of funds for charitable purposes.

• Use of Funds: CRA requires nonprofits to allocate a significant portion of their resources towards charitable activities rather than administrative or fundraising expenses. This ensures that donations are used effectively to support the organization's mission and programs. Donations must be used for charitable purposes as defined by the Income Tax Act.

• Receipting Requirements: Proper documentation and issuance of donation receipts are essential for compliance with CRA guidelines. Receipts must contain accurate information and adhere to prescribed formats to ensure their validity for tax purposes. Proper documentation and issuance of donation receipts are essential for compliance with CRA guidelines. There is detailed information and some formulas that can help nonprofits issue receipts correctly, on the CRA website at https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/operating-a-registered-charity/fundraising-activities-charities-other-qualified-donees.html

• Solicitation and Reporting: Nonprofits engaging in fundraising activities must adhere to regulations regarding solicitation practices, including the disclosure of fundraising costs and the reporting of financial information to CRA. This includes disclosing fundraising costs and ensuring that financial information is accurately reported in annual filings.

Additional Considerations for Ethical Fundraising

Beyond the AFP code and CRA regulations, nonprofit professionals in Canada should consider the following aspects to uphold ethical standards:

• Donor Stewardship: Building long-term relationships with donors through effective stewardship practices fosters loyalty and ongoing support for the organization's mission.

• Diversity, Equity, and Inclusion: Embracing diversity, equity, and inclusion principles in fundraising ensures that all individuals are treated with fairness and respect, and that fundraising efforts are inclusive of diverse communities.

• Professional Development: Continuous learning and professional development are essential for fundraising professionals to stay abreast of emerging trends, best practices, and ethical considerations in the field.

• Monitoring and Evaluation: Regular monitoring and evaluation of fundraising activities help identify areas for improvement and ensure alignment with ethical standards and organizational goals.

Summing up!

Ethical fundraising is not merely a legal obligation but a moral imperative for nonprofit organizations in Canada. By adhering to the principles outlined by the Association of Fundraising Professionals, complying with Canada Revenue Agency regulations, and embracing additional considerations, fundraising professionals can uphold the highest standards of integrity, transparency, and accountability. In doing so, they not only honor the trust of their donors and stakeholders but also contribute to the collective advancement of the nonprofit sector towards its noble objectives.

Author: Wendy Kotorynski

https://www.nexuselevatenonprofitsolutions.com