Optimizing Fundraising Compensation for Non-Profits: Guidelines and Best Practices

Non-profit organizations rely heavily on fundraising initiatives to generate the necessary funds to support their missions. An important aspect of these efforts is the allocation of funds for the compensation of fundraising professionals. This article explores best practices, guidelines, and considerations for non-profits and fundraising managers to ensure optimal efficiency and compliance with regulatory standards.

Introduction to Fundraising Compensation

When it comes to hiring fundraising professionals, the question of how much of the raised funds should be allocated to their salaries is a common concern. Generally, the best practice is not to pay or promise fundraisers a percentage of the funds they raise. This method can lead to conflicts of interest and may not promote sustainable growth and transparency.

Guidelines for Non-Profit Organizations in Canada

For Canadian non-profits, the Canada Revenue Agency (CRA) provides specific guidelines for fundraising and administrative expenses. According to the CRA, charities should keep their administrative expenses, including salaries, below 30% of total revenue. This figure serves as a benchmark to ensure efficient and ethical use of resources.

Using the CRA Benchmark for Optimal Allocation

It is crucial for charities to review their organizational expenditures, including salaries, and ensure they adhere to the 30% benchmark. Over 30% may result in audits and the need to justify the unbalanced revenue/expense ratio. However, the CRA recognizes that sometimes charities need to invest in long-term strategies or campaigns. In such cases, a temporary imbalance in the revenue/expense ratio may be justified if it leads to a return to the acceptable benchmark within a reasonable timeframe.

Accessing CRA Information Directly

Nonprofits seeking detailed information or clarification on CRA guidelines should not hesitate to contact the CRA directly. The CRA provides a toll-free number (1-800-267-2384) for inquiries and assistance. Direct communication with the CRA can ensure accurate and up-to-date information, avoiding potential misunderstandings and non-compliance.

Conclusion

In summary, the best approach for fundraising compensation is to ensure that it aligns with transparent and regulatory standards. Non-profit organizations should adhere to the 30% benchmark set by the CRA, while also considering the long-term strategic goals and justifications for any deviations.

By following these guidelines and staying informed about CRA updates, non-profits can maintain financial integrity and effectively manage their fundraising efforts.