CRA Compliance

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The proverb “No good deed goes unpunished” is one the charity space is all too familiar with. The rules and regulations around supporting your mission are seemingly never-ending.

One minute you are just trying to fundraise so you can support your mission, the next you get caught up in one of the legal pitfalls that can accompany a cause marketing campaign.

What is cause marketing?

You have probably encountered an advertisement offering to donate a portion of proceeds from sales of small items to charity, or had a cashier at a LCBO ask you if you want to donate to a certain charity at checkout.

This type of fundraising—commonly called “cause marketing”—is known as a “commercial co-venture” arrangement in the legal field and can present invisible pitfalls for the unwary.

Cause marketing is projected to be a $3 billion industry for 2019.  Among North American consumers, 56 percent say they have bought a charity-related product in the last 12 months; and those numbers are even higher among millennials (66 percent).  Consumers are about 5-10 percent more likely to purchase a product than they were to make an outright donation.

Given these numbers, any charity would logically conclude that partnering with a for-profit business in such an arrangement would be an excellent opportunity.

However, there is some risk to the charity.

Use of its name, branding and/or logo without the proper permissions in place could cause the charity to lose its rights; worse, even with proper permissions, if the for-profit partner were to suffer a public embarrassment or setback, it could reflect poorly on charity too.

Further, since the for-profit will get a tax break for its “donation” to the charity through the sales arrangement, an unscrupulous business could seek to exploit a charity through an unfair distribution system or by trying to get free advertising out of the deal.

What’s a charity to do?

1.      Some will blow off the repercussions and go forward anyways;

2.      Some will get paralyzed by all the pitfalls and not run a campaign at all;

We recommend a 3rd option. Get competent accounting and legal advice before getting too far into campaign planning. It’s better to work on the issues well in advance of any campaigns you have planned for 2019 and beyond.

A charity looking to enter into a cause marketing or commercial co-venture situation should seek competent accounting and legal advice first.

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