The entire idea behind a charity is that it performs an unequivocal, objectively righteous task. But to fulfill that mission, it must operate within the legal requirements and regulations of its country. A charity functions to perform tasks for or distribute donations to those who need them most. Whether it’s providing services or distributing donations, it relies on the support of volunteers to make its efforts effective.
Whether people are willing to allocate hours of their time to charity work or others donate goods, a charity needs individuals who want to participate in its righteous work to function.
In Canada, charities operate under a complex regulatory environment. Organizations must adhere to evolving legal standards, reporting rules, and governance expectations to sustain their operations and maintain public trust. For all the good intentions that go into creating a charity, the only way for such a venture to truly succeed is to adhere to the legal necessities surrounding it.
As such, Canadian charity registration is essential before doing any substantial work.
What Regulatory Compliance Means for Canadian Charities
In many ways, charities are similar to churches. Theoretically, both aim to do good for the community and assist those who need it most. While that is a noble intention on both fronts, execution becomes considerably more complex. Forming a charity as a bona fide institution requires those running it to adhere to compliance obligations laid out by the Canada Revenue Agency (CRA), which can become quite nuanced.
The CRA draws a definite distinction between charities and non-profit organizations. So, even though a charity technically is a non-profit organization, it must adhere to an entirely different set of standards under the CRA’s regulations. For example, a charity must spend a minimum amount on its charitable activities or as gifts to qualified donors. Conversely, a non-profit organization (which the CRA generally categorizes as akin to a club, association, or society) has no such spending requirements for tax purposes.
With that in mind, charities in Canada must understand the requirements of their operations to remain compliant with CRA rules and regulations.
Donors Are the Lifeblood of Charities
While there are several legal reasons for charities to maintain their status as officially regulated by the CRA, the greatest inspiration for many is to nurture relationships with their most valuable assets: donors.
In numerous ways, a charity can be considered a wealth distribution system. People longing to give back to their community through donations or volunteer services can visit a charity and get the opportunity to connect with individuals who will benefit from such work.
This is an essential service for those in need who directly benefit from the charity work and the donors. Studies have consistently demonstrated that people who yearn to give back to those less fortunate than themselves experience a release of endorphins in the brain that evoke joy and satisfaction. People long to give back; it’s a basic human instinct rooted in the desire for a strong community.
However, if a charity is not officially verified or regulated by the government, many donors will become wary of giving their money, goods, or time to that charity. In this way, charities must adhere to evolving legal standards to maintain the trust of their donors and efficiently give back to the community.
The Endgame of Charity
Charities operate with noble intentions, but to turn that vision into a reality, they must adhere to the legal regulations of the area where they operate. Without the government’s official verification, charities fall into legal trouble and lose their ability to make the changes they initially set out to achieve within their community.