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Transition from registered Society�to Charitable Status �Implications for Edmonton Bicycle Commuter’s Society (EBC)

Open House

June 16 2015

La Cite francophone 8627 91 ST NW

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Current Situation for EBC

At present, EBC is registered as a society in Alberta and is governed by the Societies Act
Regulations governing Societies are not onerous. An annual return must be filed with Corporate Registry
As a society, access to many grants, sponsorships and fundraising opportunities are limited

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EBC is Growing

Membership is now over 1700
Most clinics and classes are oversubscribed
Programing such as You Can Ride Two and The Spoke regularly have waiting lists
Current revenue sources (Casino, BikeWorks, grants and donations, class fees, rental revenues) are not sufficient to cover the cost of current operations

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EBC at a Crossroads

While EBC has sufficient cash to operate with negative cash flow for a period of time, this is not sustainable.
A balanced budget is essential: that means cutting costs or generating more revenues (or both)
Cutting costs would lead to reduced programming and services
Increasing revenues would fund the resources needed to meet the demands of the Edmonton cycling community

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Is Charitable Status the Answer?

EBC Board of Directors is evaluating charitable status:

Demand for EBC programming and services is growing and additional funding is required to expand our programs
All of our current programming and services meet charitable status guidelines

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Charitable Status: General Considerations

Increased regulatory obligations

Financial reporting
Eligible directors
Accountable to provide charitable services in strict accordance with organization’s charitable objects
Can donate funds only to other charities
Resources allocated to political activities restricted to 10%
Must advise CRA of any changes to mode of operation or legal structure

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General Considerations - continued

Once Charitable Status is conferred, the organization cannot subsequently “opt out” and return to being a society. The organization must cease all operations and donate any remaining assets to another registered charitable organization.

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General Considerations - continued

Registered Charities have access to more funding:

Grants offered by other charitable organizations and foundations may only be directed to other charities. Societies are not eligible
Registered Charities can issue tax receipts; this usually attracts more donors and larger donations
Registered Charities generally can host fund-raising events with greater success as participants often receive a tax benefit

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General Considerations - continued

Charitable Organizations generally benefit from the perception that their organization is doing good work.
Charities are eligible for a 50% rebate on GST/HST paid on purchased goods and services

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Specific Considerations for EBC as a Registered Charitable Organization

Increased regulatory obligations:

Financial reporting: EBC has a part time bookkeeper who already maintains most financial records needed to support charitable status. However additional record keeping and reporting activities would increase bookkeeping costs by several hundred dollars per month
As revenues grow, EBC should produce accountant prepared financial statements. This represents potential additional costs of over $4,000 per year for audited statements. Audited Statements are often required to apply for grants.
Eligible directors: Directors must certify that they have not been found guilty of any criminal offence in past history with charitable organizations
Accountable to provide charitable services in strict accordance with organization’s charitable objects: All of EBC’s current objects pass this test. However, changing EBC objects once charitable status is achieved is an involved process, subject to CRA review.

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Specific Considerations for EBC - continued

Can donate funds only to other charities: as a society, EBC can donate funds to anybody as approved by the EBC Board of Directors. However, as a charity, EBC can donate resources (e.g. help with event organization, operate a clinic, or provide volunteer mechanic service at an event) but no money can change hands.
Resources allocated to political activities restricted to 10% of revenues. As a society, EBC can spend as much or as little on political activities as it chooses. Currently EBC spends less than 2% of revenues on advocacy activities.
Must advise CRA of any changes to mode of operation or legal structure: Failure to do so could result in significant penalties

e.g. Edmonton Bike Coalition $1500

Political activities

A charity may engage in limited political activities, subject to the rules established by the Canada Revenue Agency (CRA), if they are:

connected to the charity's purpose;

subordinate to the charity's purpose;

not partisan political activities;

if the charity otherwise devotes substantially all of its resources to its charitable purposes.

Organizations must track political activity expenses for reporting on their annual T3010 filing. For more detailed information, review CRA's detailed technical policy on political activities.

What is a political activity?

According to the Canada Revenue Agency (CRA), an activity is considered to be political if it:

encourages the public to contact elected representatives or public officials, to urge them to retain, oppose, or change any law, policy, or decision in any jurisdiction;

communicates to the public that a law, policy, or decision of any level of government in any jurisdiction should be retained, opposed, or changed; or,

attempts to incite or organize the public to put pressure on elected representatives or public officials to retain, oppose, or change any law, policy, or decision of any level of government in any jurisdiction.

When is it not a political activity?

Some activities that may seem to be political are actually accepted by the Canada Revenue Agency (CRA) as charitable activities. These are:

Making representations. If you make a representation to an elected representative or public official, this is generally considered to be a charitable activity. You may need to register under the Lobbying Act if you are communicating with an elected representative or public official.

Releasing representations. Releasing the text of a representation is considered a charitable activity if the entire text is released and there is no explicit call to political action either in the text or in reference to the text. The entire representation can be released through a press release or on the charity’s website.

Public Awareness Activities. When a charity promotes public awareness about its work or an issue, and the activity is connected and subordinate to the charity's purpose, CRA considers this to be a charitable activity. The activity should also be based on a position that is well-reasoned, and not on false, inaccurate, or misleading information. Finally, although CRA accepts that public awareness material may have some emotional content, it is not acceptable to use primarily emotive material.

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Specific Considerations for EBC - continued

Once Charitable Status is conferred, the organization cannot subsequently “opt out” and return to being a society. The organization must cease all operations and donate any remaining assets to another registered charitable organization: This would require a change to the EBC Bylaws to name a “donee” organization in the event that EBC ceases operations. This must be proposed and approved at the EBC Annual General Meeting

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Specific Considerations for EBC - continued

Registered Charities have access to more funding:

Grants offered by other charitable organizations and foundations may only be directed to other charities. Societies are not eligible: While difficult to predict exactly how much additional grant revenues EBC would receive, there are many local and provincial grants (Telus, Edmonton Community Foundation, RBC, TD Bank) each worth 10,000 to 20,000 and up.

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Specific Considerations for EBC - continued

Registered Charities can issue tax receipts; this usually attracts more donors and larger donations: currently, most donations are in the $20 - $100 range. Promoting tax receipts for charitable donations on our website would likely double the value of donations, from both individual donors as well as one-time non-grant corporate donations, an increase of about $10,000 using averages from the past several years

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Specific Considerations for EBC - continued

Registered Charities generally can host fundraising events with greater success as participants often receive a tax benefit: This is perhaps the greatest benefit of charitable status as not only is it a means to increase revenues, it also can also significantly raise awareness of the organization. This could boost membership and increase use of our various programs including BikeWorks, further increasing EBC revenues.

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Specific Considerations for EBC - continued

Charitable Organizations generally benefit from the perception that their organization is doing good work. People often deem charitable organizations as more trustworthy and more accountable that donations are used for the intended purpose. This would like contribute to an increase in donations
Charities are eligible for a 50% rebate on GST/HST paid on purchased goods and services: based on 2014 results, this would yield a rebate of $500 - $1,000

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Conclusion

EBC’s mandate is to provide services, programs, education and civic representation to make everyday cycling in Edmonton safe, widespread and accessible to people of all comfort levels
EBC’s growth in membership and increased demand for our services demonstrates that our mandate is relevant to the Edmonton community
To deliver on our mandate, EBC needs more revenues
Transitioning from a not-for-profit society to a charitable organization appears to be a viable option to achieve this goal

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Discussion and Feedback

Questions about charitable status and implications (risks vs. benefits) for EBC
Other options to cut costs/increase revenues that the board should consider