Larger Text
Smaller Text
PrintFrequently Asked Questions
Index of Questions
3. Notification of Donations Recieved
4. Transfer of Donations Funds
6. Donor Recognition and Donor Clubs
8. Can Cheques that do not identify clearly the actual donor be tax receipted
9. Honorariums
11. Can We Transfer donations to Another Organization
1. Donations Processing
Q: I will be soliciting potential donors. Some individuals will receive a brochure in the mail, while others will receive face-to-face meetings. Why would I need pledge cards?
A: There are a number of reasons to use pledge cards:
- Advancement Services can preprint the cards with the most up to date name and address information. These cards are then ready to fit into a standard business window envelope for mailing.
- The pledge cards have been designed to provide the donor with alternative methods of payment, such as, cheque, monthly pre-authorized chequing from her bank account, or credit card processing. Spaces are available for all necessary information so that the transaction can be properly processed once it is returned to Advancement Services.
- The pledge card has an "office use" box into which we add codes to tell us the appeal related to this gift and the allocation to which the funds should go. This enables you to measure the success of your solicitation, and ensures the donation is directed to the correct project.
- The identification number on the pledge card assures us that we issue the tax receipt to the correct donor.
- If your donor works for a company that matches charitable donations, that could double the gift, hence it could increase your success rate. The pledge card reminds the donor of this possibility.
- The back of the pledge card informs donors about our gift club levels. When a donor is considering the value of his gift, the option of becoming a member of a gift club may increase the gift amount.
- Tick boxes on the back of the card permit donors to seek more information about alumni branch involvement and planned giving opportunities. All of this information enables University Advancement staff avenues for future contact with this donor to help strengthen our developing relationship.
- The pledge card encourages the donor to give us new or updated business or address information. This helps keep our database current
- Many of the above reasons for using pledge cards would appear to be of most benefit to McMaster University, however, a more important reason for using pledge cards is for the donor's benefit. Donors like to include a document with their cheque which specifies where and to whom they are sending their money. Pledge cards offer comfort to donors that their cheque will find its way to the correct person and to the correct purpose. A satisfied donor is a repeat donor.
- Please supply an Advancement Services return envelope with the pledge card, so it is mailed directly to us. This avoids stray cheques and ensures the donor receives a charitable receipt promptly.
2. Tax Receipting
Q: As my department's Secretary, I have forwarded donations to Advancement Services when they have been sent to me. Why does Donations staff sometimes call me and ask so many questions to determine if it really is a gift? Shouldn't they just be happy to get the gift?
A: University Advancement is always pleased to accept gifts from the public. However, we never want to process as a gift any item that is not a gift by Canada Revenue Agency's (CRA) definition. The CRA takes very seriously the issuance of any and all tax receipts. Every receipt issued represents a deduction from the total of all income taxes owed and collected. CRA is vigilant in its audit of charitable receipt use. It is well known that CRA can and does redraw the charitable registration privileges of those charities that abuse this privilege. It may be less well known that CRA's more common practice is to disallow the charitable deduction on a taxpayer's income tax submission.
Except for cases of intentional fraud, CRA has seven years to audit any Canadian income tax submission. The Income Tax Act specifies that it is each taxpayer's responsibility to include only those deductions to income, which are valid. If the taxpayer is in possession of a document that provides an invalid deduction to income, it is the taxpayer's responsibility not to use it. All additional tax, penalties and interest due to CRA from the inappropriate use of such deductions is the sole responsibility of the taxpayer.
As an example, if a person's income-tax submission is audited five years later and the auditor disallows a charitable receipt, that year's submission must be revised. The increased tax payable, the penalty for using an invalid deduction, and the interest on both amounts for the five years compounded is charged to the taxpayer.
Donors expect that we know the rules and that we issue only valid tax receipts. If McMaster participated in the scenario described above, it would jeopardize our reputation, seriously damage or destroy any relationship we had with this donor and impair our ability to develop new relationships with the many people who would invariably hear of the incident.
Donations staff review every donation processed. If information is lacking or inconsistent, so that it is questionable whether the transaction qualifies for a charitable tax receipt, clarification is sought. It is our responsibility to make inquiries of any McMaster University employees who may be able to provide the necessary answers to clear the transaction. Once staff is satisfied that the transaction is a donation, the receipt will be quickly processed. We ask those questions in order to protect our donors.
3. Notification of Donations Received
Q: Donations to my project are being mailed directly to Advancement Services, how will I know who has sent in money and how much?
A: Specific Decentralized Advancement Officers (DAO) manage the fundraising activities for each faculty. On a monthly basis, after Advancement Services has completed the previous month's financial records, the DAO prepares that area's Donations Notifications for departmental circulation. These notifications indicate the donations received during the month, including the name and address of the donor and the donation amount. The Dean, Chair or Director receiving these notifications can use them, to send a secondary acknowledgement of the gift to the donor, to account for future funds that will become available, or to begin the process to have the funds transferred to the unit.
If the notification recipient wishes to have the funds transferred, please read the conditions for transfer shown on the notification, or check the Release of Monetary Donations section of the Charitable Giving Policy.
When reading the notifications, it should be noted that some donors make monthly donations through payroll deductions, pre-authorized chequing payments or automatic credit card deductions. To save you from thanking them for each payment, on the notification we will show you only their initial pledge set up and the first payment.
4. Transfer of Donation Funds
Q: Our department has been given a gift that has gone to Advancement Services, how do we get the money into our account?
A: If you have received the Donation Notification for this gift, the conditions for transfer are listed on the form. Also, you may check the Release of Monetary Donations section of the Charitable Giving Policy.
Normal practice is to send all Deans and Directors an Annual Transfer Form in April of each year for a May 1st transfer of all funds remaining in the accounts from the previous calendar year. Trust funds are transferred monthly. If there is an immediate expenditure contact us at the extension number listed on the notification and we will e-mail a transfer form to you.
When you receive the transfer form, we ask that you give us an account number to transfer to if the account number section is blank. Then sign the form and return it to us. Signing this form indicates that you will spend the money according to the donor's wishes. Any Donations Audit may require departmental evidence that the funds were spent accordingly.
We process transfer journal entries on the 15th of each month. Any requests received after that date, are done in the next month.
5. Holding an Event
Q: A group of individuals have decided that we want to hold an event to raise funds for our favourite project. Can the participants to the event get a tax receipt for the donation portion of their ticket?
A: That may be possible. If you are considering holding any type of event check out Guidelines to Holding an Event. This document sets out all the information you will need to know in laymen's terms, with references to the relevant CRA links.
6. Donor Recognition and Donor Clubs
Q: Does the university recognize donors who make donations to McMaster University?
A: The University appreciates the interest and support it receives from alumni, friends, corporations and foundations. That support comes in many forms such as participation in university sponsored events, volunteering of one's time and financial contributions. Support in all its forms are recognized in a variety of Recognition Events. Donors to the University are recognized in three ways.
- The Annual Report publicly acknowledges donors for their support. Donors are grouped into donation levels so as not to specifically document any particular donation amount. Any donor may elect to request anonymity if preferred.
- The President's Club invites our more generous donors to join us in celebrating their strong support of McMaster activities. For those persons making annual contributions in one of the categories below, we recognize them as a member of the various Club levels:
Annual Donations of: President's Club Level: $10,000 and up Chancellor's Circle $5,000 to $9,999 Laureate $2,500 to $4,999 Scholar $1,000 to $2,499 Patron $500 to $999 Member $250 to $499 Gilmour Society (6-10 yrs since graduation) $100 to $499 Gilmour Society (1-5 yrs since graduation)
- Naming Opportunities are available for exceptionally generous gifts to the university. The Development Officer responsible for Donor Stewardship is always ready to discuss this option with any interested person. The naming opportunities offered will be determined by availability.
7. Third Party Cheques
Q: What is a third party cheque and can it be processed to make a donation?
A: Third party cheques are cheques that are payable to any type of entity - an individual or corporation and that entity wants to use the cheque to give the funds to pass onto another entity.
In the past, the payee would sign the back of the cheque and add "to be paid to (a third entity)". Many years ago all Canadian banks stopped accepting such cheques. Thus, McMaster is not permitted to accept such a cheque. All cheques to be cashed by McMaster must have only McMaster University's name noted as the payee. If a donor wishes to pass along a cheque he/she received, the donor must cash the cheque that is in his/her name and write a cheque on a personal bank account with the payee as McMaster University.
8. Can Cheques that do not identify clearly the actual donor be tax receipted?
A: CRA requires that the charity must be confident that in any donation transaction, the true donor's identity is known. If a cheque is presented that does not have any name, address or legible signature on it to provide assurance of whose bank account is providing the funds, the university must be provided with additional information that will identify the true donor. Examples of information that can provide clarification are:
- A copy of the bank statement that indicates the account number, name and address, the debits, credits and balances could be blacked out to maintain confidentiality.
- A signed statement from the donor that stipulates the account number, bank and branch, the name of the account owner and the owner's address.
9. Honorariums
Q: What is an honorarium and is it tax receiptable?
A: McMaster employees, graduates or friends of the university, as knowledgeable experts in their field, are asked to speak or participate in workshops, lectures or information sessions. Although the speaker is not hired to perform at the engagement, the speaker is sometimes provided with a cash gift for attending. The Canada Revenue Agency considers acceptance of these payments as income and therefore the payments must be included in the speaker's income tax filing for that year. Speakers often do not want to complicate their tax filing with these small sums so they ask that the honorarium be donated in their name to a charity. McMaster is the recipient of such donations.
As the number of these transactions is minimal per year, they are handled on a case by case basis. There are two ways of handling the transaction. In either case the organization or corporation providing the honorarium is actually paying a "fee for services rendered" and therefore the payment should not be construed as a gift from that organization. For McMaster's record keeping, the organization is linked to the transaction by a "zero dollar associated credit". The speaker is contacted by either Advancement Services or Development staff to explain the tax implications of receiving a tax receipt for the donation (requirement to claim the income). If the donor agrees that the income will be claimed, then the speaker receives both the legal and associated amount of the gift.
If the speaker wants to waive claiming the income, then the speaker is relinquishing any rights to direct the contribution and no gift has been given. In this case, the contribution is processed with legal credit going on our "Anonymous" data Record, against which no tax receipt is produced. The speaker receives the associated credit for the value of the payment. Associated credit entries on a person's record count towards donor club membership.
If the speaker is unavailable to discuss the options and there is no indication on the correspondence with the cheque, then the former option is selected. If the speaker later contacts the office to inquiry about the tax receipt the options can be explained at that time. Should the speaker opt for claiming the income and receiving the tax receipt, the legal credit can be moved to the donor's record and a tax receipt generated with the date of the original transaction.
10. Donations - Alcohol & Tobacco Companies
Q: Does the university accept donations from alcohol and tobacco companies?
A: As an appendix within the University's Alcohol Policy Appendix F notes:
APPENDIX F - GUIDELINES FOR THE RESPONSIBLE PROMOTION AND/OR MARKETING OF ALCOHOLIC BEVERAGES ON CAMPUSMcMaster Policies
All university policies are listed and available for review on McMaster's web site.
Related policies include McMaster's code of advertising which stipulates that McMaster University does not accept advertising or donations from liquor or tobacco manufacturers. Additionally, "No university, nor any of its agents, will accept gifts of liquor or promotional items from manufacturers, except as permitted by the regulations of the Liquor Licence Act and Liquor Licence Board of Ontario directives." (President's Executive Committee, 1990)
11. Can We Transfer donations to Another Organization?
Q: Can we transfer donations to another organization?
A: The only way to transfer to another charity is by way of a transfer to a qualified donee. That requires a cheque cut and a letter to that charity notifying them that we are by way of this cheque transferring to a "qualified donee". Both Finance and Donations Coordinator must report this on the T3010 Annual Return.
12. Can We Tax Receipt Donations of Software?
Q: Can We Tax Receipt Donations of Software?
A: We can only tax receipt software if we get the source code and are cleared to be able to modify it as we want. As that is not usual, we cannot tax receipt software.
13. Can a researcher or other employee of McMaster donate his/her own research or other account on which the donor has signing authority
Q: Can a researcher or other employee of McMaster donate his/her own research or other account on which the donor has signing authority?
A: CRA does not permit donors to have direct access to the spending of their own donations. The potential exists that the donor could use the funds to provide a personal benefit for one's self. If a McMaster employee wishes to donate to a purpose which is under his/her personal control, that donation should be directed to a supervisor's account so that the expenditure of the donation can be monitored and authorized by that supervisor, thus removing any control by the donor. Prior to making the donation, the donor should discuss the purpose and donor's expectations regarding the use of the donation to ensure the supervisor is in agreement with how the funds will be spent.
14. What is the difference between donor recognition, sponsorship and the use of corporate Logos in recognition of a donation
Q: What is the difference between donor recognition, sponsorship and the use of corporate Logos in recognition of a donation?
A: Charities like to thank donors by publishing their names in a public way. Plaques listing donor names, designated areas within a room or building can be named after a donor. These methods or recognition are acceptable to CRA, as they are lists of names or plaques with a name, all in the same standard font size. These lists often are produced only or primarily for individuals who make gifts to the university. When corporations, organization or foundations make significant gifts they frequently want to their name displayed with the logo and font patented for their sole use. CRA claims that public placement of an organization's logo constitutes advertising. Advertising is expensive and if a corporation can make a donation, receive a tax receipt and then get an undetermined value back in free advertising, they have received a benefit. Whenever, a benefit or advantage is gained by a contributor and its value cannot be quantified, no tax receipt can be issued.
In such cases CRA suggests that the charity accept the contribution, recognize it as a sponsorship and offer the corporation a Business Receipt. The Business Receipt can be used by the corporation against its sales and advertising expense income tax deduction section. Often the tax advantage is equal or better than that received from a charitable tax receipt.