Transcript

So, our first set of issues that I'm going to enumerate here are, first we have donation receipts, books and records that are not complete and/or books and records that are not accurate and/or incomplete. Failure to file the charity information return, that's the T-3010, or T-3010 errors or omission.

Moving on to the next slide and jumping right into first of all, our donation receipts. The Receipting deficiencies, with respect to the donation receipts, are primarily discovered through audits. Charities must abide by the rules that relate to the issuing of official donation receipts and receipts that are missing information may be disallowed. There are 15 elements generally required on the receipt and often a number of these elements are missing. If you want to know which are the elements, I encourage you -- take a look at our website. We have the various elements that are generally required on receipts and we also have, on our website, sample receipts. So if you're a charity and you're running out of receipts or looking for new receipts, we have sample receipts available on the website that have all the required elements. Generally, they're broken into gifts of cash receipts and gifts in kind receipts. The gift in kind receipt, I want to point that out, because gifts in kind is one of the concerns that we often see is fair market value. Some charities are not doing a good enough job assessing the fair market value on gifts in kind. When issuing a receipt for gifts in kind, you must be able to establish the fair market value of the item. You may also, depending on the gift, have to determine the deemed fair market value of that gift. And, so what we're trying to do here is to encourage charities to take a more active role in determining the fair market value of the items they receive and then receipt. Importantly, simply taking the donor's word or the donor's recommendation for the value of the gift -- you should try to avoid that. Charities should maintain documentation to support the fair market value that they receive and here's a really important point that I want to stress. I see this often when I'm on the road shows is if you cannot determine the fair market value of the gift, then no receipt should be issued. Okay, I'll repeat that, if you cannot determine the fair market value of the item, then no receipt should be issued. Additionally, for those of you who have been receipting for many years, you're probably aware that charities cannot issue receipt for services, as services are not tangible property, they don't qualify for a charitable tax receipt.

As regards receipting errors, there are two different financial penalties which apply. The first is incorrect information. Initially, 5% penalty will apply to the eligible amount recorded on the receipt and for subsequent infractions; a 10% penalty will apply on the eligible amount of the receipt. That is the first type that is incorrect information. The second type is false information. As regards to that, there could be 125% penalty for the recorded amount on the receipt. Those are your two penalties for receipting errors; incorrect information and false information.

Moving on to the next compliance issue which is books and records that are not complete, or not accurate or incomplete. Inadequate books and records can range from minor oversights on the part of the charity to very serious infractions, including records that are deliberately altered, destroyed, hidden or concealed in order to conceal non-compliance issues. A registered charity must keep adequate books and records in either French or English at an address located in Canada and, importantly, you must notify the CRA, the Charities Directorate of your location because in order for us to inspect the books and records, they must be located at an address here in Canada and, of course, we must therefore be aware of where the charity's address is. Failure to keep books and records may lead to suspension of tax receipting privileges.

While not all inclusive, the following list of documents that I'll give you must be maintained for charities, books and records. First, copies of official donation receipts. Second, all records concerning ten years gifts, meeting minutes of the directors, trustees or executives. Fourth, meeting minutes of the members. All governing documents and by-laws. General ledgers or other books of final entry containing summaries of year-to-year transactions and the vouchers and accounts necessary to verify those entries. Financial statements, source documents, and copies of T-3010s. Now, if I said those kind of quickly, not to worry. I'm going to refer you to our website. And on our website, it's going to have that list there. But, I just want to make people aware of that list of documents that must kept as part of the books and records at a location in Canada for the registered charity. As well, on the website, when you go there, you'll be able to verify the retention, destruction period for those books and records and as you'll be aware, when you take a look, that retention/destruction period does differ depending on the type of record requested.

Moving on to our next slide, the failure to file a charity information return. This continues to be one of our greatest compliance issues. Registered charities are required to file a T-3010 with financial statements and applicable schedules six months from their fiscal period end. Despite several reminders to file from the CRA, that is, we do send out continual reminders to charities in order to ensure that they file a return, but despite this, almost 600 charities had their registration revoked for failure to file in a 2009-2010 fiscal period. Most of these organizations subsequently applied for re-registration. As you can imagine, that created a huge workload within the Charities Directorate. So, the issue is serious enough that we've implemented a $500 penalty applicable at the time of application for re-registration. The number of revocations for failure to file decreased as a result, for example in 2007 we had 1673 revocations due to failure to file. However, 600 charities still failing to file their T-3010 is still a problem so we encourage you, do ensure that you have your address up to date with us so that we can send you and that you're going to receive those reminders and we do encourage you to try to get those books and records in order so that you can file your T-3010 on time with us.

Moving on to the next slide which is T-3010 errors and omissions. Following the T-3010 of course, is the first half of the battle, if you will. But submitting a T-3010 with incomplete or inaccurate information obviously diminishes the usefulness of that information provided. The public and the CRA use this information to establish the good works or to understand what good works the charity is doing. Common errors on the T-3010 that we've seen include: charities often leave the financial section of the T-3010 blank, indicating that the readers should see the attached financial statements. However, these financial statements are not posted on the website, so what you should be doing is submitting or filling out the T-3010 with the proper financial information. If you're just submitting the attached financial statements, the problem is, of course, those financial statements don't get uploaded to the website and consequently donors, when they go to our website, to check out your charity, they're not going to be able to see what monies were spent on the charity. In fact, it's going to look as though no money was spent by the charity on their charitable good works throughout the year.

Another problem that we're seeing, you'll note this on the slide, is in keeping with the financial section of the T-3010, sometimes people are confusing Section D with Schedule 6. That is on the return, there's two separate financial sections. Only fill out one of those financial sections, either Schedule 6 or Section D, not both. What has happened, is people are filling out Schedule 6, and what happens in our system is as soon as there is information uploaded about Schedule 6, it overrides and deletes all the financial information that might have been included on Section D. Consequently, the information is inaccurate. So, that's with respect to the financial information on the T-3010.

A final point I'll make out on the T-3010 errors and omissions is Line 5000. This continues to be a concern. People are not filling out this line, so what ends up happening is on Line 5000 there is no amount included and Line 5000 is where you put how much money you spent throughout the year on your charitable programs. If there is a zero there, then it looks to the CRA, and to the donors who are consulting the website, that the charity spent no money on their charitable programs. So, we encourage you to make sure that you have an appropriate amount and include an amount on Line 5000.