Transcript

"Maintaining Registered Status." This chart will provide your charity with information relating to benefits, maintaining your registration status, and the consequences of not meeting the obligations of registration.

The benefits. You're exempt from paying income tax under part one of the Income Tax Act. It allows the issuance of an official income tax receipt for gifts it receives, eligibility to receive gifts from other registered charities such as foundations, and you're eligible for partial rebates for the paid GST/HST. Maintaining registration status includes undertaking only allowable activities, maintaining adequate books and records, issue complete and accurate donation receipts, file the annual return form T3010-1 on a timely basis, inform the Charities Directorate of any changes such as an address change, change of name, change in activities, maintain the charities status as a legal entity if it is incorporated and other CRA requirements such as payroll, GST, etc.

The consequences of not meeting the obligations of registration: you can be given a sanction, which involves monetary penalties and/or suspensions of tax receipting privileges, or revocation, which is the cancelation of the charity's registration and the privileges that go with it. A revoked charity must transfer all of its remaining property to an eligible donee, or be subject to a revocation tax which is equal to the total of its property remaining after all debts and liabilities have been paid. And if you're re-registering, your organization will be liable for a $500 late penalty fee. Re-registering means a complete reapplication has to be reviewed by the Canada Revenue Agency, which is of course a very lengthy process.

"Engage Only in Allowable Activities." Is the charity aware of the following requirements? A registered charity is allowed to carry out its charitable purposes both inside and outside Canada in only two ways: by carrying on its own charitable activities, or by making gifts to other qualified donees. It's limited when using its resources for social activities and for fundraising activities, as they are generally not considered charitable. And if it's working through its intermediary such as an agent, a contractor, or any non-qualified donee, the charity must be able to demonstrate that it retains direction and control over the use of its resources. For example, the charity can enter into a formal written agreement with the intermediary body. It must also not engage in any activities that may directly or indirectly support or facilitate an act of terrorism. And it must only gift to qualified donees. For example, other registered charities or other organizations that are found on our qualified donee listings.

Generally, the charity must also engage in allowable business activities that accomplish or promote the charity's purposes. The charity is designated as a charitable organization or public foundation, this would be okay. However, if it is a private foundation, it may not engage in any business activities. For further information on related businesses, please refer to our policy statement CPS-019, available on our website under "Operating a registered charity" topic link. It must also not engage in any prohibited political activities, such as supporting or opposing a political party or candidate for public office. Contact the Charities Directorate if the charity plans to engage in new activities that were not identified in its application when it became registered to ensure that those activities qualify and to ensure that they're still charitable.

"Maintaining Adequate Books and Records." A registered charity should maintain adequate books and records in English or in French at an address in Canada. A charity's books and records must allow the CRA to verify revenues (including tax-receipted donations), verify how the resources are spent, and verify that the charity's purposes and activities continue to be charitable. Books and records must be kept for the prescribed period of time. The retention periods are mentioned within the next couple of slides.

The following slides will provide you with information on the types of documents found within a charity's books and records in addition to the retention periods. So, copies of official donation receipts other than those for 10-year gifts must be kept for a minimum of 2 years from the end of the calendar year in which the donations were made. All records concerning those 10-year gifts must be kept for a minimum of 2 years after the date of registration—after the date the registration of the charity is revoked. Otherwise, they must be kept for the life of the charity.

Continuing now with the other requirements. Minutes of meetings of the directors. As long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked, or in the case of corporations two years after the date the corporation is dissolved. That's how long you must maintain the meetings of the minutes. Meetings of minutes of the members must be kept as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked. All governing documents and bylaws must be kept as long as the charity is registered and again for two years after the date the registration of the charity has been revoked.

General ledgers or other books, financial entries containing summaries of year to year transactions, and the vouchers and accounts necessary to verify the entries must be kept for six years from the end of the last tax year to which they relate or for as long as the charity is registered and for two years after the date the registration of a charity is revoked, or in the case of a corporation, two years after the date the corporation is dissolved. Financial statements, source documents, and copies of the T3010 returns must be kept for six years from the end of the last tax year to which they relate, or if the charity is revoked, for two years after the date of revocation. Source documents may include items such as invoices, vouchers, formal contracts, work orders, delivery slips, purchase orders, or bank deposit slips.

It is important to ensure to keep supporting documents. When a charity is being audited by the Charities Directorate, the charity will need to show the tracing of money, meaning proof of expenses and revenue transactions which includes copies of invoices, vouchers, work orders, delivery slips, purchase orders, and bank deposit slips. In addition, your charity will need to show proof of donation transactions. For example, date of donation received, name and address of the donor, donation amount, whether the donation is a cash or is in kind gift, and other information as required by the CRA. You will also have to keep copies of evaluation for a gift in kind so you will have to keep the fair market value of a gift in kind as of the date of the donation and it must be determined—the fair market value must be determined the day that you receive the donation. We recommend the gifts over $1,000 be appraised to determine their fair market value. Therefore, the charity is required to keep a copy of the written evaluation from an independent evaluator providing the fair market value and any other relative information on the donated item. If the fair market value is less than $1,000, then a qualified staff member of the charity may appraise the gift. However, the charity will need to keep a copy of the research documentation to show proof of how the donated item was evaluated.

"The Importance of Adequate Books and Records." Maintaining proper books and records will help charities respond to questions and provide required information and documentation during an audit, which could avoid suspension of receipting privileges, and it can avoid the loss of your registration status. A charity's resources must be spent on the charitable activities. Therefore, it is important to know how the moneys are spent and where revenues come from. Understanding the financial matters of the charity will help the board members acquire knowledge and be better able to make important decisions in relation to their charitable programs. Keeping a donation ledger with all required information relating to a donation will ensure that the official donation receipt is completed as per the requirements of the Income Tax Act. When the charity's books and records are kept in order and with detailed accounting, the individual (for example, the treasurer) who is responsible for completing all the required forms will be able to complete them with ease. For example, the T3010, which has to be filed at the end of every fiscal year.