Print Print

Charities - Compliance and audits


A charity is responsible for all receipts issued under its name and registration number. It must account for the corresponding donations on its annual information return and in its books and records. Under no circumstances should a registered charity issue donation receipts on behalf of another organization or lend its registration number to another organization for receipting purposes. A charity that lends its registration number may have its receipting privileges suspended and/or lose its registered status.

Registered charities have certain obligations under the Income Tax Act. The Charities Directorate monitors the operations of registered charities to make sure they comply with these obligations.

Canada Revenue Agency (CRA) ensures that:

  • only organizations that qualify as charities under the common law are registered;
  • the operations of registered charities fall within the limits of the Act;
  • registered charities issue official donation receipts appropriately; and
  • revoked charities pay a revocation tax.

Audits help CRA maintain public confidence in the fairness and integrity of the registration system for charities and are a key part of the compliance program.

While generally CRA approach compliance through education first, the approach CRA take depends on the severity of the non-compliance.

If an audit raises concerns, CRA will use one or more of the following compliance measures:

1.      Education letters guide charities through the steps they need to follow to be fully compliant.

2.      Compliance agreements outline areas of non-compliance and commit charities to take corrective action.

3.      Sanctions include financial penalties and temporary suspensions of charities’ tax-receipting privileges as well as their status as qualified donees.

4.      Revocation is the loss of charitable registration and the privileges that go with it. It is used in serious cases of non-compliance with the Act.

The Canada Revenue Agency (CRA) takes abuse of Canada's tax laws very seriously. When registered charities do not fully comply with tax legislation, it places an unfair burden on law-abiding taxpayers and businesses, and it jeopardizes the integrity of Canada's tax base, as well as the integrity of the charitable sector as a whole.

The Income Tax Act provides for a formal objection process when a charity feels the Canada Revenue Agency (CRA) did not interpret the facts or applied the law correctly. If a charity disagrees with the CRA's decision concerning its objection, it has the right to appeal to a court

Footnotes: Footnotes: This column is presented as a general source of information only and is not intended as a solicitation for business. Mohammed Yasin, CPA,CGA, is the principal of M. Yasin & Co. Inc., Certified General Accountants and has offices in Vancouver & Surrey,B.C. Article Source: ALAMEENPOST.COM