Charity FAQs

The CRA is always ready to show its teeth to Charity Organization strutting their stuff in wanton neglect of its established order, and this hardly requires analysis. 

Canada boasts a legion of registered charities that’re charitable organizations. You couldn’t count them even if you tried. 86,000, to slap a figure on that. That said, 74,500 of those registered as charitable organizations that run their charity operations with the aid of employees, volunteers and intermediaries which may not be charities. 

With a largesse of charity organizations comes the need for compliance. These legal obligations have been put in place, and the directors and staff of these charities must understand that it is their legal duty to avoid problems such as compliance agreements, penalties or outright revocation.

Most times charity organizations are oblivious of these regulations. And to compound their woes, the documentation of these matters relating to legal compliance has been a hard nut to crack. Issues ranging from difficult-to-understand, legal lingo that is the stuff of legal experts. 

You don’t wanna deal with that. And in this post, we roll up our sleeves and dig deep into the dirt of these topics with your ease of comprehension top of mind. So, you can put the stress of making sense of it aside and focus on what you’re good at — your charity operations:

1. Filing of the T3010: 

The T3010 is an income tax return form for registered charities, and it is alternatively known as the Registered Charity Information Return Form. The charity must complete and submit this form every six months after its fiscal year. Charities are expected to fill this form each year, and it doesn’t matter if they’re active or not — what’s relevant is that they’re in operation.

Failure of a charity to fill and submit this form will cause its registered status to be revoked. In simpler terms, this means that Canada would no longer recognize the organization as a legal charity organization within its borders. And with this comes the revocation of every other advantage originally enjoyed by the charity. 

Flowing from this, the charity would no longer be able to issue official donation receipts to their donors, and they won’t be eligible for tax exemptions either.

2. Fundraising Guidance 

Fundraising is any activity that involves soliciting donations in cash or kind. During fundraising, charities are mandated to comply with their legal and ethical obligations. Fundraising can be carried out by the charity or anyone acting in its place. For it to be carried out within the boundaries permissible by law, it must not:

 a). be illegal orcontrary to public policy;

b). be deceptive; or

c). be for personal gain or be the main purpose of the charity.

A charity that engages in unacceptable fundraising, even through a third party, would face the threat of sanctions or the revocation of its registered status.

3. Direction and Control Over Its Activities

It is not unheard of for charities to select intermediaries to perform charity operations in their stead. Where this is the case, the charity must ensure that it has direction and control over these activities performed on its behalf. 

Having direction and control means that they will have a say in how the overall operation is run — from the objective to when it would begin and end, the area, and the region where the activity would be carried out. 

A charity that selects intermediaries is expected to have autonomy over them.

4. Proper Receipting 

Receipts issued for donations received by charities must be done according to the Income Tax Act. A charity must take note of its responsibility, so it doesn't unwittingly find itself in a situation of non-compliance. Cases of improper receipting may lead to the registered status of a charity being revoked, and it will be found guilty of improper receipting in the following circumstances:

a) If it issues a receipt with inaccurate or incomplete information

b) If it issues a receipt for a transaction that doesn't qualify as a gift, e.g, services rendered.

c) If it issues a receipt on behalf of another organization. Doing this can be seen as a way to evade tax.

d) If it issues a receipt for an inflated amount/False reportage of donations. For instance, whena charity puts in an amount on a receipt that is more than value of the gift received. 

Although the chances of this being an honest mistake cannot be struck out due to the charity's inability to correctly place the fair market value (FMV) of a property, it remains strongly advised that if the FMV cannot be rightly determined, a receipt shouldn't be issued. Better safe than sorry! 

5. Documentation 

It goes without saying that Charity operations should be documented — all of its income and expenditures. Extra care must be paid to the documentation of donations received, and the receipts issued along with them. Because a charity is responsible for every issue under its name, it must account for corresponding donations in its books. 

That’s why lending the charity’s registration number to another organization could be such a bad idea because it could lead to the revocation of your charity’s registered status.

Under the Income Tax Act, a charity must keep adequate books and records, and they must contain enough information to allow the CRA to determine if the charity is operating in accordance with the Income Tax Act. The CRA recommends that the books and records be kept in either English or French.

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