CRA Compliance

What Must Be Included in An Agency Contract or Joint Venture Agreement for Charities operating through 3rd Party Intermediaries?

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1. Ensure that the 3rd party has the “reputation, expertise, capacity, and experience” to execute the activities. It is also critical that the intermediary is not affiliated with terror or militia groups.

2. A project description which is “clear, complete, and detailed”:
This must include:
a. Where the activities will take place;
b. When will they take place;
c. Who will be doing them;
d. projected budget.

3. A Written Agreement outlining how the Canadian charity will maintain “Direction and Control” over its funds and resources.

4. If the foreign activity involves a capital project (i.e., purchasing property or a building) the Canadian charity must (subject to limited exceptions) hold title to the foreign assets.

5. Verification: The foreign intermediary must provide the Canadian charity with sufficient “Books and Records” to satisfy the Canadian Charity (and the CRA) that the project is being completed as instructed. Books and Records.

6. The contract must specify how the project is a distinct project from other projects carried out by the contractor. Otherwise, the CRA will assume that the Canadian Charity is no more than a conduit for the 3rd party.

7. Decisions for recipient eligibility must be made by the Canadian charity, not by the contractor. This is included in the “direction and control” requirement noted above.

8. Reports: The contract must provide for ongoing reports, including interim and final reports. Source documents, including receipts, pictures, invoices and the like must be included in the reports.

9. Funds may not generally be transferred in one tranche. Instead, funds should be advanced in installments, upon the 3rd party contract reaching pre-determined milestones.