CRA Compliance

If you look at any organization five, ten or twenty years after it was created, it’s probably going to be very different. Just like people grow and change, companies and corporations evolve. So do charities.

It’s not only expected that some things about your charity will change over time, but also almost inevitable. But, like any changes to a legal entity, there’s a specific process you need to follow for most significant changes to the structure or operations of your charity. Here’s what you need to know.

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Who Needs to Know?

When something significant changes about the structure of your charity or how you operate, you will need to report the change to the Charities Directorate at the CRA.

Some minor changes may be possible via your organization’s MyCRA account, but in most cases, you will need to contact the Directorate to find out what you need to submit, and how they need it to be submitted.

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Change of Purpose or Activities

When you register a charity in Canada, you have to provide detailed information about the purpose of the organization, and the activities that you will be engaged in. This is required because there is a fairly narrow definition of what qualifies as a charity in Canada.

This also means that if you make substantial changes to either your purpose or activities, you might no longer qualify to be a registered charity. In order to be sure, you need to submit the details of the change to the Charities Directorate.

Remember to do this before you implement the proposed changes. If your revised purpose or activities don’t meet the definitions, you will be advised, and you can avoid putting your charitable status in jeopardy.

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Redesignation

There are three designations of charities in Canada: charitable organizations, public foundations, and private foundations.

Sometimes, due to various factors, you might want to change the designation of your organization. If you want to change the way you operate, how you fundraise and the structure, you need to apply to have the designation changed.

A designation change doesn’t stop your organization from being a registered charity or being able to raise funds and issue receipts, but it does allow you to change your internal operations.

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Fiscal Year End Changes

Registered charities are tax exempt, but they still have tax reporting obligations, and those obligations are tied to their fiscal year end. Because of this, if you want to change your fiscal year end, you first have to notify the CRA, so that they can update your account accordingly.

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Requesting Associated Status

There are rules about how much money charities can give to other organizations, and to which kinds of organizations. Usually, charities can give foundations more than half of their revenue, but if they give the same amount to a charity that is not a foundation, that charity might be redesignated a foundation.

Requesting associated status with the charity that will receive the gift in this case allows them to avoid the redesignation. Essentially, it’s the charitable version of a joint venture, that allows them to have some relaxed rules.

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Permission to Accumulate.

Most non charitable organizations work with the specific goal of accumulating profits over time. Charitable organizations, however, are not supposed to do that. They are supposed to follow the rules related to disbursement and give the money they raise away according to that schedule.

However, sometimes, a charity needs to save money for a big purchase. Maybe they need a new vehicle or building. In that case, they can request permission to accumulate funds, which relaxes the disbursement requirements, and allows them to save money until they can make the purchase.

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Disbursement Quota Reductions

Disbursement requirements not only govern when charities must give the money they raise away, and to whom, but it also sets a requirement for the amount to be given away.

Sometimes, however, charities don’t meet their fundraising goals, which means that they don’t have enough money available to make those disbursements – or pass the money they have raised on to approved recipients. Of course, this would leave the charity with a negative balance in their bank account, and that’s not really an option.

A disbursement quota reduction allows charities to reduce the amount of money they are required to pay to those recipients.

As Soon As Possible

Now that you know what you need to notify the government of, the next question is when you should do this. The answer is always as soon as possible. Don’t wait until you actually need the change to have been made. As soon as you become aware that it will be necessary, you should start communicating with the Directorate. That way, you won’t be left wondering what to do when deadlines roll around!