What Letters Can a Charity Receive After a CRA Audit?

TL;DR: After an audit, the Canada Revenue Agency (CRA) sends a registered charity one of several letters: a no-change letter, an education letter, a proposed compliance agreement or, for serious findings, an administrative fairness letter (AFL) that can lead to a penalty or suspension under sections 188.1 and 188.2 of the Income Tax Act, or a notice of intention to revoke under section 168(1). A charity generally has 30 days to answer an AFL and 90 days to object to a final decision.

If you’re a board chair or treasurer and a letter from the CRA’s Charities Directorate has just arrived after an audit, your first job is to work out which letter you have. The Charities Directorate is the part of the CRA that registers, audits and regulates charities. The letter type tells you whether you need to reply, how fast, and what is at stake for your charitable registration.

Which letters does the CRA send after a charity audit?

The CRA sends a written results letter when every charity audit ends. Under the CRA’s Guidelines for applying sanctions, the Charities Directorate usually starts with education and moves up through compliance agreements, sanctions and revocation. In serious cases, the CRA can move straight to a sanction or revocation.

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How often does a CRA audit end in a serious outcome?

Serious outcomes are more common than older CRA web pages suggest. The CRA’s Report on the Charities Program 2025–2026 shows that 64% of the 227 audits completed that year found serious non-compliance. Those audits produced 81 education letters, 66 compliance agreements, 48 notices of intention to revoke, 20 voluntary revocations, 7 no-change letters, 2 penalties or suspensions and 0 annulments. The CRA chooses audit targets based on risk, so these figures describe audited charities, not the whole sector.

Do you have to reply to a CRA education letter?

No, a charity does not have to reply to a CRA education letter, and the letter does not affect its registration. An education letter identifies where the charity did not follow the Income Tax Act and explains what to change. Incomplete donation receipts and weak books and records are common examples. Treat the letter as a checklist: the CRA may compare your practices against it on a later audit.

What is a compliance agreement, and can you negotiate it?

A compliance agreement is a formal document, signed by both the charity and the CRA, that lists the problems found, the steps the charity will take to fix them and the consequences if it doesn’t. The CRA uses compliance agreements for moderate non-compliance. A later audit can check whether the charity kept its promises. The Federal Court of Appeal has confirmed that the CRA can withdraw a compliance agreement and move to stronger measures, including revocation (Christ Apostolic Church of God Mission International v. Canada (MNR), 2009).

What is an administrative fairness letter, and how fast must you respond?

An administrative fairness letter (AFL) is the CRA’s written statement of its audit findings when it is considering a sanction, revocation or annulment. The AFL is a proposal, not a final decision. A charity generally has 30 days to respond to an AFL and can ask for an extension before the deadline passes. Your response can explain why you disagree with the CRA’s view, add documents, or describe the changes you have already made.

The CRA considers the charity’s representations before it decides on the final outcome. A charity that does not respond leaves the CRA to decide on the audit findings alone. If you receive an AFL, mark the 30-day deadline on the board calendar the same day.

What penalties or suspensions can the CRA impose?

The CRA can impose financial penalties under section 188.1 of the Income Tax Act and a one-year suspension of receipting privileges under section 188.2. During a suspension, the charity cannot issue official donation receipts and loses its qualified donee status. A qualified donee is an organization that can issue official donation receipts and receive gifts from registered charities. A suspended charity must tell donors about the suspension.

Penalty amounts depend on the problem. Under the CRA’s guidelines, incorrect information on receipts carries a penalty of 5% of the eligible amount (10% for a repeat), and false receipts carry 125%. Inadequate books and records can lead to a one-year suspension. Read more about typical penalties for charity non-compliance.

What happens after a notice of intention to revoke?

A notice of intention to revoke is the CRA’s formal decision to end a charity’s registration under section 168(1) of the Income Tax Act. Revocation takes effect when the CRA publishes the notice in the Canada Gazette. In cases of aggravated non-compliance, the CRA can publish 30 days after the notice unless the charity obtains a stay from the Federal Court of Appeal.

A revoked charity owes a revocation tax equal to 100% of its remaining assets after debts, under section 188 of the Income Tax Act. The one-year winding-up period starts the day after the CRA issues the notice of intention to revoke, not the day of publication. During that year, the charity can reduce the tax by spending on charitable activities or transferring assets to an eligible donee. An eligible donee is a registered charity in good standing that is largely independent of your board.

The charity must file Form T2046, Tax Return Where Registration of a Charity is Revoked, within one year of the date on the notice. A charity can avoid the tax if it regains registration within that year and meets the CRA’s other conditions. See our guide to charity revocation in Canada.

How is annulment different from revocation?

Annulment cancels a charity’s registration as if the CRA had never granted it, and an annulled charity does not pay revocation tax. Under section 149.1(23) of the Income Tax Act, the CRA can annul registration only when it was granted in error or the charity no longer qualifies solely because of a change in law. Under section 149.1(24), receipts issued before the annulment stay valid if they would otherwise have been valid. Annulment is rare: the CRA reported none from audits in 2025–2026. Learn more about annulment of charitable registration.

How do you object to a CRA audit decision?

A charity must file a written objection within 90 days of the date on the CRA’s final letter. The objection goes to the CRA’s Appeals Branch and must set out the reasons and all relevant facts. The CRA’s objections and appeals page for registered charities explains how to file. If the Appeals Branch confirms the decision, revocation appeals go to the Federal Court of Appeal and penalty appeals go to the Tax Court of Canada. For more, read what recourse charities have after a CRA decision.

Frequently Asked Questions

Do we have to reply to a CRA education letter?

No. An education letter does not affect your registration and needs no reply, but you should fix the issues it lists before your next T3010 filing.

How long do we have to respond to an administrative fairness letter?

The CRA generally gives a charity 30 days to respond to an AFL. You can ask for an extension, but ask before the deadline.

Can we negotiate a compliance agreement?

The charity and the CRA both sign a compliance agreement, so there is room to discuss its terms. Once signed, breaking the agreement can lead to sanctions or revocation.

Will the public find out if the CRA sanctions or revokes our charity?

Yes. The CRA posts sanctions, revocations and annulments on its public List of charities and can release the letter explaining its decision.

How long do we have to object to a notice of intention to revoke?

A charity has 90 days from the date of the notice to file an objection under section 168(4) of the Income Tax Act.

Is annulment the same as revocation?

No. Annulment treats the registration as never granted and carries no revocation tax, while revocation ends a valid registration and triggers the 100% revocation tax.

What should your board do after receiving a CRA audit letter?

Identify the letter type using the table above, then mark every deadline from the date printed on the letter. Gather the books, records and board minutes the CRA refers to before drafting any reply. If you have an AFL, a penalty notice or a notice of intention to revoke, book a free consultation with Dov Goldberg so your response is planned before the clock runs out. Our charity governance and compliance services can also help you prevent the same findings on the next audit.