CRA Compliance

The CRA employs an education-first strategy, providing the charity an opportunity to rectify non-compliance through education or compliance agreements before considering measures such as sanctions or revocation, which are only applied in a small fraction of audits.

The particulars of the charity's case determine the CRA's chosen compliance approach:

Education Letters:

For minor non-compliance, the CRA issues education letters. These letters identify areas where the charity has deviated from the law, offering guidance for necessary changes. An education letter does not impact the charity's registration, and no response is required.

Compliance Agreements:

In cases of moderate non-compliance, the Charities Directorate may propose a compliance agreement. This outlines non-compliance issues, remedial actions, timelines for changes, and consequences if the charity fails to comply. The CRA ensures the charity adheres to the agreement

Sanctions:

For serious or repeated non-compliance, the CRA may suggest sanctions (financial penalties or temporary suspension of tax receipting privileges). Sanctions may also be proposed if the charity disregards its compliance agreement.

Revocation of Registration:

In cases of severe non-compliance, the CRA may propose revoking the charity's registered status. While revocation is a last resort, it can occur when:

• Non-compliance is serious and intentional
• Non-compliance significantly affects others (beneficiaries, donors, or funders)
• The charity has a history of serious non-compliance or refuses to follow rules

A revoked charity must transfer assets within a year or pay a 100% revocation tax, ensuring funds remain in the charitable sector.

Annulment of Registration:

In rare cases, an audit may reveal a charity was not established or operated exclusively for charitable purposes during registration. In such cases, the CRA may propose annulment, allowing the charity to keep its assets despite losing tax receipt privileges.