Resources. Contents. 1 Overview. 2 Administrative Info. 3 Constitution. Glossary. 4 Charitable Status. 5 Minutes

Transcription

1 Contents Glossary Appendix A References Booklet of Frequenty Asked Questions A Guide to Searching Government Registries Canada Revenue Agency Information Circular, Books and Records Retention/Destruction - IC78-10R4 1 Overview 2 Administrative Info 3 Constitution 4 Charitable Status 5 Minutes 6 Policies & Procedures 7 Financial Documents 8 Annual Returns 9 Official Tax Receipts 10 Operational Info Appendix B Templates 2010 Legal Resource Centre, Edmonton, AB

2 G 1 Glossary The following information has been gathered from various sources, particularly (but not exclusively) Charity Central. Other sources are given in footnotes. For accounting terminology, please refer to Section 7.9. Absolute majority 1 Act 2 Advantage Amendment 3 When a motion or nominee has the support of more than half of the voters An individual piece of legislation passed by a government. This term is used interchangeably with statute except when used in the name of a specific act. An advantage is the total value of any property, service, compensation, use, or any other benefit that a donor receives in return for his or her donation. Formal change to a statute, incorporation document, policy or motion. Annual general meeting or AGM Annulment 4 The AGM is a legally required meeting that is held each calendar year in which all members (and shareholders) meet to review financial statements, elect new directors, and conduct certain other business. Under the Income Tax Act, the Minister of National Revenue can annul a registered charity s status if it was registered in error or if it has ceased to be a charity as a result of a change in law. A charity that has been annulled is deemed never to have been registered as a charity and, consequently, is not subject to revocation tax. However, an official donation receipt issued by a charity prior to the annulment of its registration is valid as long as it would have otherwise been valid. 1 Legal and Ethical Duties of Directors of Not-for-Profit Organizations: Organizing Your Corporate Documents (2009). Lois Gander. The Muttart Foundation. ethical_1_organizing.pdf 2 Ibid. 3 Ibid. 4 Ibid.

3 Bylaws 7 The portion of a corporation s constitution that sets out the internal rules by which the 2010 Legal Resource Centre, Edmonton, AB G 2 Arm s length 5 At arm s length is a concept describing a relationship in which the parties are acting independently of each other. The opposite, not at arm s length, includes individuals who are related to each other by blood, marriage, adoption, and common-law relationships, as well as people with shared interests such as those with close business or organizational ties. Audit Basically, a regularly scheduled systematic review and verification of a group s actions and accounts. An audit is usually conducted by qualified accountants. Charities need to be aware that the term audit isn t always precisely used. When someone uses the term, they may be referring to: A compilations (or a Notice to Reader), A review, or A full audit See Section 7 for full information on audits. Books and records Books and records are both the governing documents and financial records of an organization. Business number (BN) 6 Numbering system used by Canada Revenue Agency (CRA) that simplifies and streamlines the way businesses deal with the federal government. It is based on the idea of one business, one number. organization will be governed Certificate of incorporation or letters patent The certificate of incorporation or letters patent announces to the rest of the world that your organization is in existence. These are the formal letters from the incorporating government which indicate that the organization is now incorporated. Charitable Fundraising Act Alberta 8 Sets standards for charitable organizations and professional fund-raisers when soliciting contributions and helps protect the public from fraudulent, misleading or confusing solicitations. Ensures that members of the public have sufficient information to make informed decisions when making charitable donations. 5 CRA 6 Legal and Ethical Duties of Directors of Not-for-Profit Organizations: Organizing Your Corporate Documents (2009). Lois Gander. The Muttart Foundation. 7 Ibid. 8

4 G 3 Charitable Fund-raising Number 9 Consensus 10 Unique number issued to an organization licensed under the Alberta Charitable Fundraising Act. A general agreement among the members of a given group or community Consensus decision-making 11 Constitution 12 Contract 13 A process that not only seeks the agreement of a majority of participants, but also seeks to resolve or minimize the objections of the minority to achieve the most agreeable decision The documents used to incorporate an organization. The specific documents will vary depending upon the statute that the organization is incorporated under. The constitution sets out the purpose of the organization and the way it is to be governed. The constitution is binding on the organization s directors and members. A set of promises or an agreement that the courts will enforce Corporate Access Number (Alberta) 14 Unique number issued to a corporation by the Alberta Corporate Registry Office upon registration of the organization. (Number is located on the top right corner of the Certificate of Incorporation document) Corporate Number (federal) 15 Unique number issued by the government of Canada upon incorporation of an organization. Corporate seal 16 A seal adopted and used by a corporation as part of its official signature. 9 Legal and Ethical Duties of Directors of Not-for-Profit Organizations: Organizing Your Corporate Documents (2009). Lois Gander. The Muttart Foundation. 10 Ibid. 11 Ibid. 12 Ibid. 13 Ibid. 14 Ibid. 15 Ibid. 16 Ibid.

5 The De Minimis threshold rule The de minimis threshold rule allows a donor to receive an official donation receipt for the full amount, when the advantage that the donor receives does not exceed the lesser of $75 or 10 per cent of the amount of the gift to the registered charity. Example: A museum gives small gifts to acknowledge donations of certain amounts. Can the museum issue donation receipts for these gifts? For a $150 donation, donors receive a calendar worth $14 The $14 calendar is worth less than the lesser of $75 or $15 (10 per cent of the $150 donation) and is therefore not considered an advantage. An official receipt can be issued for $150. For a $200 donation, donors receive a tote bag worth $25 The $25 tote bag is worth more than the lesser of $75 or $20 (10 per cent of the $200 donation) and must be considered an advantage. An official receipt can be issued for $175. For a $1,000 donation, donors receive a gift certificate worth $100 The $100 gift certificate is greater than the lesser of $75 or $100 (10 per cent of the $1,000 donation) and must be considered an advantage. An official receipt can be issued for $900. G 4 CRA definition: From pplyng/gdc/wgd-eng.html Deregistration 17 See revocation. Director (Trustee) 18 Director refers to a member of a board of directors. The term director should be understood as referring to any duly elected or appointed member of the board or other governing body. Most corporations [i.e. not-for-profit] statutes contemplate the possibility of ex officio directors and honourary directors. Some corporations include in their governance structure provisions that restrict the capacity or limit the powers, such as voting rights, of particular individuals affiliated with their board [such as ex officio directors]. As such individuals remain potentially subject to liability, they are not distinguished from other directors in the text. Chair refers to a person presiding over the board or a committee. Executive director refers to the individual presiding over the day-to-day operations of a corporation. Member refers to a person with voting rights in the corporation. Stakeholders refers to members, and other constituencies of the corporation. These could include (but are not limited to): donors, staff, volunteers, alumni, and clients. Again, depending on the practice of your organization, you may be familiar with some of these functions by other terms. 17 Ibid. 18 Primer for Directors of Not-for-profit Corporations: Rights, Duties and Practices. Industry Canada, 2002

6 G 5 Dissolution 19 The breaking down or ending of the organization OR The act of ending, terminating or winding up a company or state of affairs. For example, when the life of a company is ended by normal legal means, it is said to be dissolved. Eligible amount of gift for tax purposes 20 The amount of a gift that a donor can claim on his or her tax return. Generally, this is the amount by which the fair market value of the donated property exceeds the amount of an advantage, if any, in respect of the donation Fair market value (FMV) is understood as: the highest dollar value you can get for your property; in an open and unrestricted market; on the day that it was transferred; between a willing and knowledgeable buyer: and a willing and knowledgeable seller; who are acting independently of each other Federal incorporation 21 Fiscal year 22 Incorporation under a federal statute, usually the Canada Corporations Act Part II rather than under a provincial or territorial statute Period of 12 consecutive months chosen by an organization as its accounting period, which may or may not be a calendar year or the 12 months (or, for incorporated charities, a period of up to 53 weeks) covered by an organization s financial statements. Framework policies Clarify the organization s philosophy, mission and vision, and outline the beneficiaries the organization will serve. They may include one or more of the following: Mandate Belief statement Vision statement Mission statement Target statement Aim statements Objects The most commonly used of these is a mission statement or mandate. 19 Legal and Ethical Duties of Directors of Not-for-Profit Organizations: Organizing Your Corporate Documents (2009). Lois Gander. The Muttart Foundation. 20 CRA 21 Legal and Ethical Duties of Directors of Not-for-Profit Organizations: Organizing Your Corporate Documents (2009). Lois Gander. The Muttart Foundation. 22 Ibid.

7 G 6 Gift A gift is a voluntary transfer of property, meaning: It is given of one s free will; the donor must not be obliged to part with the property, for instance as the result of a contract or a court order. It is given by a donor to a Registered Charity or other qualified donee. It is either in the form of cash or a gift-in-kind; services are not property and therefore are not considered gifts. Gift-in-kind Governance A gift of property other than cash. It includes numerous types of property, in particular inventory, capital property, and depreciable property. Donations of real estate, stocks and bonds, and personal items are all considered gifts-in-kind. Items of little value, such as hobby crafts or home baking, do not qualify as gifts-in-kind for the purposes of issuing a tax receipt. Relates to decisions that define expectations, grant power, or verify performance. It is the means by which the board of directors guides and monitors the values and goals of its organization Governing document 23 A governing document gives an organization its legal existence. The document identifies the organization s name, states its purpose(s), and describes its structure and internal procedures. Types of governing documents All registered charities (other than internal divisions* of existing registered charities) must be legally established by one of the following types of governing documents: incorporating documents (for example, letters patent or articles of incorporation) a constitution a trust document (for legal trusts). *An internal division is a branch, section or division of a registered charity. An internal division does not have its own governing document but operates under the governing document of a parent body or head body. To apply for registration as a charity, an internal division must provide a letter of good standing. Other governing documents An organization may have a governing document that is not an incorporation document, a constitution, or at trust (for example, an organization established by an act of Parliament, or a will). If this applies to your organization, contact the CRA for information before you send your application for registration. In good standing 24 A corporation that has complied with all statutory and regulatory requirements for filing of documents 23 CRA (from 24 Legal and Ethical Duties of Directors of Not-for-Profit Organizations: Organizing Your Corporate Documents (2009). Lois Gander. The Muttart Foundation.

8 G 7 Income Tax Act Incorporation Legislation 25 Canadian federal government act pertaining to all taxes on income. View at: The process by which an organization gets its legal status, i.e. the process by which a corporation is created. These can include business corporations, cooperatives, not-for-profit companies, and societies. Incorporation takes place according to the specific requirements of an act passed by a provincial or federal government. Acts or statutes passed by governments together with any regulations made under the authority of the statute. Letters patent 26 Majority 27 Letters patent refers to the document issued when an organization is incorporated under federal legislation. It includes the information contained in the application for incorporation that sets out the corporate objects or purposes which is filed under the Canada Corporations Act Part II. The number of people who must favour a motion before it can be carried. A simple majority is more than half the members voting, that is, 50 percent plus one additional person. Majority rule 28 Minutes The system of giving the largest group in a particular place or area the power to make decisions for everyone OR Rule by the choice of the majority of those who actually vote, irrespective of whether a majority of those entitled to vote participate. Minutes, which are considered a Governing Document, are the official record of a meeting, to specify what was done and what was decided. Mission statement Declares what business the organization is in and how the organization will work toward its vision, and explains what is unique about the organization, and what it adds to society (1-10 sentences long). Notification of registration If your organization has been granted charitable status, it will have been issued a Notification of Registration by the Canada Revenue Agency (CRA). This notification is considered a historical document of your charity. 25 Ibid. 26 Ibid. 27 Ibid. 28 Ibid.

9 G 8 NUANS 29 Objects 30 NUANS (Newly Upgraded Automated Name Search) is a computerized search system that, for the purposes of Corporate Registry, compares a proposed corporate name to a database of existing corporate names. Aim or purpose, the thing sought to be attained or accomplished. A corporation s objects are stated in its constitution Official donation receipt An official donation receipt is a receipt issued by charities that are registered with the Canada Revenue Agency s Charities Directorate, and other qualified donees for gifts received. Official donation receipts must comply with certain requirements specified by the CRA. Policy A policy is a deliberate decision made by the Board that provides guidance for addressing identified objectives and concerns. Procedure A procedure, which may change frequently, details methods by which these principles of a policy are implemented. A procedure is step-by-step instructions that bring a policy to life. Qualified donee Quorum 31 Qualified donees are organizations that can, under the Income Tax Act, issue official tax receipts for gifts that individuals or corporations make to them. Entities considered qualified donees are set out in section of the Income Tax Act. See the list online: The minimum number of people, as specified in the bylaws or meeting rules, required at each board meeting, general meeting, or special meeting for business to be legally carried out. In the absence of a quorum, most rules of order state that formal debate cannot continue. Registered office 32 Official location where official forms and notices must be delivered to the organization 29 Ibid. 30 Ibid. 31 Ibid. 32 Ibid.

10 Statute 34 An individual piece of legislation passed by a government. It is used interchangeably with 2010 Legal Resource Centre, Edmonton, AB G 9 Revocation 33 Cancellation of a charity s registered charitable status. Action which may be taken by the Canada Revenue Agency when a charity has not met the filing requirements of the Income Tax Act. On revocation of a charity s registration: the charity is no longer exempt from tax, unless it qualifies as a non-profit organization; it cannot issue official donation receipts; and it may be subject to a tax equivalent to the full value of its remaining assets (revocation tax). Split receipting The term split receipting refers to the fact that, from the charity s perspective, the donation is split into two portions: the portion for which the charity can issue a receipt (that is, the eligible amount) and the portion for which the charity cannot issue a receipt (that is, the advantage). Act except when used in the name of a specific statute. Struck 35 Removal of the corporation from the active status records of a corporate registry. Winding up 36 Year end 37 The process of settling the accounts and liquidating the assets of a corporation for the purpose of distributing any assets and dissolving the organization Final date of a fiscal year OR taking place at the close of a fiscal year; eg. yearend audit 33 Ibid. 34 Ibid. 35 Ibid. 36 Ibid. 37 Ibid.

11 A 1 Appendix A References Key Sources Canada Revenue Agency, Charities Directorate CRA Publications: Guide GST/HST Information for Charities (2008) Employers Guide Filing the T4 Slip and Summary (2009) Charity Central Includes detailed FAQs on Receipting (The basics; Determining the eligible amount on official donation receipts; Receipts for specific gifts; Enduring property; Disbursement quota); Books and Records (The basics; Format and copies; Location and retention; Adequate books and records; Related issues); Fundraising (Fundraising Activities; Illegal and Prohibited Activities; Cost of Fundraising; Personal Information and Privacy; Fundraising in Alberta); and Registered Charities (general information). Charity Law Information Program (CLIP) Includes materials from workshops on many topics pertaining to maintaining charitable status, particularly in the area of foreign activities The Charities File: On Board Includes FAQs about the T3010 form and Best Practices for Maintaining your Charitable Status training modules and workbook Imagine Canada, Charity Tax Tools Includes online resources regarding receipting, maintaining books and records, and improving financial reporting

12 A 2 Legal Information Society of Nova Scotia Includes annotated T3010B form Board Development Program materials (Government of Alberta) Information Bulletins on 16 topics including: Understanding Financial Statements Financial Responsibilities of Not-For-Profit Boards Roles and Responsibilities for Not-For-Profit Boards The Board s Role in Fund Development Meetings that Work How to access: download for free from website at bulletins.aspx or receive a free hard copy set of these information bulletins by phoning the Board Development Program at or ing to bdp@gov. ab.ca The Workbook Series, produced in co-operation with The Muttart Foundation, which includes five titles: Developing Job Descriptions for Board Members of Nonprofit Organizations Drafting and Revising Bylaws BOARD BUILDING: Recruiting and Developing Effective Board Members for Not-for- Profit Organizations Hiring and Performance Appraisal of the Executive Director Financial Responsibilities of Not-for-Profit Boards How to access: download for free from website at workbooks.aspx or order printed copies for a nominal charge online through Resource Center for Voluntary Organizations ( or Volunteer Calgary ( Publications The Audit Process: A Two Way Street (In press). Betty Thompson. Lo Porter Hetu. Basic Guide to Non-Profit Financial Management. Carter McNamara. Authenticity Consulting. Building an Effective Policy and Procedure Manual: Whitepaper (2006). Colin Braithwaite. First Reference Inc. Available for purchase; see: Bylaws and Policies. Institute on Governance.

13 A 3 Community League Resource Guide (April 2009). Edmonton Federation of Community Leagues. Core Operations: Conflict and Complaint Resolution (2007). Dalhousie University Non-Profit Sector Leadership Program. Creating a Non-profit Organization. Volunteer Manitoba. Creating an Orientation Manual for Volunteers: A Template for Non-Profit Organizations. (February 2008). Volunteer Centre of Camrose and District. Developing a Policy and Procedures Manual (June 2008). Fern Richardson & Stacey Tames. Alberta Agriculture and Rural Development. www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/rsv9182 Developing Policies and Procedures for Volunteer Organizations: Factsheet (December 2008). Denise Edwards. Ontario Ministry of Agriculture, Foods and Rural Affairs Employee, Volunteer and Student Orientation and Human Policy and Procedure Manual (February 2006). Volunteer Calgary. manual.pdf Financial Policies and Procedures: Protecting Your Organization s Financial Assets (2001). Stuart Budd. Ontario Ministry of Agriculture, Foods and Rural Affairs Fundamentals of Effective Board Involvement (2005). Sherry Ferronato. Mentoring Canada (Big Brothers Big Sisters of Canada). A Guide to Bookkeeping for Non-Profit Organizations (February 1991). Laurinda Lang. Governance Process: Role of the Board (2008). Dalhousie University Non-Profit Sector Leadership Program. Keeping Track of the Details As You Get Down to Business (2000). Laird Hunter. LawNow: 25 (2).

14 A 4 Legal and Ethical Duties of Directors of Not-for-Profit Organizations: Organizing Your Corporate Documents (2009). Lois Gander. The Muttart Foundation. organizing.pdf Legal Risk Management Checklist for Non-for-Profit Organizations (October 2009). Terrance S. Carter and Jacqueline M. Demczur. Carters Professional Corporation. Not-for-profit organizations in Manitoba: Beginning and incorporating (2003 Rev. ed.). Community Legal Education Association of Manitoba. Booklet available for purchase. Not-for-profit organizations in Manitoba: Directors liabilities (2002 Rev. ed.). Community Legal Education Association of Manitoba. Booklet available for purchase. Primer for Directors of Not-For-Profit Corporations: Rights, Duties and Practices (2002). Peter Broder & Norah McClintock, Eds. Industry Canada. Procedures for Meetings: Factsheet (November 1996). Chuck Bokor. Ontario Ministry of Agriculture, Foods and Rural Affairs Record Keeping for Non-Profit Organizations: Factsheet (December 2008). Denise Edwards. Ontario Ministry of Agriculture, Foods and Rural Affairs The Roles, Responsibilities and Functions of a Board: A Board Development Guide. (Reprinted February 2002). Prepared by Manitoba Family Services and Housing. Sample Governance Policies (2002). Mel Gill. Institute on Governance. The Secretary s Handbook (4 th ed. 2008). Myles McGregor-Lowndes. Centre of Philanthropy and Nonprofit Studies, Queensland University of Technology. s+handbook Tutorial for Directors and Officers of Non-profit Corporations in Saskatchewan: Sample Bylaws. Saskatchewan Department of Justice.

15 A 5 Understanding Your Corporate Documents (2010). Lois Gander. The Muttart Foundation. Understanding Your Organization s Financial Statements: Factsheet (November 1996). Katharine Schmidt. Ontario Ministry of Agriculture, Foods and Rural Affairs Other Notable Websites for Small and Rural Charities: Canadian Charity Village Contains comprehensive information for the Canadian non-profit sector, including news, trends, articles, and links to useful resources, learning opportunities, jobs, suppliers and more. HR Council for the Voluntary and Non-profit Sector Source of information, tools and research related to human resources in Canada s non-profit sector Imagine Canada For the charity and non-profit sector: Delivers research about the sector; shapes public policy; encourages businesses, government and individuals to collaborate and engage with the sector; and delivers tools, resources and networking opportunities directly to nonprofits and charities to build and strengthen the sector. Nonprofit Library Commons An initiative of Imagine Canada, the online database features resources created by and produced for the Canadian charitable and nonprofit sector. Volunteer Alberta Encourages the establishment of Volunteer Centres in Alberta s communities to serve volunteer engaging organizations in a broad range of sectors, including: health, recreation, arts, sports, faith, community development, and social services; provides services that help our members meet the many challenges confronting them

16 A 6 Volunteer Canada Provides resources aimed at supporting volunteerism and civic participation in Canada, such as standards for volunteer screening and management, information on trends in the voluntary sector, and links to local volunteer centres. American BoardSource Contains resources aimed at strengthening nonprofit boards of directors The Management Assistance Program for Nonprofits, Free Toolkit for Boards Contains numerous articles on a wide range of nonprofit board topics, such as board roles and responsibilities, staffing the board, evaluating the board, and ensuring successful committees and meetings Minnesota Council of Nonprofits Provides standards of excellence for nonprofit organizations, as well as other nonprofit management resources Federal Government Information Industry Canada Corporations Canada Manitoba Government Information Manitoba Companies Office Legislation Manitoba Corporations Act and Canada Corporations Act

17 Appendix A FAQ Booklet Production of this booklet has been made possible by a financial contribution from the Canada Revenue Agency. 2010, Legal Resource Centre of Alberta, Ltd., Edmonton, Alberta

18 Introduction This booklet provides answers to basic questions about the nature of registered charities and the books and records that must be kept by registered charities. The information only deals with federal law, as outlined in the Income Tax Act. See other sources for additional requirements of your province and local municipality. Canada Revenue Agency, Charities Directorate This website contains a wealth of information including checklists, forms, guides, policies and technical information. To talk to someone at the Charities Directorate, you can call (English) toll free from anywhere in Canada or (bilingual). Charity Central/ Charity Central Essentials Charity Central is a project of the Legal Resource Centre of Alberta (LRC), designed to help Canada s Registered Charities understand their responsibilities under the Income Tax Act. It provides a wide range of print and electronic resources including learning modules and FAQs, to help guide Registered Charities through the ins and outs of: issuing proper donation receipts; maintaining proper books and records; and, understanding fundraising activity guidelines. Charity Central Essentials is a project of the LRC designed to assist small and rural charities in the Prairie Provinces to improve voluntary compliance with Canada Revenue Agency s requirements.

19 Disclaimer The contents of this booklet are provided as general background only. It is not legal or accounting advice. If you have a legal or accounting problem, you should consult a lawyer or accounting professional. Your use of the information in this booklet is your responsibility and is at your own risk. This information is provided as is, without warranty of any kind. The information contained in this booklet was correct at the time it was printed. Be aware that there may have been subsequent changes which make the information outdated at the time you are reading it. Charity Central (CC), Charity Central Essentials (CCE), and the Legal Resource Centre of Alberta (LRC) will not be responsible for any loss arising from reliance on, or action taken (or not taken) as a result of, this information. This booklet contains references to external websites and other information sources. This is done for your convenience. We do not endorse these sites and they are not under the authority of CC, CCE, or the LRC. We are not responsible for the information these sites and materials provide or for the use you make of them. Some sites charge a fee for use. If you use these sites, you will be responsible for any fees charged. Any opinions and views expressed on other sites do not necessarily reflect the opinion of CC, CCE, or the LRC.

20 About Registered Charities 1. Is my organization a registered charity? Short Answer A registered charity is a technical and precise term referring to a charitable organization that is registered under the Income Tax Act (ITA). In order for your organization to be a registered charity, you must have applied for charitable status with the Charities Directorate of the Canada Revenue Agency (CRA). Just because your organization is referred to as a charity or because you do charitable work (that is, helping those in need and not taking any profit) does not necessarily mean that your organization is a registered charity under the ITA. Your organization can become a registered charity by applying for charitable status with the CRA. Detailed requirements are set out in the rules of the ITA. The process begins by sending in a completed T2050 form. When the process is complete, the federal government provides you with a charities registration number. (See Question 3.) Don t confuse a charities registration number with other numbers that may be issued by a province, territory, or municipality, such as a fundraising registration number or a number issued upon registration as a corporation (corporate access, business or entity number). Long Answer Municipal, provincial (territorial), federal, and specific commissions and other bodies define the terms charity and charitable in various ways. For example: In Alberta, an organization that wishes to promote charitable purposes can incorporate under either the Companies Act or the Societies Act. Neither of these acts defines the term charitable and neither of them links the term to the concept of a registered charity under the ITA. In addition, any organization that wishes to raise funds over $25,000 must register with the provincial government as a charitable organization under the Charitable Fund-Raising Act. This applies to both registered charities and non-profits in general. So, if you are a charitable organization in Alberta, that does not necessarily mean that you are also a registered charity under the ITA. This lack of a link between the provincial concept of charity and charitable and the concept of a registered charity under the ITA can also be found in British Columbia, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, and Newfoundland and Labrador.

21 In Saskatchewan both the Charitable Fund-Raising Businesses Act and the Non-Profit Corporations Act refer to charitable corporations and charitable organizations as corporations and organizations that are registered charities within the meaning of the ITA. More To find out if your organization is a registered charity, go to Question My organization is a non-profit. Is it a registered charity? Not necessarily. A non-profit organization can be set up for any legal purpose as long as its members do not receive a direct financial benefit from the revenues or assets of the organization. A non-profit can operate fully without registering as a registered charity with the Canada Revenue Agency (CRA). A registered charity, on the other hand, is a technical and precise term that refers to an organization that is established exclusively for charitable purposes uses its resources (personnel, funds, and property) for charitable activities does not operate for profit has applied and is registered as a charity under the Income Tax Act (ITA) has received a Notice of Registration from the CRA has been assigned a charitable registration number by the CRA (see Question 3). More For further explanation of the differences between a registered charity and a nonprofit organization, see the Charity Central Fast Facts tip sheet titled Registered Charity vs Non-Profit Organization at

22 3. What is a charitable registration number? A charitable registration number is a number assigned by the Canada Revenue Agency (CRA) to a registered charity. Don t confuse a charities registration number with other numbers that may be issued by a province, territory, or municipality, such as a fundraising registration number or a number issued upon registration as a corporation (corporate access, business or entity number). A charitable registration number has 12 digits and 2 letters. It consists of your nine-digit business number (this number is unique and does not change no matter how many or what type of CRA accounts you have) the two letters RR identify your account as a registered charity 0001 is the reference number used to distinguish between internal divisions with the same program accounts Example: RR0001 is an example of a charitable registration number 4. Can our charity lend its registration number to another organization? No! Under no circumstances should your registration number be loaned to another organization. A charity is responsible for all tax receipts issued under its name and number and must account for the corresponding donations on its annual information return. Lending the registration number to another organization could lead to the revocation of your charity s registered status. 5. How can I find out if my organization is a registered charity? You can call the Charities Directorate of the Canada Revenue Agency at (English) or (bilingual) and speak to an agent or search the CRA website at for your organization by name. You may also be able to find this information in your organization s Minute Book (the book that contains your organization s incorporation documents) on your organization s tax returns on your Notice of Registration from the CRA from your organization s lawyer

23 6. What are the responsibilities of a registered charity? Short answer In return for the advantages of being a registered charity, a charity must follow certain rules. There are three general categories of responsibility: 1. A registered charity can only do a limited range of things. It can advance religion, relieve poverty, carry out education, or undertake programs and activities of benefit to the community that the law considers charitable. 2. It must follow detailed rules under the Income Tax Act (ITA) for spending money, receiving income, and reporting. 3. It cannot engage in a range of activities that the law considers political. Long answer As part of its responsibilities, a registered charity must: ensure that all its activities are charitable and within its objects demonstrate that it is devoting its resources to its stated charitable purposes keep accurate, detailed and complete records, books and receipts ensure that it does not pay, or otherwise make available, its income to any of its members ensure that at least 50 per cent of its directors are at arm s length (that is, not in a close relationship) with each other meet its spending requirement (disbursement quota), which generally speaking is 80 per cent of the income for which it issued receipts in the last year ensure the accuracy of all official donation receipts and ensure that all such receipts are in accordance with the ITA and its regulations file a yearly T3010B Information Return on time (within six months of the organization s fiscal year-end) engage only in permitted political activity. A charity cannot engage in any political activities to support or oppose a political party or a candidate; try to influence public opinion on a broad social question; or advocate for a change in law or policy. However, a charity can spend up to 10 per cent of its resources on non-partisan political activities that help to accomplish the charity s purpose. All political activity must also be ancillary and incidental to the objects of the charity. not make any changes to its constitution without the approval of the Canada Revenue Agency (CRA)

24 allow the CRA to audit its books and activities, if asked and carry out all other obligations under the ITA. These responsibilities are to be taken very seriously, as any violation could result in public embarrassment, the loss of reputation, and a range of sanctions by the CRA (such as financial penalties, the loss of privileges until corrective action is taken, or ultimately the revocation of charitable status). 7. What are the consequences of not meeting the obligations of a registered charity? If a registered charity does not meet its obligations, it may be subject to a penalty or revocation (that is, lose its charitable status). The Charities Directorate of the CRA uses a scale to determine whether a charity is meeting its obligations. In increasing severity, the Charities Directorate may use the following tools: education (explaining the rules to a charity) compliance agreements (a formal document signed by the charity and the CRA identifying the problem, the solution, and the consequences if the charity does not solve the problem) sanctions financial penalty suspension of the charity s right to issue official donation receipts (for example, for one year) revocation of charitable status. If an organization s charitable status is revoked, it can no longer issue tax receipts for donations and will no longer be a qualified donee.

25 Books and Records Basics 8. What are the basic elements of a charity s books and records? Short answer The books and records of a registered charity should reflect all of the activities of the charity be capable of verifying all charitable donations received be supported by source documents, like original receipts and invoices and be in one of Canada s two official languages (see Question 12). More Also note that privacy legislation relates to the use and the retention of records. Any records containing personal information, including that of employees, volunteers, clients or donors, should be handled carefully by your organization. More information about the principles guiding the use of personal information and about what privacy legislation may apply to your organization can be found in the Fundraising FAQ section of Charity Central. ( ) Always ensure that records are kept for as long as they have to but no longer. For more information about retention of records, see Questions 20 and What are our charity s general responsibilities regarding our financial and other books and records? A charity must keep adequate books and records in either English or French at a Canadian address it has on file with CRA so that CRA can verify official donation receipts issued, as well as income and expenditures. A charity must also keep information that proves that its activities continue to be charitable. This additional information will vary from charity to charity but could include, for example, copies of minutes of meetings, correspondence, publicity brochures, or advertisements. For more on adequate books and records, see Questions The charity should also retain its books and records appropriately (see Questions 20 and 21).

26 10. The Income Tax Act includes a long list of items in its definition of books and records. What types of books and records does our charity have to keep? The usual books and records held and maintained by registered charities include governing documents constitution and bylaws annual reports board and staff meetings minutes ledgers bank statements expense accounts purchase vouchers inventories contracts investment agreements official donation receipts accountant s working papers payroll records promotional materials fundraising materials financial statements You re right: it is a long list. Subsection 248(1) of the Income Tax Act defines a record as including an account, an agreement, a book, a chart or table, a diagram, a form, an image, an invoice, a letter, a map, a memorandum, a plan, a return, a statement, a telegram, a voucher, and any other thing containing information, whether in writing or in any other form. Notice that a book is defined as a record. 11. The Income Tax Act has a long list of books and records for a charity to keep. Does our organization have to keep all of the records noted in section 248(1)? No, section 230 of the Act says that a charity must keep three kinds of books and records. These include information to enable determination of whether there are grounds for revocation of its status under the Act (i.e., its compliance with the Act); duplicates of donation receipts; and such other information to allow verification of donations for which a deduction or tax credit is available. Within these three categories, it is up to you to decide which books and records to keep. As a general rule, it is better to keep more records than fewer.

27 12. Our charity does all its work in a language other than French or English. Do we still need to keep our records in English or French? Short answer Long answer Yes. Records must be in English or French. Example Say your charity addresses concerns of a Spanish-speaking community. You may have kept your books and records in Spanish. In this case, you should talk to CRA about your circumstances. If you do not talk to them, you will still be required to have your books and records in English or French. The CRA does recognize that for some very small charities translating from the original may become a significant burden. So the CRA is willing to consider such situations on a case-by-case basis. Charities should be aware that under subsection 286(1) of the Excise Tax Act, persons, including charities, who carry on a business or are engaged in a commercial activity in Canada, who are required to file a GST/HST return, or persons who make an application for a rebate or refund, must keep adequate books and records in English or French in Canada. 13. Our previous treasurer has our books and records for the last fiscal period and has refused to return them. As a result, we cannot obtain the necessary information to file our T3010. What should we do? Your charity remains responsible for maintaining adequate books and records and for meeting its filing requirements. If a legal means is necessary to obtain the documentation from the last treasurer, you may want to keep the Canada Revenue Agency informed of the steps you are taking.

28 Books and Records Format and Copies 14. Can books and records be kept in electronic format? Yes, but remember: Electronic records are subject to the same rules and retention periods as hard copy or paper books and records. Books and records that are created and maintained in electronic format must be kept in an electronically readable format, even if the charity has paper printouts of the electronic records. An electronically readable format means information supported by a system capable of producing an accessible and useable copy that would allow auditors to process and analyze the electronic records on the CRA s equipment. If any source documents are initially created, transmitted, or received electronically, they must be kept in an electronically readable format. Scanned images of paper documents, records, or books of account that are maintained in electronic format are acceptable if proper imaging practices are followed and documented. Books and records maintained outside Canada but accessible electronically in Canada do not meet the requirement of being kept in Canada. 15. I m a church treasurer and the offering counters are asking if they need to save the offering envelopes. Are church offering envelopes considered a record? Yes. When the offering envelopes help verify donations, they are considered a record and must be kept for two years following the end of the fiscal period for which they were issued. On the other hand, if the individual donations are recorded from the envelopes directly into a ledger of some type, you do not need to keep the envelopes. 16. Does a charity need to keep more than one copy of its books and records? No, but it may be smart to do so. In the event of a fire or other disaster that destroys the charity s books and records, a second set would be very useful. The Canada Revenue Agency may be able to help a charity re-establish itself after such a disaster by giving them copies of documents they hold on file. This can only partly replace what may have been lost. It may, therefore, be prudent to keep duplicates of key documents at a separate location. Storing data electronically can also increase the chances of retrieving information, as long as a regular back-up system is in place and the back-ups are kept in a safe place. (See Questions 14 and 26.)

29 Books and Records Location and Retention 17. Where should the books and records of a registered charity be kept? Books and records must be kept at the Canadian address that the charity has on file with the Canada Revenue Agency. This includes all books and records related to any activity carried on outside Canada. The charity s books and records cannot be kept at a foreign address. 18. The treasurer of our charity prefers to keep our registered charity s books and records at his house. Is that okay? No. Books and records must be kept at the Canadian address that the charity has on file with the Canada Revenue Agency. It is, however, permissible for a charity to be run out of a home office, and if this is the registered address on file, the group s books and records can be at that location. Note that this includes all books and records related to any activity even if it is carried on outside Canada. A Canadian charity s books and records cannot be kept at a foreign address. Any foreign-based information or documents need to be available when requested by the Minister of National Revenue. The Minister may require a charity to provide any foreign-based information and/or documents and it is an offence not to produce such information as and when required. 19. Our charity has information and documents all related to our charitable activity located outside Canada. Do I need to concern myself about these? Yes, you do. The Minister of National Revenue may require a Canadian-based charity to provide any foreign-based information and/or documents. It is an offence not to produce any foreign-based information, as and when required.

30 20. How long does our charity need to hold on to its books and records? Short answer It depends on the type of record. Some may be kept as short as two or six years after the end of the calendar year in which they were produced. More important records must be retained for as long as two years after the charity is no longer registered. Long answer The Income Tax Act and Regulations spell out the length of time each record must be kept. The Minister responsible for this Act can also give written permission for the earlier disposal of records. Here s a checklist of retention periods for your charity s books and records: Copies of official donation receipts (other than for 10-year gifts) must be kept for a minimum of two years from the end of the calendar year in which the donations were made. Records for 10-year gifts must be kept for as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked. Minutes of meetings of the directors/trustees/executives must be kept for as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked. Minutes of meetings of the members must be kept for as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked. Governing documents and bylaws relating to the charity must be held for as long as the charity is registered and for two years after the date the registration of the charity is revoked. General ledgers or other books of final entry containing summaries of year-to-year transactions and the accounts necessary to verify the entries must be kept for six years from the end of the last tax year to which they relate, while the charity is registered, and for two years after the date the registration of the charity is revoked. Financial statements, source documents and copies of annual information returns (T3010 forms) must be kept for six years from the end of the last tax year to which they relate or, if the charity is revoked, for two years after the date of revocation.

31 21. Does the six-year retention period mean that we can destroy all of our financial information every six years? No! The six-year retention requirement means that you can destroy only that information that you have kept six years from the end of the taxation year to which the records relate. Each year you can destroy the records that reach six years of shelf life. This year you can destroy the records that are six years old. Next year you can destroy another batch of six-year-old records. Of course, this only refers to certain records, for example, books and records, together with the accounts and vouchers, containing the summaries of the year-to-year transactions of the charity financial statements invoices and vouchers completed T3010 forms Adequate books and records 22. What does the Canada Revenue Agency mean by adequate books and records? Your charity must keep books and records (located at the Canadian address that CRA has on file) adequate enough to verify official donation receipts issued, income received, and expenses made. The CRA does not specify the records to be kept. According to subsection 230(3) of the Income Tax Act, however, the Minister of National Revenue may specify what records or books of account must be kept after a charity has been found to be keeping inadequate records and books of account. Also, the Income Tax Act requires charities to keep information in addition to their books and records so that the CRA can determine whether the activities of the charity continue to be charitable. This additional information will vary from charity to charity but should include, for example, copies of minutes of meetings, correspondence, publicity brochures or advertisements, and details of charitable program activities including program reports.

32 23. What happens if a charity s records are inadequate? Short answer Keeping inadequate records may risk your registration as a charity. If a charity s records are considered inadequate, the Minister may issue a requirement that adequate records be provided suspend the charity s tax-receipting privileges and/or revoke the status of a charity that has not provided adequate records. Long answer Under subsection 230(3) of the Income Tax Act, the Minister of National Revenue may require the registered charity to keep such records and books of account as the Minister may specify and that the registered charity shall thereafter keep records and books of account as so required. Suspension is a new CRA sanction. Under new subsection 188.2(2) of the Income Tax Act, a charity may have its tax-receipting privileges suspended for a year if it contravenes any of sections 230 to of the Act, which include providing information as required. While the CRA may generally use education and compliance agreements first, it anticipates instances where records are deliberately not compiled or are altered, destroyed or hidden in order to disguise a serious infraction. In such cases, the CRA will likely move directly to an intermediate sanction or even revocation of the charity s registration. 24. Why is it so important for my charity to maintain adequate books and records? Short answer There are many good reasons to maintain adequate books and records: You need adequate books and records in order to maintain a healthy happy donor base. You ll operate more efficiently and effectively with good records. The CRA reviews financial records of registered charities for compliance, and you could be audited at any time. Certain federal, provincial, and territorial legislation demands it. Funding agencies may require it. Long answer The public increasingly asks that registered charities they support be transparent and

33 accountable. Maintaining adequate books and records and ensuring proper financial statements relates to this public awareness. Prospective donors to a charity may also wish to personally review the charity s financial information prior to making a contribution. The federal Canada Corporations Act and some provinces have legal requirements for charities to maintain proper books and records. Failure to comply with the requirements of federal or provincial legislation can result in penalties and possible director liability. The Canada Revenue Agency reviews financial records of registered charities to make sure they comply with the requirements of the Income Tax Act. Audits are an important element of this process. Having all the books and records in order will lessen the burden on the charity s staff and resources when a CRA audit occurs. For all of these reasons maintaining proper books and records is essential. To assist with meeting the requirements of keeping proper books and records, the Canadian Institute of Chartered Accountants (CICA) has developed generally accepted accounting standards for charitable and not-for-profit organizations. 25. Are there penalties for failing to keep and maintain adequate books and records? Yes, indeed! Failure to keep adequate books and records may result in the suspension of a charity s tax receipting privileges, suspension of its status as a qualified donee or the loss of its registered status. 26. Our computer crashed and it looks like all our records may have been lost. What should we do? Do all you can to retrieve them: ask a computer specialist to see if the records can be retrieved; load your back-up files; reconstruct missing pieces from your hard copies. When these routes have been used to the fullest and you re still missing records, contact the Canada Revenue Agency, which may be able to provide copies of your records held by the CRA. The charity remains responsible for maintaining adequate books and records. As described in Question 14, electronic records must be retained in an electronically readable format.

34 Books and Records Related Issues 27. Our charity s fiscal year just ended. How soon do we have to submit our return and what needs to be included? You have six months to file and you must include a Registered Charity Information Return and the Registered Charity Basic Information Sheet (form T3010B). Failure to file on time may result in a charity being deregistered. More Example A T3010 return for a December 31 fiscal period end is due on or before June 30 of the following year. The CRA s instructions for completing the necessary forms can be found at Filing the T3010B information return ( ) 28. Do we have to get an audit done on the financial statements included with the T3010? Not for the purposes of the Canada Revenue Agency, although your treasurer should sign financial statements that have not been audited. Note, however, that in deciding what charities to audit, CRA uses a risk management approach. One of the factors it may consider in determining whether to investigate a charity is the availability of an independent audit or third party review of the charity s finances. On the other hand, other government authorities, your charity s governing body, or its funding bodies may require audited statements. 29. When setting up and maintaining books and records for our charity, do I have to allow for GST? More Yes, in most cases you do have to allow for GST/HST. To learn more about GST/HST, see the Canada Revenue Agency Guide titled GST/ HST Information for Charities ( This publication includes the general rules for charities, exempt supplies of goods and services, rebates that may be available to you, and whether or not you are required to register. 30. Does a charity have to calculate payroll deductions? If your charity has employees, you have payroll deduction obligations.

35 Where Can I Find More Information? Canada Revenue Agency, Charities Directorate Phone: Charity Central Phone: info@charitycentral.ca Charity Central Essentials, Office in a Box Community Legal Education Association (Manitoba) Inc. (CLEA) Provides public legal education and information programs to Manitobans Phone: Imagine Canada, Charity Tax Tools Charity Tax Tools is operated by Imagine Canada on behalf of the charitable sector. Legal Information Society of Nova Scotia (LISNS) Providing Nova Scotians with information and resources about the law for more than 25 years Phone: Legal Resource Centre of Alberta Uses a collaborative approach to develop materials and strategies for teaching Albertans and other Canadians about the law, including creating resources on the topic of non-profit and charitable law Phone: Public Legal Education Association of Saskatchewan (PLEA) Educates and informs the people of Saskatchewan about the law and the legal system Phone: The Charities File: On Board A joint project of the Canadian Federation of Voluntary Sector Networks and the Centre for Voluntary Sector Research and Development Phone:

36 A 8 A Guide to Searching Government Registries This section is adapted from Legal and Ethical Duties of Directors of Not-for-Profit Organizations: Organizing Your Corporate Documents (2009). Lois Gander. The Muttart Foundation. Getting Professional Help Contact Information The following four pages provide information on searching government registries online. If, however, you do not have access to the Internet or you require information or documents that are not available online you can contact: n Companies Office (Manitoba), you can: Visit the Companies Office in person at the Woodsworth Building, Room 1010, 405 Broadway, Winnipeg, Manitoba. Fees may apply. Send a request via mail, along with the required fee, to the Companies Office, Broadway, Winnipeg, Manitoba R3C 3L6 For information on fees, see n Corporate Registry (Federal), phone: Industry Canada (Corporations Canada) Toll-free: , or (613) n Charities Directorate, phone: Canada Revenue Agency Toll-free English: , or Toll-free bilingual: Corporate Registries Both the federal and provincial governments can incorporate not-for-profit organizations and they both maintain registries of those organizations that they have incorporated. At several places we suggest that you might want to do a search of either or both government registries and/or contact them by phone: n To find out if an organization is incorporated n To find its corporate numbers n To get a copy of its constitution n To find out if its constitution has been amended n To get a copy of any amendments to the constitution that have been filed n To find its registered office

37 If you know where your organization was incorporated you only need to search the registry for that level of government. However, if you are not sure whether your organization was incorporated provincially or federally, you may need to search both registries. Registry of Charitable Organizations All charities must be registered with the Canada Revenue Agency to receive charitable tax benefits and to issue tax deduction receipts. To find out if your organization is a registered charity, search the Registry of Charitable Organizations. Corporate Registry Manitoba Organizations incorporated under Manitoba statutes are registered in the Government of Manitoba Companies Office database. The Companies Office keeps track of the organization s status based on annual returns or other documents that it requires organizations to file from time to time. These include a change in the organization s directors or its registered office. These are considered to be public documents and may be looked at by anyone. By accessing the province s Manitoba Online service, subscribers can gain access to the Companies Office database as well as other provincial government databases. Subscribers to the Companies Office database are able to access the most recent information available for businesses and corporations on record in Manitoba (but not to copies of actual documents on file). The Manitoba Government Companies Office website at search_registry.html has some information about the province s Manitoba Online service, service levels and fees. The Manitoba Online website is at You may find it helpful to browse the site for more information. If you do not have access to the Internet you can visit the Companies Office in person, or mail in your request. See the first page of this guide for contact information.

38 Conducting a Search of Manitoba Online Before potential users can gain access to Manitoba Online, they are required to submit registration information to become an authorized user. Download an information package at and mail it in. Organizations as well as individual users must submit a Security Application Form. Instructions and forms are available at For further information, contact the IBM Customer Service Centre by phone at (204) or You or anyone else can do a search of the registry n To find out if an organization is incorporated n To get a copy of its constitution n To find your organization s corporate number n To find out if its constitution has been amended n To get a copy of any amendments to the constitution that have been filed n To find its registered office It will be more efficient for you if you do your searches of Manitoba Online all at once. Federal The registry of federally incorporated not-for-profit corporations is maintained by Industry Canada. The Federal Corporations Data On-Line system allows users to search the Federal Corporations Database free of cost.

39 Conducting a Search of the Corporations Data On-Line You or anyone else can do a search of the registry n To find out if an organization is incorporated n To find your organization s corporate number n To find out if it has been filing its annual reports and annual summaries n To find its registered office It will be more efficient for you if you do your searches all at once. n Do a list of all searches you need. n The database can be found on the Industry Canada website at for Businesses, Company Directories. n Searches can be performed by Corporate Number, name, creation date, city, province, corporation status or Act. n If you do not have access to the Internet see Corporations Canada (Industry Canada) contact information on the first page of this guide. Obtaining a copy of incorporation and related documents To obtain a copy of a federally incorporated not-for-profit s constitution (Letters Patent and by-laws) and any amendments, fax your request to Corporations Canada (Industry Canada) at 1 (613) As of the time of writing, the cost for this is $1/page. These charges may be paid by credit card. To do so, include the credit card number, expiry date, and name of cardholder in the fax.

40 Canada Revenue Agency Charities Directorate The Charities Directorate of the Canada Revenue Agency maintains a list of over 80,000 charities registered with the CRA. The list includes the name of the charity, Business Number (BN)/Registration Number, mailing address, designation type, category code, and when available the charity s annual information returns starting with the 2000 T3010A, Registered Charity Information Return. Conducting a Search of Canadian registered charitable organizations You or anyone else can do a search of the registry n To find out if your organization is a registered charitable organization n To find out if it is in good standing n To find its contact information for the purposes of receiving notices from the CRA To search the online directory go to Searches can be conducted using the charity name, Business Number(BN)/Registration Number or other fields. Instructions about searching the list are available on the site. In addition to the list of all Canadian registered charities who are in good standing, the Charities Directorate now gives you online access to n newly registered charities (within the last 12 months) and n recently revoked charities (within the last 12 months). If you do not have access to the Internet see the Charities Directorate contact information on the first page of this guide.