publication date: Mar 13, 2012
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author/source: Janet Gadeski
Yes, I am from CRA - but I come in peace!
Danie Huppé-Cranford's opening words to delegates
attending February's
Being Good at Doing
Good conference in Toronto raised a laugh. But they emphasized a helpful,
open aspect of the
Canada Revenue Agency
that isn't always apparent in its official communications and pages of
regulatory text.
The
Charities
Directorate of CRA has a threefold mandate. It reviews applications for
charitable registration. It develops policy and provides information,
communication and education for charities and donors. Finally, it ensures that
registered charities comply with the requirements of the
Income Tax Act - the function with which charity managers are most
familiar.
Few audited, even
fewer sanctioned
Cranford explained that CRA audits almost 1% of registered
charities each year. During 2011/12, for example, 746 audits are in progress. Those
audits are carried out by 40 auditors across Canada, and nearly 2/3 of the
audits this fiscal year were triggered by suspected schemes for tax avoidance or
fraudulent receipting.
Though it's the tax dodge and false receipt schemes that make
the news, most of the audits are related to other issues such as incorrectly
formatted (but not false) receipts, inadequate books and records, gifts to
non-qualified donees, failure to maintain direction and control, and failure to
file the Charities Annual Information Return (T-3010).
In 2010/11, for example -
-
just 10% of the charities audited were revoked,
annulled or penalized with fines or suspension of receipting privileges;
-
27% had to sign compliance agreements enforcing
specific improvements in their procedures;
-
54% received education to correct their
processes; and
-
9% were found to be fully compliant.
"We recognize that majority of charities are volunteer-run, and
that they face high turnover and limited resources," Huppé emphasized. "They want
to be compliant but circumstances deflect them."
"When we knock on
your door..."
Huppé explained that CRA auditors will never show up on your
doorstep unannounced. "We contact the charity first and provide context for the
audit," she said. "We want to understand three things: are you still
constituted for charitable purposes, still delivering charitable services, and
have your finances in order."
The auditors will examine your internal controls, check that
you have proper books and records, and verify that all your gifts are to
qualified donees. They'll also want to see that you're completing your
information returns and financial statements on time.
"If your controls and processes are correct," Huppé stated, "the auditor
already has confidence in you. Plus, for your own sake, it helps protect your
funds."
Keep full records,
file on time
Complete records are important. You should hang on to your
copies of official donation receipts; minutes of meetings of your directors or
trustees, executives and members; all governing documents and by-laws;
financial statements, source documents and copies of T-3010 returns; and all
records concerning 10-year gifts.
Huppé noted that CRA does not require audited financial
statements to accompany the T-3010. "Don't use that as an excuse for late
filing," she warned. "File on time and send the financial statements when you
get them."
To contact CRA,
1-800-267-2384 or 1-888-892-5667; charities information on the Web,
www.cra.gc.ca/charities.