Foundation-necessary obligations

Necessary obligations to create and operate a registered non-profit Foundation

Incorporating as a non-profit

Most charities are corporations. Corporations are legal entities that have been formed under the corporations legislation of the federal government or of one of the provincial or territorial governments.

Every corporation has certain legal requirements imposed on it by its incorporating legislation. Failing to meet these requirements can jeopardize a corporation's existence. The Canada Revenue Agency (CRA) requires that registered charities keep their legal corporate status in good standing in order to retain their charitable registration.

Starting an organization

Many think starting a registered charity is the main (or only) option, but there is a range of organization types that operate for social benefit. People often want to start a charity because they have:

passion about a cause and a great idea about how to achieve these goals.
significant funds to donate to a cause but want to ensure the funds are used for a specific charitable activity.

Applying for Charitable Status

Running a registered charity is a noble but sometimes challenging endeavour. In reviewing applications for charitable registration, the Canada Revenue Agency (CRA) considers whether the organization:

is appropriately set up and organized;
has exclusively charitable purposes (or objects);
will have activities that are charitable, are carried out in an allowable manner, and further one or more of its purposes; and
will deliver a public benefit.

These criteria must be met; otherwise, your application for charitable status may be rejected by the CRA. Assess your concept with:

What constitutes a charitable purpose

Forms and required details

The CRA application form requires detailed information about the organization's:

legal form and structure;
directors or trustees;
expected activities;
how it will achieve each of its charitable objects;
expected fundraising activities;
financial position;
income and expenses; and
supporting documentation for all of the above.

Form T2050, Application to Register a Charity Under the Income Tax Act

Guide T4063, Registering a Charity for Income Tax Purposes

Tip! Ensure this application is complete upon submission. The CRA will not make a decision about registration without all of the required information and incomplete information will result in a returned application.

Incorporation : essential steps

Here are the major steps to creating a corporation as your charity ("incorporate"):

choose a name for the corporation, and ensure that it is not in conflict with an existing name;
arrange for at least three arm's-length eligible directors to serve on the corporation's board;
determine other requirements: e.g. choose a fiscal year, select auditors, a head office location;
prepare corporate purposes (or objects);
draft bylaws and organizing resolutions for the corporation;
apply for corporate registration ("letters patent" or "articles of incorporation"); and
prepare and submit various corporate filings and pay various fees.

Require more detail? A charity lawyer should be able to assist you directly or direct you to resources in your province so that you can understand these steps on your own.

Here are some links to resources that can help guide you through the registration process.

Learning modules on registered charities - Charity Central

(https://www.charitycentral.ca/)

Applying for charitable status - webinar from Charity Tax Tools

(http://sectorsource.ca/resource/video/applying-charitable-status)

What is the difference between a non-profit organization and a charity?

These terms are used interchangeably in common language. The CRA has a helpful chart outlining the differences between how each is legally defined according to the Income Tax Act.

In Canada, the term "nonprofit" is generally applied to organizations representing one of three groups:

Registered charity

Distinct from not-for-profit corporations, charities run programs that meet the charitable activities as outlined by the Canada Revenue Agency’s Charities Directorate. They are registered and regulated by the CRA and are able to issue tax receipts to donors.

Video : What is charitable status? (from The Charities File)

http://sourceosbl.ca/resource/video/en-quoi-consiste-le-statut-dorganisme-de-bienfaisance

(http://sourceosbl.ca/node/7510)

Foundation

A type of registered charity that primarily exists to distribute funds to qualified donees. Canadian foundations may give grants (donations) to other charities, they may exist to be a funding arm for another charity - such as hospital foundations - or they may carry on their own charitable activities.

Nonprofit corporation

Incorporated as a legal entity separate from its members and directors. Not all register as a charity with the CRA. They can earn a profit, but profits are used to further its corporate goals (and not be distributed to shareholders, members, or directors).

Alternatives to becoming a charity

Before you decide to register a charity with the Canada Revenue Agency (CRA), you should consider other possible ways of achieving your goals. Being a registered charity involves many challenges, obligations, and related costs, so it is wise to look at all the alternatives and select the one that will best help you meet your goals.

If your goal is to carry on a specific charitable program or activity, consider alternatives to establishing a charitable organization. If your goal is to ensure that a significant donation of funds is used for a specific purpose, both now and in the future, consider alternatives to establishing a foundation.

If your goal is to operate a specific kind of program or activity to achieve your charitable aims, there are various ways of doing this without creating a separate registered charity. Consider the following.

Which is right for you?

This depends on the activities you will be carrying out. Charities have some benefits such as: issuing tax receipts to donors, certain favourable income tax treatment, and general public trust; however not-for-profit corporations and social enterprises have fewer regulatory constraints for earning income from events, fundraising and product sales. Here are some alternatives to operating a charity:

Working with an existing charity

With some 85,000 charities in Canada, it is very likely that a registered charity already exists that is working to achieve the charitable aims that you have in mind. It is also very likely that this charity would be delighted to hear from you.

Whether you are bringing volunteer talent and skills, money, or just a great idea about how to achieve your goals, it is very possible that another charity with similar goals would be in a good position to work with you to help bring your ideas to life. In fact, by working together, you may be able to improve even further on your good idea! And the existing charity will already have charitable registration, as well all the infrastructure in place to meet CRA obligations and properly manage and control operations.

How can you find possible charities to work with? You can start by searching the charities listings through CharityData. Using the advanced search feature, you can identify charities by name, location, or category of charity. You can also use a more broadly based Web search to find the websites of Canadian charities. Or you can ask other experienced people in the sector for referrals to organizations that they know.

When approaching a charity to discuss the possibility of working together, understand that most charities are already frantically busy. To be taken seriously, you should be prepared to share your own work, plans, and budgets, rather than simply talking about your great idea. Understand as well that most organizations have their own internal review and approval processes, and their own priorities. However, if you have a well-thought-out plan that addresses how you will accomplish your programming goals, including how you intend to resource it, and it is within the core mission and objects of the other organization, you have a good chance at getting a fair hearing.

Use CanadaHelps, CharityData or CRA's database of registered charities to research existing charities that provide similar services or support the same cause.

Operating as a nonprofit

If what you want to do is partially charitable (according to the legal definition) and partially not, operating as a nonprofit is the likely solution. (If your activities are exclusively charitable, however, you must be a registered charity.) Many great charitable works are done by nonprofit organizations without registered charitable status.

Although nonprofits are not able to issue tax receipts, they have somewhat greater latitude as to how they can raise funds and operate. For example, CRA limits on the political activities of charities do not apply to nonprofits. Nor do CRA rules on the disbursement quota or its fundraising guidelines.

If you plan on raising most of your funds from activities such as fundraising events where no receipts need to be issued and from user fees, there may be little or no advantage (and several disadvantages) to operating as a registered charity.

If what you want to do is partially charitable and partially not, a nonprofit corporation might be a better fit. Nonprofits have different latitude in operations, even though they cannot issue tax receipts. Nonprofits have fewer regulations when it comes to:

political activities (charities are limited);
fundraising events & events in general (charities require receipting procedures); and
user fees (charities require receipting procedures that nonprofits do not).
Operating as a social enterprise or business

You may also consider operating your program or activities as a business. For example, if you expect user fees to more than cover all of the costs of offering a program, it may be that a for-profit business model is the best approach. The service or activity you offer may still be "good" and may benefit participants or the community at large, even though it pays for itself. This is often referred to as carrying on a social enterprise.

In such a case, you will have to pay income taxes on any profits, but if profits are small or are reinvested in growing the organization and its programs, the amount of tax may actually be small, and paying them may be easier -- and cheaper -- than dealing with the many constraints of charitable registration. As well, businesses can donate up to 75% of their net income to charity, thereby reducing the amount of tax that needs to be paid.

Finally, businesses are treated far more favourably when it comes to GST/HST/QST than are charities: businesses generally get back, through input tax credits, all of the GST/HST/QST that they pay, while charities only get about half of that tax rebated to them. A charity's GST/HST/QST tax burden can be significant, and may be much greater than the income taxes that would be owing if the organization were simply a business.

Some activities that are designed to be social enterprises (that is, combining activities that are good for the community with modest profits) could be better suited to a for-profit business model than to registered charitable status.

If the service or activity you offer benefits participants or the community, but your user fees and/or sales of products more than cover all of the costs of offering the program(s), you may want to consider establishing a social enterprise. Additionally, businesses generally get back, through input tax credits, all of the GST/HST/QST that they pay, while charities only get about half of that tax rebated to them.

Resources

Canada Revenue Agency's Charities Directorate

(https://www.canada.ca/en/services/taxes/charities.html)

Canada Revenue Agency's database of registered charities

(Info not available)

CanadaHelps' Explore Directory

(https://www.canadahelps.org/fr/explorez/)

Blumberg's CharityData

(https://www.charitydata.ca/)

Charity Tax Tools' "Alternatives to becoming a charity"

(http://sectorsource.ca/gestion-dun-organisme/cr%C3%A9ation-dun-organisme/alternatives-becoming-charity)

Corporations Canada -- Not-for-profit corporations page

(http://www.strategis.gc.ca/eic/site/cd-dgc.nsf/eng/h_cs03925.html)

Éducaloi's Introduction to registered charities

(http://sectorsource.ca/resource/web/introduction-registered-charities)

Information Services Corporation -- How to incorporate a nonprofit organization (À revoir)***********************

(https://www.isc.ca/CorporateRegistry/RegisteringaBusiness/Pages/default.aspx)

Muttart Foundation -- Drafting and revising bylaws for not-for-profit organizations in Alberta: a guidebook

(https://muttart.org/wp-content/uploads/2015/11/Drafting-and-Revising-Bylaws-2009.pdf)

http://sectorsource.ca/managing-organization/charity-tax-tools/starting-organization

What is a non-profit corporation?

Not-for-profit corporations (also called “non-share capital corporations”) are different from for-profit corporations (also called “business corporations”) in three fundamental ways:

The not-for-profit corporation is composed of members, whereas the for-profit corporation is owned by shareholders.
The members of a not-for-profit corporation cannot receive any financial (or pecuniary) gain during the life of the corporation, whereas a for-profit corporation may distribute profits to its shareholders in the form of dividends.
In some cases, the powers of a not-for-profit corporation may be limited to what is written into its objects (purposes), whereas, typically, the for-profit corporation has no such limits.

The process of incorporation is also usually different for not-for-profit corporations, although this varies from jurisdiction to jurisdiction. Incorporating a for-profit entity is a routine matter of submitting the correct forms and payments. Saskatchewan provides for a similar process with respect to not-for-profit corporations, as does the new Canada Not-for-Profit Corporations Act. Incorporating a not-for-profit entity in most other jurisdictions, however, requires government review and approval.

In various jurisdictions, additional approvals are required, or conditions must be met, for the incorporation of certain types of not-for-profit organizations and for those with certain specific words in their name.

A not-for-profit entity can incorporate either federally or provincially, depending on the scope of its stated purpose and proposed activities. Each jurisdiction has its own legislation for the incorporation of not-for-profit organizations, and its own approval process.

Implications of becoming a charity

Being registered as a charity with the Canada Revenue Agency (CRA) brings certain benefits to an organization but also several challenges and regulatory obligations. Before applying for registration, you should satisfy yourself that the benefits outweigh these challenges and obligations, and that there is no better alternative available for you.

(http://sourceosbl.ca/node/7779)

Benefits of being a charity

There are three basic advantages of being a registered charity. Registered charities:

can issue official tax receipts to donors;
receive favourable income tax treatment; and
benefit from the perception that their organization is doing good work.

Issuing official receipts

Tax receipts provide a benefit to donors and can be a significant factor in strengthening fundraising activities. Consider the impact of tax receipting on the following types of potential donors:

Individual donors. Individuals benefit by using charitable tax receipts to reduce the amount of income tax they pay.
Business donors. Some businesses can benefit by reducing their taxable income based on receipted donations. But many businesses support charities by sponsorship rather than donations, and these expenditures are often a tax-deductible business expense. In this case, a tax receipt is of no additional benefit to the business.
Foundations and charitable organizations. Foundations and charitable organizations are generally able to make gifts only to organizations that are registered charities. Registered charities that receive such gifts should not issue tax receipts for them, however.
Governments. Governments are not limited in who they provide funds to, although some government programs may fund only registered charities.
Receiving favourable tax treatment

Registered charities do not pay income tax on their earnings.

When it comes to the Goods and Services Tax (or Harmonized Sales Tax or Quebec Sale Tax), charities are actually in a less favourable position relative to businesses. Whereas businesses generally get back, through input tax credits, all of the GST/HST/QST that they pay, charities normally are rebated only half of the tax they pay. This can be a more significant issue in some situations than income taxes, particularly if the charity is not anticipating a surplus of revenues over expenditures, since it must pay GST/HST/QST as applicable.

Benefiting from the perception that the organization is doing good work

Being a registered charity evokes a positive image in the minds of most Canadians. This encourages people to support charities. It is also often a factor in the mind of the individual behind a charity's formation.

Some Canadians feel that registered charities are regulated and overseen to a greater degree than are other nonprofits, and so have a greater degree of confidence when donating. While they are indeed subject to more regulation, fulfilling the regulatory obligations and retaining charitable status is not trivial. These obligations must be balanced against the benefits outlined above.

Control over charities

One motivation common to many people who want to start a charity is the desire to maintain control, either over "their" program or activity, or over "their" funds. This motivation, while generally well-intended, is misplaced. (http://sourceosbl.ca/node/7209)

Control rests with the board of directors, which has legal responsibilities to the organization itself and its charitable purpose, not with the founder. Regulatory constraints exist about what any registered charity may legally do. (http://sourceosbl.ca/node/7781)

If a high degree of control over the intended activities (in the case of a charitable program) or over ongoing funding (in the case of a private foundation) is a primary consideration for the founder, there are alternatives that may be more attractive than charitable registration.

Challenges faced by new charities

People who want to start a charity generally want to establish either a charitable organization (that primarily runs charitable activities) or a foundation (that typically makes donations to other charities that meet its objectives). These two types of organizations face some common and unique challenges.

A charity must:

be a legal entity. Often a charity is a corporation. As a corporation, the charity generally needs bylaws, policies and procedures, meetings of members, minutes of meetings, proper books and records of account, and so on. (http://sourceosbl.ca/node/172)

(http://sourceosbl.ca/node/7221)

(http://sourceosbl.ca/node/7815)

(http://sectorsource.ca/managing-organization/charity-tax-tools/record-keeping)

have a board of directors that will lead the organization. Often, a minimum of three directors is required, with regular directors' meetings and minutes. Directors can have a measure of personal liability for the actions of the charity, which means that there is risk associated with serving as a director.
have only eligible directors.
comply with various legislative and regulatory requirements, including those of the CRA.
have the resources to actually carry out the mission of the organization, whether that is charitable programming or making grants.

An operating charity must also raise all the funds it needs to carry out its programming, in addition to paying for the above responsibilities. Fundraising itself is a specialized function that may require dedicated volunteer or staff resources to raise sufficient funds. Along with fundraising come responsibilities to funders, such as only using funds in accordance with the funders' wishes, reporting back to and recognizing funders, and so on.

A foundation, by contrast, may not have to worry about raising funds if it has been endowed by its founder. But it will have to:

use some of its funds to pay for the above responsibilities,
manage and effectively invest its funds,
research and make prudent granting decisions, and
follow up on grants to ensure that funds were used appropriately and in accordance with the foundation's mandate and the specific terms of the grant.

Regulatory obligations of a registered charity

Registered charities are governed by the relevant requirements of the Income Tax Act. Registered charities must:

engage only in allowable activities. A charity is generally required to engage only in charitable activities that support its charitable objects.

(http://sourceosbl.ca/node/7781)

keep adequate books and records. While there are no specific requirements about how or what books to keep, they must be clear and complete so that CRA can verify that the charity is carrying on its charitable activities according to its charitable purposes. Generally, the records must include:
- Governance documents – corporate records, meeting minutes, and reports; (http://sourceosbl.ca/node/7213)
- Financial information – bank statements, journals, general ledger, tax receipt copies, payroll records, investment documents, and financial statements and reports;

(http://sourceosbl.ca/node/7210) and

Source documents – invoices, paid cheques, deposit slips, credit card statements and chits, contracts, e-mails, and memos. (http://sourceosbl.ca/node/7806)

issue complete and accurate donation receipts. CRA specifies exactly what information is required on a tax receipt. Also, any calculations or other information supporting the value of gifts and advantages must be kept. (http://sourceosbl.ca/node/7800)
meet annual spending requirements.

(http://www.crra-arc.gc.ca/chrts-gvng/chrts/prtng/spndng/menu-fra.html)

file an annual T3010 information return. An annual return must be completed and filed with CRA within six months of the end of the fiscal year. Failing to file the return will result in the charity's registration being revoked by CRA.

(http://www.cra-arc.gc.ca/chrts-gvng/prtng/rtrn/t3010flng-fra.html)

maintain the charity's legal status. This includes having an annual general meeting, elections of directors, appointment of auditors, and so on.
inform CRA's Charities Directorate of any changes to the charity's mode of operation or legal structure.

(http://sourceosbl.ca/node/7821)

Charities should advise CRA in writing of significant changes that affect their operations, legal status, or how to contact them.

Advantages & Disadvantages of incorporation
- Advantages of incorporation

There are many advantages to incorporation. These include:

A not-for-profit corporation has a legal status separate and distinct from its members. Members may come and go, but the corporation continues until it is dissolved or wound up.
The not-for-profit corporation can enter into contracts, buy and sell property, etc.
Individual members of a corporation have protection from liability for the actions of the corporation.
The formal corporate structure facilitates ongoing operations and decision-making.
There may be increased credibility with the government, funders, and the public.
The not-for-profit corporation has an enhanced ability, through its governing documents, to address membership status issues (e.g., removal for unpaid dues or death, and expulsion for disciplinary reasons).
- Disadvantages of incorporation

There are some disadvantages to incorporation. The most commonly encountered is the paperwork and regulation entailed. This includes:

Most jurisdictions require an annual corporate filing related to the location of the head office as well as director information.
Federal corporations incorporated under the Canada Corporations Act must get ministerial approval to change certain bylaws (though this will change under the new Canada Not-for-Profit Corporations Act, once the federal corporation is continued under it).
There are some constraints placed on the type of activity that the group or entity may engage in.
There is a need to devote time and resources to maintaining corporate structure that would otherwise go to carrying out the desired purposes or activities of the organization.

See : Should a not-for-profit organization incorporate? (Jeffrey Miller, 2015, Hilborn Charity Info)

Ressourdes supplémentaires.

Board Governance

The board is comprised of no less than 3 (but preferably 5 or more) directors, a majority of whom must be at arm’s length to each other, to the most senior staff person and/or other management staff. No employee may be a director. See also: Imagine Canada Standards Program Interpretation Guide on Board Composition.

Use the guides, samples and tools in this section to build a strong and effective board.

Building your Board

Charitable and nonprofit organizations are governed by volunteer boards of directors. This guide outlines key topics for building and managing your board.

Recruitment

http://sectorsource.ca/managing-organization/board-governance/building-your-board

A guide to successful board recruitment (2013, Dalhousie University)
Your board's recruitment package (2013, Dalhousie University)
Board Recruitment: Part 1 & Part 2 (2010, Deazeley)
20 questions directors of not-for-profit organizations should ask about board recruitment, development and assessment (2010, CICA)
Board building : recruiting and developing effective board members for not-for-profit organizations (2008, Board Development Program, Alberta, & The Muttart Foundation)

Get more targeted resources at Standard A18: Board Composition

Evaluation – Performance of the Board
Board self-evaluation questionnaire : a tool for improving the governance practices of non-profit organizations (2013, Dalhousie University)

(http://sectorsource.ca/resource/file/board-self-evaluation-questionnaire-tool-improving-governance-practices-non-profit)

Director Non-Performance (2010, Deazeley) (http://sectorsource.ca/resource/file/director-non-performance)
Overcoming the Fear of Board Assessments (2010, Deazeley) (http://sectorsource.ca/resource/file/overcoming-fear-board-assessments)
Learn more about board evaluation from the Standards Reference Guide on Performance of the Board (http://sectorsource.ca/standards-community/standards-reference-guide/standard-a24-performance-board)
Succession planning
Tools for nonprofit leaders: Succession planning in the not-for-profit world (2006, CharityVillage) (https://charityvillage.com/)
Succession Planning for the Board (2010, Deazeley) (http://sectorsource.ca/resource/file/succession-planning-board)
Board Member Orientation
Effective Director Orientation (2009, Deazeley)

(http://sectorsource.ca/resource/file/effective-director-orientation)

Creating a board member's manual (2013, Dalhousie University)

(http://sectorsource.ca/resource/file/creating-board-members-manual)

Board member's code of conduct (sample policy) (2016, Governing Good) (http://sectorsource.ca/resource/file/board-members-code-conduct-sample-policy)
Board compensation & Benefits
CRA’s Policy Statement on Compensation of Directors (2005, CRA)

(https://www.canada.ca/en/revenue-agency/cra-canada.html?utm_campaign=not-applicable&utm_medium=redirect&utm_source=cra-arc.gc.ca_redirect)

Compensation of Directors of charities in Ontario - generally prohibited without court order (2010, Blumberg)

(https://www.canadiancharitylaw.ca/blog/compensation_of_directors_of_charities_in_ontario_-generally_prohibited_wit/)

Board roles & requirements

This section outlines material that can help you understand how to establish a strong board and manage risk, covering: core governing documents, how to establish by-laws and the key responsibilities of board members.

Governing documents — by-laws & Constitutions
By-law builder (2011, Corporations Canada)

(Web page not available)

Model by-laws (2014, Corporations Canada)

(https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04999.html)

Drafting and revising bylaws for Not-for-profit organizations in Alberta (2009, Board Development Program, Alberta, & The Muttart Foundation)

(https://muttart.org/wp-content/uploads/2015/11/Drafting-and-Revising-Bylaws-2009.pdf)

Organizing your corporate documents (2014, The Muttart Foundation)

(https://muttart.org/wp-content/uploads/2015/11/Organizing-Your-Corporate-Documents-2014.pdf)

Roles and Responsibilities of Board Members
Duties and Liabilities of Directors and Officers of Charities and Non-Profit Organizations (2011, Carters Professional Corporation)

(https://www.carters.ca/pub/article/charity/2011/tsc0329.pdf)

When a Director Disagrees with a Board Decision(2009, Deazeley)

(Info not available)

What If Board Member is Treasurer and Chair of Audit Committee? (2009, Deazeley)

(http://sectorsource.ca/resource/file/what-if-board-member-treasurer-and-chair-audit-committee)

Board member's job description (2016, Governing Good)

(http://sectorsource.ca/resource/file/board-members-job-description-sample)

Board chair job description (2016, Governing Good)

(http://sectorsource.ca/resource/file/board-chair-job-description-sample)

Legal responsibilities of boards (2016, Governing Good)

(http://sectorsource.ca/resource/file/legal-responsibilities-boards)

Board policies and planning

This section provides you and your board with guidance on strategic planning and a collection of standard policy examples every board should have in place. (http://sourceosbl.ca/node/38)

Strategic planning
20 questions directors of not-for-profit organizations should ask about strategy and planning (CICA, 2008)

(http://sectorsource.ca/resource/file/20-questions-directors-not-profit-organizations-should-ask-about-strategy-and-planning)

Best Practices in Strategic Planning - Charity Village article

(https://charityvillage.com/)

Seven Sins of Strategic Planning - Charity Village article

(https://charityvillage.com/)

The Balanced Scorecard: From Strategic Plan to Effective Execution - Charity Village article (https://charityvillage.com/)
What role should the Board of Directors play in strategic planning? (Beth Deazeley)

(http://sectorsource.ca/resource/file/what-role-should-board-directors-play-strategic-planning)

Mission statement development
BoardSource : The Mission Statement

(http://www.boardsource.org/Knowledge.asp?ID-1,262&gclid-CJPWn4fw_ZICFRciFQodcQkLFQ)

Harvard Business Review: How to Create an Effective Nonprofit Mission Statement

(https://hbr.org/2011/03/how-nonprofit-misuse-their-mis)

The Importance of Vision, Mission and Values (Beth Deazeley)

(http://sectorsource.ca/resource/file/importance-vision-mission-and-values)

Key Board Policies
- Code of conduct & ethics
- Example of HR politics (http://sourceosbl.ca/node/7404)
- 20 Questions Directors Should Ask About Codes of Conduct (CICA, 2010)
- Private Policy
- Charity Central's Privacy Policy Checklist

(http://www.charitycentral.ca/wp-content/uploads/privacy-en.pdf)

Summary of privacy laws (federal and provincial) by TechSoup

(https://www.techsoup.ca/)

Act to Charitable and Non-Profit Organizations – Fact Sheet from the Office of the Privacy Commissioner

(Info not available)

Links to provincial laws and oversight bodies

(https://www.priv.gc.ca/en/about-the-opc/what-we-do/provincial-and-territorial-collaboration/provincial-and-territorial-privacy-laws-and-oversight/)

(Info not available)

Complaintes
Toronto Affordable Housing Office Complaints Policy

(Info not available)

BC Cancer Foundation Complaints Policy

(https://bccancerfoundation.com/complaints/)

Complaints policy and procedure - sample from Imagine Canada (Info not available)
Conflict of interest policy
Community Sector Council Newfoundland and Labrador

(http://communitysector.nl.ca/board-development/conflict-interest-policy)

Whistle blower policy
Whistleblower policy - Ducks Unlimited

(https://www.ducks.ca/whistleblowers/whistleblower-policy-procedures/)

Policy on the Internal Disclosure of Information Concerning Wrongdoing in the Workplace - Treasury Board Secretariat. For organizations under federal jurisdiction (Canada Labour Code)

(https://www.tbs-sct.gc.ca/pubs_pol/hrpubs/tb_851/idicww-diicaft01-eng.asp)

Whistleblower Policy - Canadian Council of Christian Charities

https://www.cccc.org/documents/governance/CCCC_Whistleblower_Policy.pdf

Fundraising

Funding sources change but fundraising remains constant to the work of most charities and nonprofits. It is common within an organization that every staff, board member, and volunteer participate in fundraising in one way or another. To guide your fundraising practices this section highlights:

Grantseeking Fundamentals
Fundraising Management & Policies
Corporate Giving
Ethics & Risk Management

See also our Reporting and receipting page in the Finance & Administration section for information on reporting and transparency.

Imagine Canada's Standards Section C provides a comprehensive list of practices & policies for every board to have in place. See the library for key documents supporting the Fundraising Standards.

Grantseeking foundamentals

Grantseeking and prospecting funds often becomes the business of almost anyone involved with a nonprofit organization. This page provides resources on key aspects of grantseeking for the novice to the seasoned professional.

Fundraising strategies
Introduction to Fundraising Planning - Webinar. (GrantSpace, 2011)

(Info not available)

Board handbook for fundraising.(VON, 2002)

(http://www.orgwise.ca/sites/osi.ocasi.org.stage/files/resources/Board%20Handbook%20for%20Fundraising.pdf)

Friendraising : raising funds, finding friends to realize bold community visions : a workbook (Born, 2003)

(Info not available)

Donor centered fundraising : how to hold on to your donors and raise much more money(Burk, 2003) Members of Imagine Canada can borrow this book through our Lending Library program.

(http://sectorsource.ca/resource/book/donor-centered-fundraising-how-hold-your-donors-and-raise-much-more-money)

Face to face : how to get bigger donations from very generous people.(Wyman, 1993)

(https://www.gov.mb.ca/chc/pdf/ch_how_to_get_donations.pdf)

Considerations in Developing Gift Acceptance Policies

(http://www.carters.ca/pub/seminar/charity/2011/kebbo414.pdf) Presentation (Carters Professional Corporation)

Prospect research & grantseeking
Canada Business: Government Grants, Loans and Financing - Free search tool listing over 400 government funding programs.

(Info not available)

The Scoop(newsletter) from the Association of Professional Researchers for Advancement – Canada APRA – APRA’s online quarterly newsletter.

(Info not available)

The Fundraising Authority: How Many Prospects do You Need? An article discussing prospect ratios for major gifts.

(https://thefundraisingauthority.com/donor-cultivation/prospects/)

Debunking Foundation Myths - Article discussing 5 common foundations myths with Mark Blumberg, a charity lawyer based in Toronto, Canada.

(Info not available)

Insights on Grantseeking (Imagine Canada's Blog) Part one focuses on planning and research, while part two looks at proposal writing and stewardship.

(Info not available)

Proposal Writing
GrantSpace: Sample Documents - This free collection contains winning proposals, cover letters, letters of inquiry, winning proposal budgets, and more. (https://learning.candid.org/)
Common Reasons Grant Proposals Get Rejected - Grantmakers reveal the most common reasons proposals get rejected in this Chronicle of Philanthropy article (Info not available)

Foundation Center: Proposal Writing Short Course - Describes in detail how to prepare of the various components of a funding proposal, and includes planning, research, and cultivation of potential foundation and corporate donors. (Info not available)

Cass CCE: The Art of Refusal A new report sets out a new series of guidelines to help charities reduce the time spend on unsuccessful grant applications.

(https://www.bayes.city.ac.uk/__data/assets/pdf_file/0008/103679/PromisingPractice_Complete_Electronic.pdf)

Demystifying Grant Seeking; What You Really Need to Do to Get Grants. (http://sourceosbl.ca/node/419
Webster’s New World Grant Writing Handbook

(http://sourceosbl.ca/node/1679) – par Sarah D. Watson (anglais seulement). Les membres d’Imagine Canada peuvent emprunter ce livre de notre Bibliothèque.

Corporate giving

Corporate sponsorships, donations and grants make up approximately $3 billion worth of funding to the charitable sector in Canada (Corporate community investment practices, motivations and challenges (CSBCC) pp. 1). The following list of resources focuses on corporate community investment in charities and nonprofits.

Fundraising from Corporations
The Who, How, What and Why of Corporate Community Investment in Canada (by Clarke & Ayer 2010)

(http://sectorsource.ca/resource/file/who-how-what-and-why-corporate-community-investment-canada-summary-findings-canada)

Insights for strategic corporate fundraising (Ayer, 2010)

(http://sectorsource.ca/resource/file/insights-strategic-corporate-fundraising-further-findings-canada-survey-business)

Corporate community investment practices, motivations and challenges : findings from the Canada Survey of Business Contributions to Community (CSBCC) (Hall et al. 2008) Read the Executive Summary.

(http://sectorsource.ca/resource/book/corporate-community-investment-practices-motivations-and-challenges-findings-canada)

Business contributions to Canadian communities : findings from a qualitative study of current practices (Hall et al. 2007) [available online]

(http://sectorsource.ca/resource/file/business-contributions-canadian-communities-findings-qualitative-study-current)

Beyond good company : next generation corporate citizenship (Googins et al. 2007), provides insight into where corporate citizenship is going.

(http://sectorsource.ca/resource/book/beyond-good-company-next-generation-corporate-citizenship)

Agreements and Sample Politics
Corporate Sponsorship Policy - Canadian Public Health Association

(https://www.cpha.ca/en/legal/sponsorship.aspx)

Sponsorship and Gift in Kind
Canadian Heritage partnering framework : a corporate sponsorship toolbox.(Canadian Heritage: 2002).

(https://publications.gc.ca/site/archivee-archived.html?url=https://publications.gc.ca/collections/Collection/CH4-58-2002E.pdf)

Achieving sponsorship success : advice and tools for association executives (Brown & Brown, 2006)

(Inaccessible)

Regulations on reporting gifts in kind and other types of donations: see “Gifts and Receipting”

(http://sectorsource.ca/managing-organization/charity-tax-tools/gifts-and-receipting)

Fundraising Ethics & Risk Management

Fundraising is easily one of the most scrutinized activity of charities and nonprofits. This page provides resources to understand ethical issues in fundraising and manage risks associated with fundraising activities.

Codes of Ethics
Imagine Canada's Ethical Fundraising & Financial Accountability Code (Most of these standards are now included in the new Standards Program.) (Info not available)
Association of Fundraising Professionals Code of Ethical Principles & Standards (https://afpglobal.org/ethicsmain)
Canadian Association of Gift Planners Code of Ethics

(https://www.cagp-acpdp.org/en/code-of-ethics)

Donor Bill of Rights (https://afpglobal.org/donor-bill-rights)
Fundraising activities
Evaluating fundraising (Charity Law Information Program)

(http://www.capacitybuilders.ca/uploads/9/8/9/9/9899852/fundraisingfundamentals-evaluatingfundraising.pdf)

Fundraising by Registered Charities- Guidance from the Canada Revenue Agency

(https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/policies-guidance/fundraising-registered-charities-guidance.html)

The New CRA Fundraising Guidance: What Practioners & Boards Need to Know - Charity Tax Tools, Imagine Canada (webinar slides)

(http://sectorsource.ca/resource/file/new-cra-fundraising-guidance-what-practitioners-and-boards-need-know)

Charitable Fundraising: Tips for Directors & Trustees - Ontario Public Guardian & Trustee
(Info not available)
Commentary on Tips from the Ontario Public Guardian & Trustees - Carters Professional Corporation

(https://www.carters.ca/pub/bulletin/charity/2009/chylb176.pdf)

Fundraising activities - Charity Tax Tools, Imagine Canada

(http://sectorsource.ca/managing-organization/activities/fundraising-activities)

Gifts & Receipting - Charity Tax Tools, Imagine Canada

(http://sectorsource.ca/managing-organization/charity-tax-tools/gifts-and-receipting)

Donation or Sponsorship? Know the Rules, Reap the Rewards - Charity Tax Tools, Imagine Canada (webinar slides)

(http://sectorsource.ca/resource/file/donation-or-sponsorship-know-rules-reap-rewards)

Fundraising costs
New Rules for Charities' Fundraising Expenses and Program Spending: Questions for Directors to Ask- Chartered Accountants of Canada
Calculating Your Fundraising Ratio - Community Sector Council of Newfoundland & Labrador (http://communitysector.nl.ca/ratio/)
Cost of Fundraising: Questions & Answers - Imagine Canada & Association of Fundraising Professionals (Info not available)
The Elephant in the Room: The High Cost of Fundraising - Dana Young (http://sectorsource.ca/resource/file/elephant-room-high-cost-fundraising) also (http://sourceosbl.ca/note/7983)
Guide to Giving (answers to donors' questions about fundraising) - Imagine Canada (Info not available)
Research
Perspectives on Fundraising: What Charities Report to the CRA - Research Commissioned by The Muttart Foundation

(http://sectorsource.ca/resource/file/perspectives-fundraising-what-charities-report-canada-revenue-agency)

also (http://sourceosbl.ca/node/5665)

Talking About Charities - Research Commissioned by The Muttart Foundation (https://muttart.org/publications/surveys-results/)
Donor records and privacy
Regarding Donor Lists: CMA Code of ethics

(https://thecma.ca/resources/code-of-ethics-standards)

Financial Responsibilities of Not-for-Profit Boards (The Muttart Foundation)

(https://muttart.org/wp-content/uploads/2015/11/Financial-Responsibilities-2008.pdf)

Donor Bill of Rights (AFP) (https://afpglobal.org/donor-bill-rights)

Risk Management
- Risk Management Basics
  - What is risk management?

Risk management is not a task to be completed and shelved. It is a process that, once understood, should be integrated into all aspects of your organization's management. Risk management is the ongoing process of:

identifying and prioritizing risks;
developing a written action plan for each significant risk;
sharing the plan with staff and providing training if necessary; and,
monitoring and updating the plan where necessary.

One way to categorize different risks is to look at the four assets that all nonprofit organizations have:

people (directors, volunteers, employees, clients, donors)
real property (includes buildings, facilities)
income (donations, membership fees, grants & contributions, investment earnings)
goodwill (reputation, stature in the community, ability to raise funds, appeal to prospective volunteers, board members, & staff)

Risks differ depending on your organization's unique activities and holdings. For this reason we are dealing with specific risk management principles in the other subject specific areas, such as Board Governance and Staff Management. A risk for a board member could be a lawsuit flowing from a board decision. A risk for a volunteer could be an accident while driving a client to an appointment. A risk for a building could be fire or water damage. A risk to office supplies could be theft. A risk to grants and contributions could be a change in government. A risk to goodwill could result from a scandal.

The Boundary Form : a simple and powerful risk-management tool (Imagine Canada, 2010)

More about general risk management:

About Risk Management Committees: An Invaluable Resource (Nonprofit Alliance)

(Not available)

Getting started managing your risk (Insurance Bureau of Canada, 2010)

(Not available)

20 Questions Directors of Nonprofit Organizations Should Ask About Risk (CICA, 2010)

(http://sectorsource.ca/resource/file/20-questions-directors-not-profit-organizations-should-ask-about-risk)

Do you need risk management or insurance?

Risk management is not the same as insurance.

Proper insurance pays for legal fees, settlements or judgements in the event that your organization is sued. But too often insurance represents a large portion of a nonprofit's total risk management effort. Insurance provides help after the problem or allegation has already occurred. It's necessary, but it's not enough; appropriate risk management can often stop problems from occurring in the first place.

The risk management process provides a framework for identifying risks and deciding what to do about them. It is easy to become overwhelmed by the huge list of risks facing an organization, but not all risks are created equally. Risk management is about assessing risks and deciding which require immediate attention.

Legal Risk Management Checklist for Charities (Carters Professional Corporation, 2011)
Legal Risk Management Checklist For Not-For-Profit Organizations (Carters Professional Corporation, 2012)

Insurance & Liability

Insurance and Liability for charities and nonprofits

How insurance work

Insurers determine how much to charge per policy based on the probability that there will be a claim on that policy. Your organization may never have had a claim or a problem, but your premiums will be based on the national statistics your insurer has on file for similar organizations.

Do we really need insurance?

Nonprofit organizations are not required to have insurance to operate in Ontario, except for vehicle insurance for volunteer drivers. Take the example of the risk of serious injury from an accident for daily drivers. How likely is it that:

an incident would occur?
the incident could result in a financial catastrophe for your organization?
you would require legal help to defend a claim?

For most nonprofits, it makes more sense to make regular payments (premiums) to an insurer than to risk a financial loss that would severely impact their ability to operate.

Insurance policies for nonprofits

Insurance is generally intended to help policyholders cope with the financial consequences of unpredictable events that are "sudden and accidental." No insurance contracts pay for every potential risk or problem an organization faces. Insurance policies you may need generally fit into two categories:

Loss coverage. These policies provide coverage to items or places that your nonprofit owns (e.g. buildings, vehicles, desks, computers, important papers) in the event they are lost, stolen, or damaged.
Lawsuit coverage. Called liability policies, these policies cover your organization and people from a lawsuit.

Personal lines insurance (e.g., car insurance, home insurance) covers assets an insured person owns or leases or for lawsuits against the insured personally. Commercial lines insurance is for organizations and businesses and covers the assets that an organization or business owns or leases or for lawsuits against it.

Liability Insurance Nonprofits Should Consider briefly outlines eight policies relevant to nonprofits. (http://sectorsource.ca/node/83)

Insurance Coverages Nonprofits and Charities Need to Understand is an excellent detailed summary of insurance coverages charities and nonprofit may need and should be familiar with.

(http://sectorsource.ca/sites/default/files/resources/files/nonprofit_insurance_coverage_20090403.pdf)

Commercial general liability (CGL)

Covers: Bodily Injury and Property Damage, Personal Injury, Medical Payments (NO lawsuit), Tenants’ Legal Liability, Endorsements like Non-Owned Automobile Liability.

Directors’ and Officers’ liability

Directors and officers of nonprofit organizations are at risk as they can be held:

personally liable for their decisions.
liable for acts committed by other directors simply because they sit on the same board.
How to read a policy

Your renewal policy just arrived in the mail. Beyond just answering any questions you have been asked, take the time to read the policy and ensure you can answer these questions:

what is covered and what is not covered (the key is to review the exclusions);
who is covered (look at what groups of people are defined as named insureds - e.g., volunteers); and
who is not covered (e.g., volunteers, special committees).

If anything is not clear, ask for help. If you cannot find it in the policy, ask for a positive answer ("yes they're covered") in writing (email is fine). Keep that email with your other insurance documents.

Don't be nervous contacting your insurance broker or agent with questions. Reading your policy wording will be tedious and tricky, but you will be glad you did if a claim hits or your coverage is questioned by a stakeholder. For more information, see How to Read an Insurance Policy (Nonprofit Risk Management Centre, 2004)

Buying insurance : what to do and what not to do

What to do

Do find an insurance agent or broker who has a strong knowledge of nonprofits. Ask what percentage of the firm's business is represented by premiums paid by nonprofits and the number of nonprofit organizations they serve. Also ask about the types of nonprofits that they insure (it might be mostly condominium corporations or professional associations). Ask for references from other nonprofit clients.
Do take the time to understand what you're buying.
Do ask about a better deal. Unless you inquire, the cost of insurance is not likely to go down.
Do keep up to date with market conditions. A "soft" insurance market means that it is generally an excellent time to find strong coverage at a reasonable price. A couple of months before your renewal date, contact your broker and ask what they expect regarding renewal premiums (or coverage possibilities). Also ask if they plan to approach other insurers at renewal and how many.
Do obtain independent advice. If your nonprofit relies on an insurance agent or broker who also serves on your board, eliminate this serious conflict of interest as soon as possible. Either the agent/broker should step down from the board, or you should find a new agent or broker.

What not to do

Don't assume that your premiums will go down over time because your nonprofit hasn’t made a claim, as premiums are only partly affected by your history. However, it doesn’t hurt to ask.
Don't assume that your insurer is committed for the long term. Insurers may decide not to renew policies, sometimes because they decide to stop insuring a certain segment of the nonprofit sector. Insurance is a business, after all. Small and medium businesses are often in the same predicament as small and medium nonprofits in this regard.
Don't be overly trusting. You have an obligation to protect your nonprofit's assets, so take time to understand your insurance coverage rather than just waiting to hear "don't worry, you're covered." Ask for it in writing if your broker or agent cannot show you the answer clearly in the policy wording.

Guidelines and checklists
- Risk management for Boards of Directors
- Legal Risk Management Checklists for Charities & Nonprofits (Carters Professional Corporation) (Not available)
- Directors' Liability: a discussion paper on legal liability, risk management, and the role of directors in nonprofit organizations (Volunteer Canada) (Not available)
- Oversight of Risk by the Board of Directors (Beth Deazeley)

(http://sectorsource.ca/resource/file/oversight-risk-board-directors)

Financial risk management
Financial Policies & Procedures: Protecting Your Organization's Financial Assets (Ontario Ministry of Agriculture, Food & Rural Affairs)

(Info not available)

Financial risk management : a guide for nonprofit executives (Lockwood Herman, 2008)

(http://sectorsource.ca/resource/book/financial-risk-management-guide-nonprofit-executives)

The Tale of the Trusted Employee (Bill Harper)

(http://sectorsource.ca/resource/file/tale-trusted-employee)

It Pays to Manage Risk Management (Bill Harper)

(http://sectorsource.ca/resource/file/it-pays-manage-risk)

A Most Taxing Risk (Bill Harper)

(http://sectorsource.ca/resource/file/most-taxing-risk)

Tax Shelters - No Shelter for Charities (Bill Harper)

(http://sectorsource.ca/resource/file/tax-shelters-no-shelter-charities)

Provincial Charity-Related Legislation (Bill Harper)

(http://sectorsource.ca/resource/file/provincial-charity-related-legislation)

Avoiding fraud

Safeguarding Nonprofit Organizations against Fraud - webinar from KPMG

Learn how fraud happens in charitable organizations and learn what you can do to protect your organization from fraudulent activity.

Columns by James F. Finlay

ACFE Issues 2010 Report to the Nations on Occupational Fraud and Abuse (http://sectorsource.ca/resource/file/acfe-issues-2010-report-nations-occupational-fraud-and-abuse)
Payroll Frauds (http://sectorsource.ca/resource/file/payroll-frauds)
Control Your Cash and You Control Your Business (http://sectorsource.ca/resource/file/control-your-cash-and-you-control-your-business)
Tone at the Top Sets the Tone for All (http://sectorsource.ca/resource/file/tone-top-sets-tone-all)
Cheque This Out (http://sectorsource.ca/resource/file/cheque-out)
How Cash May Be Stolen (http://sectorsource.ca/resource/file/how-cash-may-be-stolen)
Fraud Schemes

(http://sectorsource.ca/resource/file/fraud-schemes

Non-Profit Fraud - A Canadian Overview (http://sectorsource.ca/resource/file/non-profit-fraud-%E2%80%93-canadian-overview)

Finance and administration

Essential to every successful organization are strong practices in finance and administration, these guides provide you with resources to use to meet your nonprofit's financial management needs. In this section:

Financial Management

Financial Management provides resources on key areas such as budgeting, regulations, tax (T3010) filing, and financial statements. (http://sourceosbl.ca/node/41)

The reputation as an accountable organization is a huge asset when liaising with stakeholders. The below resources provide information on areas to consider in maintaining accountability and transparency in organizational operations.

Budgets and Basics
Keeping the Record Straight: Introductory Accounting for Not-for-Profit Organizations (Certified General Accountants of Ontario)

(http://sectorsource.ca/resource/file/keeping-record-straight-introductory-accounting-not-profit-organizations)

Financial Management & Bookkeeping Tipsheets (Young Associates)

(Info not available)

New Accounting Standards for Not-for-Profit Organizations (Charity Tax Tools, Imagine Canada (webinar)

(Info not available)

CRA Checklists (Canada Revenue Agency)

(https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/checklists-charities.html)

New Accounting Standards for Not-for-Profit Organizations: Questions for Directors to Ask (Chartered Accountants of Canada)

(http://sectorsource.ca/resource/file/new-accounting-standards-not-profit-organizations-questions-directors-ask)

Financial Responsibilities of Not-for-Profit Boards (The Muttart Foundation)

(http://sectorsource.ca/resource/file/financial-responsibilities-not-profit-boards)

The budget-building book for nonprofits : a step-by-step guide for managers and boards (Dropkin et al, 2007)

(http://sectorsource.ca/resource/book/budget-building-book-nonprofits-step-step-guide-managers-and-boards)

Generally accepted accounting principles for small non-profit organizations (Co-Co Montreal)

(https://coco-net.org/wp-content/uploads/To%20add%20to%20media%20library/nonprof_accounting_infosheet.pdf)

Records and Financing statements
Nonprofit Financial Management Self Assessment Tool (Co-Co Montreal)

(https://coco-net.org/wp-content/uploads/2012/08/faq_TACS_Financial_Mgmt_Self_Assessment.pdf)

A Guide to Financial Statements of Not-for-Profit Organizations (Chartered Accountants of Canada)

(http://sectorsource.ca/resource/file/guide-financial-statements-not-profit-organizations-questions-directors-ask)

A Guide to Bookkeeping for Nonprofit Organizations (Ontario Ministry of Agriculture, Food & Rural Affairs)

(Info not available)

Maintaining Adequate Books & Records (Bill Harper)

(http://sectorsource.ca/resource/file/maintaining-adequate-books-and-records)

Setting Up & Keeping Books & Records (Charity Tax Tools, Imagine Canada)

(http://sectorsource.ca/managing-organization/record-keeping/retaining-records)

Gestion des risques financiers.
Audits
Learn about the importance of an independent auditor (CharityVillage)

(https://charityvillage.com/)

Preparing for and Surviving a CRA Audit [recorded webinar] (Terrance Carter, Carters Professional Corporation)

(Video not available)

Gifts and receipting

An overview of the various types of gifts a charity can give, or receive.

About gifts

All gifts must have certain attributes. A gift must be:

voluntary,
a transfer of property (for example, cash, stocks, real estate, or clothes), and
unconditional.

Since a service is not property, a donation of services is not a gift. A tax receipt cannot be issued for a donation of services.

See 'What is a Gift?' (CRA, 2014)

(https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/operating-a-registered-charity/receiving-gifts/what-a-gift.html) also (http://sourceosbl.ca/node/7939)

Giving gifts to others

Charities can generally give gifts only to other organizations that can issue a Canadian tax receipt (known as qualified donees). This section discusses qualified donees and the giving of money, goods, or services to others, in more detail. (http://sourceosbl.ca/node/7905)

Gifts in kind

Gifts in kind include all types of property, except for cash.

In order to issue a tax receipt for a gift in kind, a charity must be able to determine the gift's value. Depending on the type of property, valuing it can be very straightforward or very complex.

There are many different kinds of property. The particular classification of a property depends in part upon the circumstances of the owner of the property. For example, an article of clothing could be:

personal use property, if the owner is an individual who wears the clothing;
non-capital property (i.e. inventory), if the owner is a clothing retailer; or
depreciable property, if the owner is a business that provides the clothing to its employees as uniforms to be worn on the job.

Gifts of life insurance

One way that individuals can make a large gift to charity is by giving a gift of life insurance. The charity then receives the proceeds of the insurance policy when the individual dies. An individual can give an insurance policy to a charity when the policy is first issued or at any time after that.

There are three parts to a gift of insurance that charities should understand. These are:

the insurance policy,
any premiums paid to keep the policy in force, and
the proceeds of the policy when the insured person dies.

Insurance policy

When an insurance policy is given to a charity, it must be an unconditional transfer of ownership of the policy. The policy might have no value (as is the case with a term life insurance policy or a newly issued whole life policy) or it might have a value (as is the case with an existing whole life insurance policy). If the policy has no value, the charity cannot issue a tax receipt to the donor. The insurance company that issued the policy will be able to provide the value of the policy to the charity so that the charity can issue a tax receipt to the donor.

Insurance premiums

Once a policy is owned by a charity, premiums will generally have to continue to be paid to keep the policy in force. (Some whole life policies may be “paid up”; that is, no further premiums are required to keep the policy in force.) If the donor pays the premium, she is considered to have made a gift to the charity equal to the amount of the premium. In essence, this is no different from a donor making a cash gift to the charity, which the charity then uses to pay the insurance premium.

The charity can issue a tax receipt for the amount of the premium the individual paid. The charity should obtain a copy of a statement or receipt from the insurance company to support the amount of the premium paid and also who made the payment.

Insurance proceeds

When an insured individual dies, the insurance company pays out the proceeds of the insurance. When a charity collects insurance proceeds on a policy it owns, this payment is not a gift and no receipt may be issued. This is because the policy was a gift, and was receipted accordingly at the time it was donated. But if the policy was not owned by the charity, and the charity was simply named as the beneficiary of the insurance, then the proceeds are a gift, and a tax receipt for the amount of the proceeds may be issued to the owner of the policy (usually the insured individual's estate).

Additional resources

The Community Foundations of Canada has created two detailed resources describing the various gift options and their benefits to both donors and charitable organizations : Six gift options for Canadian donors, and the Canadian Charitable Gift Matrix.

(http://communityfoundatioins.ca/fr/guide/professional-advisors-eresource/six-gift-options-for-canadian-donors/)

Who can a charity support?

A charity can provide money, goods, or services to others as a means of fulfilling its charitable objects. For example:

A health charity funds medical research through a contractual arrangement with a for-profit organization.
A food bank gives food to people living in poverty.
A mental health organization provides counselling services to people with mental illness.

Each of the above transactions directly supports the charity's objects.

In addition to directly supporting its objects, a charity can also provide a gift of money or goods to another organization so that the other organization can fulfill its objects, but only if the other organization is allowed to issue a tax receipt for the gift (and is therefore a qualified donee). A charity cannot give gifts to non-profit organizations, businesses or individuals.

A charitable organization (as opposed to a charitable foundation) is limited to gifting up to 50% of its income to other qualified donees. There are also rules that allow for the transfer of capital (for example, endowments) to other qualified donees under certain conditions.

What is a qualified donee?

Generally, a qualified donee is an organization that can issue charitable tax receipts.

The most common example of a qualified donee is another registered charity, but there are other types of organizations that charities can make gifts to. In addition to Canadian registered charities, the following are qualified donees:

1. Organizations in Canada:

the Federal or any provincial/territorial government, or their agencies, or any municipality;
registered Canadian amateur athletic associations and registered national arts service organizations; and
Canadian tax-exempt housing corporations whose sole purpose is to provide low-cost housing for seniors.

2. International organizations:

the United Nations and its agencies;
prescribed universities (universities that ordinarily include students from Canada); and
charitable organizations to which the Canadian Federal government has made a gift during the fiscal period or in the 12 months immediately preceding the period (see a list of these organizations).

See also Guidance CG-002, Canadian Registered Charities Carrying Out Activities Outside Canada.

(http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/tsd-cnd-fra.html)

Reporting gifts given to others

As part of filing its annual T3010 return, a charity must provide a list of the gifts made to qualified donees during the year. This is done using Form T1236. (http://www.cra-arc.gc.ca/F/pbg/tf/t1236)

The following information is required for each gift:

name and address of donee,
its registration number,
amount of the gift(s), and
whether or not the donee is an associated charity.

To make this easier, the Canada Revenue Agency (CRA) recommends that charities record all gifts to qualified donees in a separate account in its books and records.

Determining the value of gifts

Before you can issue a receipt to a donor, you must detemine how much the gift was worth. This section also reviews valuing advantages, items given to donors in return for their gifts.

Before you can issue a tax receipt for a gift, you must first determine the fair market value of the gift and of any advantage the donor received in return for making the gift. If you are unable to determine the fair market value of either the gift or advantage, you cannot issue a tax receipt.

This section also reviews valuing advantages, items given to donors in return for their gifts.

(http://www.cra-arc.qc.ca/chrts-gvng/chrts/prtng/rcpts/dtrmnfmy-fra.html)

What is the fair market value?

The Canada Revenue Agency (CRA) says that fair market value "is usually the highest dollar value you can get for your property in an open and unrestricted market and between a willing buyer and a willing seller who are knowledgeable, informed, and acting independently of each other."

"Highest dollar value." Fair market value is a dollar value, even if the property being valued does not have an apparent "price" (for example, if it is a rare and personal collection donated by the owner). The "highest dollar value" suggests that the fair market value is the retail value of the item.
"Open and unrestricted market." Fair market value must be determined in the context of an open market; in other words, where there are many sellers and many buyers, all competing to buy and sell goods. The fair market value is the highest price that a willing seller can get for the item from a willing buyer. In some situations, however, the fair market value may have to be determined by a professional appraiser or valuator.
"Willing buyer and a willing seller." Fair market value must be determined without considering that either the buyer or seller may be forced, induced, or reluctant to buy or sell. A person who is forced to sell may have to lower the price of a property below market value to sell it sufficiently quickly; a person who is forced to buy may end up paying more than fair market value.
"Acting independently." This is also known as acting at arm's length. It means that neither the buyer nor seller control or influence the other or have any connection that might cause one to treat the other in any special way (for example, marriage or other family relationship).

Tip: Determining fair market value can be very difficult. If a gift is complex or very valuable, you are strongly advised to get help from a professional appraiser or valuator.

Basics of determining fair market value

There are several ways to arrive at fair market value.

1. Open market. Many types of property can be valued very easily because they can be purchased on an open market at published prices. You can often use the published price of these types of items as the fair market value for tax receipt purposes.

2. Similar items in an open market. A specific item may not be available on the open market, but very similar items may be. If you can find an item that is very similar to the one your charity has received as a gift, you can use its price as the fair market value for tax receipt purposes. Or you can take the average of the prices of several similar items.

3. Use of an appraiser or valuator. If other approaches don’t allow you to determine the fair market value of an item, you may need the services of a professional appraiser or valuator. Here are some things to keep in mind when selecting an appraiser or valuator:

Look for a professional who has recognized professional credentials in his or her field.
Look for someone who specializes in the type of property that you need to value. For example, real estate appraisers do generally not also appraise rare coin collections.
Look for someone who is independent, or at arm's length, from both the donor and the charity.
Record-keeping for fair market value

You should keep records to show how you arrived at the fair market value of any gifts in kind your charity received. These documents might include:

invoices for the item or for similar items that show a retail value;
published price lists, advertisements from flyers or Web sites, etc.;
newspaper or Web site listings of stock market prices;
copies of appraiser or valuator reports; and
details of any calculations done to arrive at the final value used on a tax receipt.

Remember that prices change over time. What may be an obviously fair price today may be very hard to support in the future without documentation produced at the time the gift was made.

Valuing several items together

Sometimes, several items are combined into one gift or one advantage in return for a gift. In this case, the fair market value of the gift or the advantage is determined by assigning a separate value to each identifiable item and then adding up the values to arrive at a total.

In some situations, however, it may be possible to use averages for similar items or to come up with an accurate estimate without specifically valuing each item individually. However, you do it, you must still arrive at a valuation that can be substantiated.

Deemed fair market value rule

The Canada Revenue Agency (CRA) sometimes requires that gifts be valued for tax receipting purposes at the original cost to the donor, rather than at the current fair market value. CRA's "deemed fair market value" rule applies to gifts in kind when the property was acquired by the donor:

as part of a tax shelter arrangement;
less than three years before the donation was made; or
less than ten years before the donation was made, if one of the main purposes of acquiring the property was to donate it.

In these cases, the deemed fair market value rule means that the amount of the tax receipt must be the lower of:

the gift's fair market value; and

the cost of the property to the donor (or, in the case of capital property, its adjusted cost base immediately before the gift is made).

There are several exemptions from this rule. The following gifts should be valued at fair market value, even if one of the above conditions applies:

gifts made as a result of a taxpayer's death;
gifts of inventory from a business;
gifts of real property located in Canada;
gifts of certified cultural property (special valuation procedures apply); and
gifts of certain publicly traded securities.

Example

A donor purchases a work of art for $300 and donates the art to a charity six months later. Just before donating the art, the donor had it appraised at a value of $1,000. Because the donation is made within three years of the purchase of the work of art, the charity must issue a tax receipt for the lesser of its fair market value and its cost to the donor. The tax receipt must be for $300.

Considerations for types of property

There are several special situations where the Canada Revenue Agency (CRA) has set out specific rules or policies on determining fair market value. These are :

real property,
capital property,
listed personal property,
artworks donated by artists,
use of property, and
non-qualifying securities.

Basics for tax receipting for donations
- Information included on a receipt

The CRA has specific requirements regarding the information included on a donation receipt. They have created a checklist of mandatory elements for use when issuing an official donation receipt ; they have also provided several sample receipts for different scenarios.

(http://www.cra-arc.gc.ca/chrts-gvng/chrts/chcklsts/rcpts-fra.html)

(http://www.ca-arc.gc.ca/chrts-gvng/chrts/pbs/rcpts-fra.html)

Some of the required information, such as the amount of the gift that is eligible for a receipt (eligible amount), may be difficult to determine.

(http://sourceosbl.ca/node/7811)

A tax receipt can be issued only in the name of the individual or organization that actually gave the gift. If the donation is made by a cheque written on a joint bank account, the tax receipt should be issued in both names on the cheque, and the receipt may be used by either party to claim a tax credit.

Is a gift eligible for a receipt?

Before you issue a tax receipt, you must determine if you have truly received a gift according to the Canada Revenue Agency's (CRA's) definition. (http://sourceosbl.ca/node/7939)

To be eligible for a tax receipt, a gift must also:

be able to be valued; and
enrich the charity (that is, the gift must be the result of an intention to make a donation).

If the donor receives something in return for their gift (known as an "advantage" by CRA), you may or may not be able to issue a receipt for part of the gift (known as the eligible amount of the gift). See Split Receipting for details.

(http://sourceosbl.ca/node/7959)

Gifts that are not eligible for receipt

Some gifts, such as money received in response to a direct mail campaign, are eligible for a tax receipt for the full amount of the donation. Some gifts are eligible for a receipt for only part of the amount of the donation. Other gifts are not eligible for a tax receipt at all.

The amount of the gift that is eligible for a receipt (eligible amount), may be difficult to determine. If the value of the gift, and the value of any advantage given in return for the gift, can’t both be determined, the Canada Revenue Agency (CRA) does not allow a tax receipt to be issued.

Also, CRA generally does not allow tax receipts to be issued for the following (click on each item for more information, exceptions and examples):

Donations received as a result of an obligation or inducement

(http://sectorsource.ca/resource/glossary/donations-received-result-obligation-or-inducement-0)

Donations of services

(http://sectorsource.ca/resource/glossary/donations-services-0)

Pledges

(http://sectorsource.ca/resource/glossary/pledges-0)

Gift cards and certificates

(http://sectorsource.ca/resource/glossary/gift-cards-and-certificates-0)

The purchase of goods or services from a charity

(http://sectorsource.ca/resource/glossary/purchase-goods-or-services-charity)

Donations directed to specific individuals, families, or non-qualified donees

(http://sectorsource.ca/resource/glossary/donations-directed-specific-individuals-families-or-non-qualified-donees)

Donations for the benefit of the donor

(http://sectorsource.ca/resource/glossary/donations-benefit-donor)

Donations of non-qualifying securities

(http://sectorsource.ca/resource/glossary/donations-non-qualifying-securities)

Use of vacation property

(http://sectorsource.ca/resource/glossary/use-vacation-property)

Lottery or raffle tickets

(http://sectorsource.ca/resource/glossary/lottery-or-raffle-tickets)

Electronic tax receipt

Charities may issue electronic tax receipts, if:

the receipts contain all the required information (see Information that must be included on a tax receipt);

the receipts can be reproduced by the charity; and
the receipting information is stored on a system that is reasonably protected from unauthorized access.

Receipts may be sent to the donor by e-mail, if:

they are sent in a non-alterable format such as PDF;
they are signed with an electronic signature; and
the charity keeps copies of all e-mailed receipts.

See the CRA's Computer-generated receipts for more information.

(http://www.cra-arc.qc.ca/chrts/gvng/chrts/prtng/rcpts/cmptr-fra.html)

Keeping records of tax receipts

Charities must keep copies of all tax receipts for two years after the year for which the receipt was issued. For ten-year gifts and other gifts of enduring property, copies of tax receipts must be kept for as long as the charity is registered, plus two additional years.

Copies must be stored in a secure place and should be made available only to those with a legitimate reason to see them. (For more information, refer to the privacy legislation that applies in your jurisdiction.)

If electronic tax receipts were issued, charities must be able to reproduce electronic copies of them for these time periods. The information must be stored in a password-protected computer system. Charities should also keep backup copies of their receipts, preferably at another secure location.

Split receipting

When a donor makes a gift to a charity and receives something in return (known as an advantage by the Canada Revenue Agency), the charity can sometimes issue a charitable tax receipt for part of the value of the gift. This is called split receipting.

(https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/operating-a-registered-charity/issuing-receipts/split-receipting.html)

Rules for split receipting

Split receipting arises when a charity provides some value to a donor (an advantage) in recognition of, or in return for, their gift. The general principle is that a receipt can be issued for the value of the gift less the value of the advantage.

Situations in which a donor might receive an advantage include:

fundraising events, including dinners or cocktails;
silent or live auctions;
concerts, shows, or sporting events (for example, golf tournaments); and
membership fees paid to a charity.

Before you can issue a tax receipt for a gift or part of a gift, you must

be satisfied that the donor really intended to make a gift (as opposed to simply obtaining the advantage); that is, that the donor intended to enrich the charity, and
be able to determine the values of both the gift and the advantage. (http://sourceosbl.ca/node/7811)

The Canada Revenue Agency (CRA) has two basic rules about the size of advantages relative to the gift:

Very small advantages do not need to be deducted from the amount of the tax receipt. Specifically, advantages that are both $75 or less in value and less than 10% of the value of the gift can be ignored when determining the amount of the tax receipt, and a tax receipt may be issued for the full amount of the gift (CRA refers to this provision as a de minimis threshold);
Large advantages mean that no tax receipt can be issued. Specifically, if the value of the advantage is more than 80% of the value of the gift, then no receipt may be issued for the gift. (In exceptional situations, CRA may consider an exemption to this rule, but only if the donor's intention to make a gift can be clearly demonstrated. Contact the CRA Helpline if you believe you have such an exceptional situation.)

If the value of the advantage is between the 10% / $75 and the 80% limits, then a split receipt is issued for the difference between the value of the gift and the value of the advantage.

Staff Management

Recruiting and retaining paid staff is a key priority for most organizations. This section focuses on key aspects of staff management. Many organizations operate with paid staff and volunteers working side by side. See our section on Volunteer involvement to understand unique policies and principles for working with volunteers. In this section:

Policies and Practices

Policies and Practices provides examples of practical policies and practices to have in place. (http://sourceosbl.ca/node/43)

The backbone to any solid HR foundation is built up through good policies and practices. This page provides you a comprehensive overview of policies, practices and bigger picture studies that inform the development of any new policy.

General Management
20 Questions Directors of Not-for-Profit Organizations Should ask About Human Resources - Chartered Accountants of Canada

(https://www.cpacanada.ca/en/business-and-accounting-resources/strategy-risk-and-governance/not-for-profit-governance/)

Recruitment, dismissal and succession
- Recruitment
- Employment Contracts for Charities & Nonprofits - Carters Professional Corporation

(https://www.carters.ca/pub/bulletin/charity/2009/chylb159.htm)

Nonprofit hiring tools : Sample interview questions – CharityVillage

(https://charityvillage.com/)

Recruiting Guidelines - Law Help Ontario

(https://www.probonoontario.org/?wpdmdl=2005&ind=9)

Recruitment of senior staff
Hiring the Right Executive Director for your Organization: One size does not fit all. - Board Development Program Alberta

(http://sectorsource.ca/resource/file/hiring-right-executive-director-your-organization-one-size-does-not-fit-all)

Hiring and performance appraisal of the executive director: a self-guided workbook - Heather Halpenny and Joan Heys Hawkins. Muttart Foundation

(http://sectorsource.ca/resource/file/hiring-and-performance-appraisal-executive-director-self-guided-workbook)

Hiring a director for a nonprofit agency : a step-by-step guide -Kurt J. Jenne, Margaret Henderson. University of North Carolina.

(http://sectorsource.ca/node/7539)

For information on developing employment contracts, see the Legislation & Liability page. (http://sourceosbl.ca/gestion-dun-organisme/gestion-du-personel/lois-et-obligation).

Dismissal
The Ins & Outs of Wrongful Dismissal for Charities & Nonprofits Carters Professional Corporation

(https://www.carters.ca/pub/bulletin/charity/2009/chylb153.htm)

Just Cause for Employee Dismissal: What Employers Need to Know Carters Professional Corporation

(https://www.carters.ca/pub/bulletin/charity/2009/chylb175.pdf)

Succession
Succession planning : often requested, rarely delivered - Paul Cantor. London, Ont. Richard Ivey School of Business, University of Western Ontario, 2005

(https://iveybusinessjournal.com/publication/succession-planning-often-requested-rarely-delivered/)

Staying engaged, stepping up : succession planning and transition management for nonprofit boards of directors. - The Annie E. Casey Foundation, 2006.

(https://assets.aecf.org/m/resourcedoc/AECF-SteppingUpStayingEngaged-2006-Full.pdf)

Diversity
Board diversity training : a toolkit (Pillar Nonprofit Network, 2008)

(https://www.pillarnonprofit.ca/sites/default/files/resources/pillartoolkit_boarddiversity_05.pdf)

Big Pictures for Managers and Executives
Exploring the looming leadership deficit in the voluntary and nonprofit sector (Toupin, 2007)

(http://thephilanthropist.ca/original-pdfs/Philanthropist-21-2-362.pdf)

Compensations and benefits

Compensation and Benefits provides links to compensation principles and links to studies that provide more data.

Compensation and benefits include professional development, workplace culture, and other benefits when assessing workplace satisfaction. This page provides tools, resources and statistics that allow organizations to assess their total compensation practices help them with supporting recruiting and keeping staff.

Legislation and liability

Even if an organization is not large enough to have a dedicated HR pro, they are required to maintain an environment that meets current HR legislative requirements. This section provides links to topics that help manage HR risk such as: harassment, health and safety, human rights and privacy, among others.

Employment pratices legislation
Employment Legislation & Standards by Province (HR Council for the Nonprofit Sector) (Info not available)
Human Rights Legislation by Province (HR Council for the Nonprofit Sector) ) (Info not available)
Health & Safety Legislation by Province (HR Council for the Nonprofit Sector) ) (Info not available)
Workplace Violence & Harassment (Ontario Ministry of Labour)

(https://www.labour.gov.on.ca/english/hs/topics/workplaceviolence.php)

Other legal issues
Employment Contracts for Charities & Nonprofits (Carters Professional Corporation) (https://www.carters.ca/pub/bulletin/charity/2009/chylb159.htm)
Legislation and Policies (HR Sector council) (Info not available)
Order criminal checks on-line

myBackCheck.com

(https://www.sterlingbackcheck.ca/backcheck-canada/?utm_source=redirects&utm_medium=backcheck.net&utm_campaign=301_Redirects)

Staff Management Standards

Imagine Canada's new Standards Program includes 13 standards relating to staff management. See Section D of the Standards Program Handbook for more information on these standards, which are based on the HR Management Standards developed by the HR Council for the Nonprofit Sector.

(https://www.imaginecanada.ca/en/standards-program)

Compensation and benefits

Compensation
Get Paid What You’re Worth: A guide for Chief Staff Officers of Not-For-Profit Organizations on How to Negotiate a competitive Compensation Package By Dan Stapleton, CAE [Full report] published by: CSAE 2006.

(http://sectorsource.ca/resource/book/getting-paid-what-youre-worth-guide-chief-staff-officers-not-profit-organizations-how)

2012 Canadian Nonprofit Sector Compensation & Benefits Study. (CharityVillage, 2011) Paid Electronic Article. Imagine Canada members can borrow this item from the library.

(info not available)

2009/2010 Association executive benefits and compensation report : the benchmark report for associations, charities and other not-for-profit organizations. (CSAE, 2010) Imagine Canada members can borrow this item from the library.

(info not available)

Benefits
HR Sector Council: Compensation and Benefits Toolkit. An online toolkit to help compensation understand compensation and benefits in the Canadian charitable and nonprofit sector.

(info not available)

Leadership and Professional Development
Building leaderful organizations : succession planning for nonprofits (Wolfred, 2008)

(http://sectorsource.ca/resource/file/building-leaderful-organizations-succession-planning-nonprofits-0)

Start with why : how great leaders inspire everyone to take action, 2009. Simon Sinek. Imagine Canada members can borrow this item from the library.

(http://sectorsource.ca/resource/book/start-why-how-great-leaders-inspire-everyone-take-action)

TED Talks Simon Sinek has a simple but powerful model for inspirational leadership
Daring to Lead national (U.S.) study is produced in partnership by CompassPoint and the Meyer Foundation.

(http://daringtolead.org/)

Contracts, leaves and retirement

Employment Risk Management Columns - By Barry Kwasniewski

Employer Responsibilities towards Pregnant Employees

(http://sectorsource.ca/resource/file/employer-responsibilities-towards-pregnant-employees)

Employee Overtime: The Rules and the Risks [Overtime]

(http://sectorsource.ca/resource/file/employee-overtime-rules-and-risks)

Employment Contracts for Charities and Non-profit Organizations [Contracts]

(https://www.carters.ca/pub/bulletin/charity/2009/chylb159.htm)

Implications of SCC ruling that Human Rights Tribunal cannot award costs

(http://sectorsource.ca/resource/file/implications-scc-ruling-human-rights-tribunal-cannot-award-costs)

The End of Mandatory Retirement: Legal Implications for Employers

(http://sectorsource.ca/resource/file/end-mandatory-retirement-legal-implications-employers)

Volunteer involvement

An estimated 55% of charities and nonprofits are entirely volunteer run and every charity engages volunteers at least the board level. Engaging volunteers presents a unique set of circumstances when it comes to ethics, recruitment and risk management. Our sector could not exist or work without volunteers.

Volunteer recruitment

Provides resources that outline recruitment practices and issues around screening.

Local volunteer centres often provide opportunities for your organization to post volunteer openings. Contact the centre in your region for more information. The following organizations and programs are great sources for either organizations looking for volunteers or volunteers seeking positions.

Getinvolved.ca

(http://communitysector.nl.ca/volunteer-management/volunteer-job-descriptions)

Timeraiser (https://www.timeraiser.ca/)
Volunteer Match (https://www.volunteermatch.org/)
Charity Republic (https://www.charityrepublic.com/about)

Recruitment – best practices
Volunteer Recruitment - Community Sector Council Newfoundland and Labrador

(http://communitysector.nl.ca/volunteer-management/volunteer-recruitment)

Volunteer Recruitment: Tips from the Field - University of Texas at Austin (US) (info not available)
Screening
What is Screening? - Volunteer Canada

(https://volunteer.ca/index.php?MenuItemID=337)

The Screening Handbook - Volunteer Canada

(info not available)

Safe enough? Reviewing your screening practices- Volunteer Canada (info not available)
Understanding police records checks - Volunteer Canada
(info not available)
Screening Process: Creating a Culture for Volunteer Involvement - Volunteer Alberta

(https://volunteeralberta.ab.ca/resources/screening-in-alberta/)

Best Practice Guidelines for Screening Volunteers

- Public Safety Canada (https://www.publicsafety.gc.ca/cnt/rsrcs/pblctns/bpg-scrng-vls/index-en.aspx)

Initial Screening Tools (Linda Graff)

(http://sectorsource.ca/resource/file/initial-screening-tools)

The Short Course on Screening Protocol Design (Linda Graff)

(http://sectorsource.ca/resource/file/short-course-screening-protocol-design)

It's Never Over: Ongoing Screening of Volunteers and Paid Staff (Linda Graff) http://www.lindagraff.ca/Past%20Musings/INO%20musing.html

Volunteer Management

Volunteers are a unique and highly valuable type of human resource, but typical HR legislation and practices are not necessarily always applicable to a volunteer group. This section focuses on the risk, ethics and liability issues related to recruiting, retaining and engaging volunteers.

Standards, Rights and Responsibilities

According to the Ontario Ministry of Labour:

Volunteers are not covered by the Employment Standards Act, 2000.
Under the Workplace Safety & Insurance Act, 1997, some volunteers, such as volunteer firefighters are covered, but most are not.
Under the Occupational Health and Safety Act, a worker is defined in part as being “person who performs work or supplies services for monetary compensation”. Although this definition does not include volunteers, employers still have some responsibility for the health and safety of people visiting or helping out in their workplaces.

Canadian Code for Volunteer Involvement (Volunteer Canada)

(http://volunteer.ca/ccvi)

What does it mean to be a volunteer under Ontario employment law? (Kelly Santini LLP's employment law blog for the suddenly unemployed. 2013) (https://www.ottawaemploymentlaw.com/2013/06/volunteers-ontario-law.html)

Placement & Training
A matter of design : job design theory and application to the voluntary sector - Volunteer Canada

(info not available)

Sample Volunteer job descriptions - Community Sector Council Newfoundland and Labrador

(http://communitysector.nl.ca/job_descriptions/search)

Volunteer job descriptions : who, what, when, why, how - Community Sector Council Newfoundland and Labrador

(http://sectorsource.ca/managing-organization)

Volunteer Placement (Linda Graff)

(http://sectorsource.ca/managing-organization)

Designing and structuring volunteer training (Linda Graff)

(http://sectorsource.ca/managing-organization)

Management
Be Careful What We Wish For! The Cost-Benefit Analysis of Volunteering

(http://www.lindagraff.ca/non%20html/Cost_Ben.pdf)

The boundary form : a simple and powerful risk-management tool (Imagine Canada, 2010)

(http://sectorsource.ca/node/8510)

Managing volunteers : balancing risk and reward (Nonprofits' Insurance Alliance of California, 2000)

(http://sectorsource.ca/resource/file/managing-volunteers-balancing-risk-and-reward)

Volunteers & Risk Management for Canadian Charities & Nonprofits - Charity Village

(https://charityvillage.com/)

Volunteer Management - Volunteer Canada

(info not available)

Volunteer management practices and retention of volunteers - Urban Institute (US)

(info not available)

Charity Tax Tools

Welcome to the new Charity Tax Tools on Sector Source. Each section contains information about the basic legal requirements for all Canadian charities that are registered with CRA and entitled to issue tax receipts for charitable

http://sectorsource.ca/managing-organization/charity-tax-tools

Activités.
Activities

According to the CRA, “A registered charity may only use its resources (funds, personnel, and property) inside or outside Canada in two ways:

It can carry on its own charitable activities.” or
“It can make gifts to qualified donees (usually other registered charities).”

These activities, in either category, must directly support the charity’s stated charitable purpose.

On its own charitable activities

A charity can carry on its own charitable activities through its staff, including volunteers, directors, and employees, or through an intermediary (for example, a consultant or contractor) acting on its behalf. Whether it works through its own staff or through an intermediary, a charity must direct and control the use of its resources, although it may delegate day-to-day decisions to its intermediary.

Working through intermediaries

When a charity transfers resources to an intermediary to carry on an activity, the charity must direct and control how the resources are used. This means the charity must make decisions and set parameters on significant issues and it must maintain books and records to show this.

For more information on working with intermediaries, see Guidance CG-002, Canadian registered charities carrying on activities outside Canada and Guidance CG-004, Using an intermediary to carry on a charity’s activities within Canada.

On making gifts to qualified donees

In addition to carrying on its own activities, a charity can make gifts to qualified donees (usually other registered charities). For more information, see Guidance CG-010, Qualified donees.

To verify that an organization is a registered charity, use the "Search" feature on the List of charities web page.

Charitable purposes

An organization's purposes (sometimes called objects) are set out in its governing documents. For example, a corporation will set out its purposes in its articles of incorporation or letters patent, and an unincorporated organization will set them out in its constitution or trust documents.

The organization's purposes or objects specify what the organization is legally able to do; they describe the aim, or main intent, of the organization. The purposes give the organization the authority to do activities that are within the scope of its purposes. Activities that are undertaken beyond the scope of an organization's purposes may not have legal force and effect, and may expose the board of directors to personal liability.

For this reason, organizations often want to have purposes that are very broadly worded. This can be a problem if the organization wishes to become a registered charity because the Canada Revenue Agency (CRA) has requirements for an applicant's purposes.

CRA’s requirements for purposes

The Canada Revenue Agency (CRA) will only grant charitable registration to organizations that have purposes that are exclusively charitable.

Organizations that have purposes that could allow for non-charitable activities will be refused charitable registration, even if the organization intends to actually do only charitable activities.

When evaluating an applicant's purposes, CRA looks for purposes that are specific enough that it is clear that they fall completely within the definition of charitable. General or vague purposes that could be interpreted as being even partly non-charitable will cause CRA to decline the application for charitable registration.

Drafting the purposes is only one part of creating the governing documents for a charitable applicant. Careful consideration should also be given to drafting other parts of the governing documents, such as power clauses, and to the requirements of all applicable federal and provincial legislation. In addition to the requirements under the Income Tax Act, there may be other applicable federal and provincial legislation that you should consider.

It may be useful to draft the purposes at the same time as drafting the Statement of Activity (outlining your organization's planned charitable activities). This will assist in having compatible purposes and activities, even though these are not submitted at the same time, or to the same government body.

The assistance of a charity lawyer will be valuable in meeting CRA's requirements for purposes.

What purposes are charitable?

There is no definition of "charitable" in the Income Tax Act or similar legislation. What is charitable is determined based on the decisions of courts over more than 400 years.

Some things that benefit the public, or are "good," are not charitable. There are many beneficial activities undertaken in communities across the country that are not charitable, and so cannot be offered by registered charities. For example, sport and recreation activities do not generally fall within the definition of charitable.

The courts have identified four types of charitable activity (http://sourceosbl.ca/node/7781) :

the relief of poverty,
the advancement of education,
the advancement of religion, and
other purposes that benefit the community in a way the courts have said is charitable.

(http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps-024-fra.html)

More information from CRA

The Canada Revenue Agency (CRA) will only grant charitable registration to organizations that have purposes that are exclusively charitable.

Organizations that have purposes that could allow for non-charitable activities will be refused charitable registration, even if the organization intends to actually do only charitable activities.

The assistance of a charity lawyer will be valuable in meeting CRA's requirements for purposes.

http://sectorsource.ca/managing-organization/starting-organization/charitable-purposes

Activities

According to the CRA, “A registered charity may only use its resources (funds, personnel, and property) inside or outside Canada in two ways:

It can carry on its own charitable activities.” or
“It can make gifts to qualified donees (usually other registered charities).” (http://sourceosbl.ca/gestion-dun-organisme/dons-et-re%C3A7us/dons-%A0-dautres-organismes)

These activities, in either category, must directly support the charity’s stated charitable purpose.

Fundraising activities

(http://sourceosl.ca/node/7782)

The Canada Revenue Agency (CRA) recognizes that fundraising is necessary for many charities but expects that charities will not devote excessive resources to fundraising activities. CRA provides guidance about what it considers to be excessive, about what activities it considers to be fundraising and about how charities should determine fundraising costs.

(http://www.cra-arc.qc.ca/chrts-gvng/chrts/plcy/cgd/fndrsng-fra.htm)

What activities are considered to be fundraising?

According to the Canada Revenue Agency (CRA), any activity that includes asking for support is fundraising, unless a charity satisfies one of these tests:

the "substantially all" test, or the
four-part test.

Planning, researching, or preparing to ask for support, along with related activities such as profile raising, donor stewardship, and donor recognition, are considered fundraising activities. Sales of goods or services, except as part of a related business activity, are also fundraising. Fundraising includes activities carried out by the charity itself and activities carried out on its behalf by employees, suppliers and volunteers.

"Support" includes both cash and in-kind donations. Recruiting, asking for, managing and recognizing volunteer support are not considered to be fundraising activities however.

Requesting funds from governments, foundations or other registered charities, and operating a related business are not considered to be fundraising.

“Substantially all” test

"Substantially all" generally means "90% or more". This test is usually based on the portion of the activity's content that relates to asking for support and the resources that are devoted to the activity. CRA also considers the relative prominence of the fundraising portion of the activity.

Four-part test

CRA considers that an activity would have been done even without asking for support if all of these four questions are answered "no":

1. Was the main objective of the activity fundraising?

Generally, the main objective of an activity is the one to which the most resources are directed. It can be difficult to tell whether content is charitable or fundraising in nature. For example, a story of a child living on the streets may be told in either context -- to raise funds or to explain the social issue that the charity is addressing. To help decide, CRA looks to see if there is a clear objective to the activity other than fundraising.

2. Did the activity include ongoing or repeated requests, emotive requests, gift incentives, donor premiums, or other fundraising merchandise?

Ongoing, repeated, or emotional requests for support, or the presence of incentives or other fundraising items, suggest that the primary focus of an activity is fundraising.

3. Was the audience for the activity selected because of its ability to give?

The audience of an activity will often reflect the purpose of an activity. For example, a brochure mailed to wealthy neighbourhoods when the charity's programs are available to all (or, particularly, poorer) neighbourhoods suggests that fundraising is the main objective.

4. Was commission-based compensation derived from the number or amount of donations?

Where an activity includes paying commissions or other results-based compensation related to funds raised, then the entire activity is considered to be fundraising.

Activities that are not allowed

Regardless of other requirements, the Canada Revenue Agency (CRA) prohibits certain types of fundraising.

(http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/fndrsng-fra.html#sctn_f) (see Section F).

Other factors affecting CRA’s assessment of funding

The CRA looks at several factors besides the fundraising ratio to assess a charity's fundraising performance. In assessing whether there is a problem, CRA decides in each charity's case how much weight it gives to each of these factors:

"best practices" that CRA considers will lower the risk of unacceptable fundraising;
how the size of the charity impacts fundraising efficiency;
causes with limited appeal, which may create particular fundraising challenges
Fundraising ratio

Ratio of costs to revenue over the fiscal period : CRA Approach

Under 35% — Not likely to generate questions or concerns.
35% to 70% — CRA will look at the average fundraising ratio over recent years to see if there is a trend of high fundraising costs. The higher the ratio, the more likely it is that CRA will be concerned and will look at expenditures in more detail.
Above 70% — This will raise concerns with the CRA. The charity must be able to provide an explanation and rationale for this level of expenditure on fundraising to show that it is in compliance with CRA guidelines.
Recording fundraising costs

Costs of fundraising activities must be recorded as fundraising costs (with one exception, below). Any activity that includes asking for support is fundraising, unless the charity satisfies one of two tests that the Canada Revenue Agency (CRA) specifies. According to CRA, these tests indicate whether the activity would still have taken place without asking for support.

For the following types of activities, you must record a portion of the cost as a fundraising cost:

activities that include asking for support, but that would still have taken place without asking for support, where the "four-part" test is met; and
activities that would not have taken place without asking for support (and so are fundraising activities) but that include charitable activities designed to prompt an action or change a behaviour (and so are exceptions to the general rule).

Business activities

Registered charities (other than private foundations) are allowed to carry on business activities, which can be an important source of revenue. These activities are subject to certain limitations, however, and must adhere to Canada Revenue Agency (CRA) requirements.

Rules for business activities

A registered charity (except for private foundations) may carry on a business if it is a related business. A related business is:

a business in which substantially all of the people involved are volunteers or
a business that is linked and subordinate to the charity's charitable purpose.

Any business in which "substantially all" of the people who are involved are volunteers is a related business. Example: Charity X operates a large retail store. The charity employs a vice-president, a store manager, three shift supervisors and 60 volunteers who work in the store at various times. Following this method, there are 60 volunteers, and 5 employees, for a total headcount of 65. Since approximately 92% (60/65) of the people involved in the store are volunteers, the store meets the "substantially all" test. Since the business has met the "substantially all" test, the business is considered to be a related business.

(http://sourceosbl.ca/node/7808)

For more information, read Policy Statement CPS-019, What is a Related Business? from the CRA.

(http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-019-fra.html)

Linked to charitable purpose?

To be linked to a charity’s purpose, the nature of the business has to have some direct connection to that purpose. There are four types of connection or linkage to charitable purposes:

Business activities that supplement charitable activities. These activities are necessary for the effective operation of the charitable activity or improve the quality of the service delivered by the charitable activity. For example, a hospital operates parking lots, cafeterias, and a gift shop for the use of patients, visitors, and staff.

Business activities that are by-products of charitable activities. The charitable activity creates, as a by-product, goods or services that can then be sold. For example, a heritage village plants crops to show visitors how 19th century farm implements were used. Visitors can watch the grain being milled into flour. The flour is sold in the village and in a for-profit grocery store nearby. .

Business activities that use excess capacity of a charity. For example, a university operates classrooms and student residences, which it rents out when its academic year is not in session.
The sale of items that promote the charity or its purpose. For example, a charity sells flowers the public associates with the charity's cause.

Tip: Organizations that are considering developing a "Social Enterprise" must apply the rules relating to business activities to these initiatives.

Comparaison to charitable activities

Many activities generate revenue for a charity, but this fact alone does not cause an activity to be considered a business activity. The table below shows some differences between charitable activities and business activities.

Charitable activity	Business activity
Charities design fee structures to cover all or part of a program's costs.	Businesses design structures to generate a profit.
Charities set fees primarily with a charitable objective, for example, based on a user's means.	Businesses set fees primarily with a market objective, such as competing with other businesses.
Charities’ goods or services may not otherwise be available to their target audiences in the marketplace.	Businesses offer goods or services that are similar to others generally available in the marketplace.

Comparaison to fundraising activities

The fundamental fundraising act of soliciting donations is not a business activity, since donors give because they wish to contribute to a charitable purpose and do not expect goods or services in return.

The CRA considers that most fundraising events are business activities, in that they often have commercial attributes. For example, events such as concerts, dinners, or golf or other sporting tournaments have many features in common with for-profit entertainment offerings.

However, some events have more attributes of a fundraising activity than a business activity. As well, even where fundraising events are business activities, they may not be affected by the related business rules because they do not amount to “carrying on a business.” CRA evaluates each fundraising event on its own merits; in cases where a charity holds several similar events in the course of a year, CRA may evaluate the events as a group and decide that their recurring nature amounts to carrying on a business.

Fundraising activity/event	Business activity
Volunteers provide a significant portion of the labour, and many supplies are donated.	Labour is provided by paid employees, and supplies are purchased.
The activity typically attracts, or provides its services to, supporters of the charitable purpose, who know of the charity and its work.	The activity typically attracts purchasers who consider the services in a commercial context, as providing the best value at the lowest price.
Fundraising events have a clear “start” and “end.”	Businesses usually have continuous operations.
A charity may hold several different types of fundraising event that typically do not recur throughout the year.	Businesses usually hold the same or very similar events with great frequency and regularity throughout the year.

Comparaison to investment activities

Charities will often earn investment income, either from temporary surplus funds, or from endowments or other assets held for the purpose of generating income in support of charitable activities. While investment and business activities both derive income from assets, investment activities tend to involve the mere ownership of assets and be fundamentally passive activities.

The table below shows some differences between investment activities and business activities.

Earning income requires an active role in operating the business.

Investment activity	Business activity
Common assets include savings accounts, GICs, stocks, bonds, and other securities	Common assets are machinery and equipment, buildings, etc., that are productively operated by the organization to create goods or services that are sold.
Income is derived as a result of ownership, such as interest or dividends.	Income is derived from trading (the active purchase and resale of assets) or from creatively operating or exploiting the assets, often in unique combinations, to create good or services that are sold.
Earning income is passive, such as receiving interest or dividends.	Earning income requires an active role in operating the business.

Activités politiques.
Political activities

A charity may engage in limited political activities, subject to the rules established by the Canada Revenue Agency (CRA), if they are:

connected to the charity's purpose;
subordinate to the charity's purpose;
not partisan political activities;
if the charity otherwise devotes substantially all of its resources to its charitable purposes.

(http://sourceosbl.ca/node/7814)

Organizations must track political activity expenses for reporting on their annual T3010 filing. For more detailed information, review CRA's detailed technical policy on political activities.

What is a political activity?

According to the Canada Revenue Agency (CRA), an activity is considered to be political if it:

encourages the public to contact elected representatives or public officials, to urge them to retain, oppose, or change any law, policy, or decision in any jurisdiction;
communicates to the public that a law, policy, or decision of any level of government in any jurisdiction should be retained, opposed, or changed; or,
attempts to incite or organize the public to put pressure on elected representatives or public officials to retain, oppose, or change any law, policy, or decision of any level of government in any jurisdiction.
When is it not a political activity?

Some activities that may seem to be political are actually accepted by the Canada Revenue Agency (CRA) as charitable activities. These are:

Making representations. If you make a representation to an elected representative or public official, this is generally considered to be a charitable activity. You may need to register under the Lobbying Act if you are communicating with an elected representative or public official.
Releasing representations. Releasing the text of a representation is considered a charitable activity if the entire text is released and there is no explicit call to political action either in the text or in reference to the text. The entire representation can be released through a press release or on the charity’s website.
Public Awareness Activities. When a charity promotes public awareness about its work or an issue, and the activity is connected and subordinate to the charity's purpose, CRA considers this to be a charitable activity. The activity should also be based on a position that is well-reasoned, and not on false, inaccurate, or misleading information. Finally, although CRA accepts that public awareness material may have some emotional content, it is not acceptable to use primarily emotive material.

Is it necessary to notify CRA?

There are no special rules about notifying the Canada Revenue Agency (CRA) about political activities in particular. If your charity undertakes any significant new activity, however, and this was not included in your original application for registration as a charity, you should notify CRA.

Record-keeping for political activities

If your charity carries on any political activities, you need to be able to identify their costs. This is to demonstrate that substantially all of your charity's resources have been devoted to charitable activities. Where expenses are partly political and partly not, you need to allocate the costs accordingly, and be consistent from year to year. Your charity's physical and human resources, like its financial resources, must also be devoted substantially to charitable activities.

Record keeping

The Canada Revenue Agency (CRA) requires charities to keep certain books and records. Books and records must be clear and complete so that CRA can verify that the charity is carrying on its charitable activities according to its charitable objects.

Retaining books & records

Learn how (and for how long) the CRA requires a charity to retain the documents necessary to maintain charitable status.

(http://courceosbl.ca/node/7819)

Governance records

A charity’s governance documents include incorporation documents, bylaws, and meeting minutes, among others.

(http://osbl.ca/node/7816)

Financial records

Practical tips on how to set up and maintain your organization's finances in order to produce clear financial records both for your use, and for the CRA. (http://sourceosbl.ca/node/7817)

Recording and allocating expenses

Properly recording expenses is essential to maintaining good financial records. This section provides on overview of the many types of expenses your organization may incur, and how to allocate them among your various activities and programs. (http://sourceosbl.ca/node/7818)

Retaining books & records

There are three types of books and records a charity needs to keep: governance documents, financial information, and source documents. All charities must keep and safeguard their books and records in either English or French.

These books and records must be available to the Canada Revenue Agency (CRA). Failing to maintain adequate books and records can result in fines, penalties or revocation of your charitable status. See the CRA document Keeping Records for more detailed information.

Where books & records must be kept

The Canada Revenue Agency (CRA) requires that original books and records be kept at the Canadian address that the charity has on file with CRA. If the charity has more than one address in Canada, originals of all the charity’s books and records must be kept at the address that is on file with CRA. Maintaining books and records outside Canada but making them accessible electronically in Canada does not meet the CRA requirements.

The charity should also keep backup copies of its books and records in a separate location, preferably off-site. This is important in case the originals are damaged or destroyed (for example, by fire or water damage).

If a charity carries on any activity outside Canada, it may keep copies of books and records related to these activities at a foreign address, but the original books and records must be kept in Canada.

How long to keep books & records?

Type of record	How long they must be kept
Copies of tax receipts	Two years after the end of the year in which the donation was made
Financial records	Six years after the end of the most recent year to which they relate (or two years after registration is revoked
Incorporating documents	For as long as the charity is registered plus two years after the charity is dissolved or wound up or registration is revoked
Minutes of meetings of board of directors and of members	For as long as the charity is registered plus two years after the charity is dissolved or wound up or registration is revoked

The Canada Revenue Agency (CRA) can require that specific records be kept for a longer time, on demand. In this case, CRA will tell you how much longer you have to keep the records.

All records that are needed to deal with an outstanding CRA assessment or investigation, as well as any appeal of a CRA decision or notice of objection, must be kept until the matter has been dealt with and the time for filing any further appeal has passed.

Computerized books & records

Books and records that are maintained on a computer must be kept in an "electronically readable" format, even if the charity has paper printouts of the electronic records. “Electronically readable” means a copy that would allow Canada Revenue Agency (CRA) representatives to access the electronic records on CRA's equipment. This generally means that you must keep both the computer data files and the computer program or software application used with the files, in a format that can be installed and run on a standard computer system.

Scanned images of paper source documents or books of account are acceptable. If the scanned images give the same information as the original documents and all significant details are readable, the original paper copies of source documents or books of account may be destroyed.

Charities must ensure that books and records maintained electronically can be related back to the supporting source documents for audit purposes. That is, electronic records must have sufficient details from the source documents (for example, invoice numbers, dates, etc.) to identify the specific source document that an electronic transaction is based on.

Les tiers et les registres.
Third parties and books & records

If a charity hires a service provider (for example, a bookkeeper, an accounting firm, or an Internet application service provider) to maintain its records, the charity is still responsible for meeting all Canada Revenue Agency (CRA) requirements.

Originals and all copies of payroll and donor records, and any other records containing personal information, should be safeguarded. Access to these records should be allowed only on a need-to-know basis, in accordance with applicable privacy legislation.

Filing the T3010 return

Every registered charity in Canada must file a Registered Charity Information Return (Form T3010) with the Canada Revenue Agency (CRA) every year. The Registered Charity Information Return asks for several different kinds of information about your charity as well as a copy of its financial statements. If your charity does not file a Registered Charity Information Return on time every year, CRA can impose serious penalties.

For help filing the T3010, see the CRA’s guide, Completing the Registered Charity Information Return. The completed return should be reviewed for completeness, and must be signed by a director, trustee, or other official of your charity. If you use the forms on the CRA Web site, be sure to print extra copies for your records before mailing your return to CRA.

Other information you must include

When filing your T3010 return, you must include the Registered Charity Basic Information Sheet and a copy of your charity's financial statements.

The Registered Charity Basic Information Sheet

The Registered Charity Basic Information Sheet is pre-printed by the Canada Revenue Agency (CRA) and asks for any changes to the following information about your charity, which you should make directly on the form:

mailing address,
telephone or fax number,
e-mail or Web site address,
the name or position of your charity’s contact person,
the name your charity is known by other than its registered name, and
your charity’s program areas.

The procedure to change other information on the pre-printed Basic Information Sheet is more complicated. If you need to change your charity’s legal name, its designation (that is, whether it is a charitable organization, a public foundation, or a private foundation), or its fiscal year end, you must send a letter and supporting documentation to CRA. See Keeping CRA Informed of Changes for more information on how to tell CRA about these changes. (http://sourceosbl.ca/node/7821)

Most information that you submit to the CRA is made available to the public on CRA's Web site along with the T3010 information, so make sure that it is accurate. (http://www.cra-arc.gc.ca/chrts-gvng/lstngs/menu-fra.html)

Financial statements

You must include your charity’s financial statements as part of your annual T3010 return even if your charity was not active during the fiscal period. At a minimum, financial statements should consist of:

a statement of assets and liabilities (or "balance sheet"), and
a statement of revenues and expenditures (or "income statement").

These financial statements should show your charity’s assets, liabilities, revenues and expenditures for the fiscal year being reported.

CRA does not require that your financial statements be audited, but if they are, the audited statements must be provided to CRA. If your charity has revenue over $250,000, the Charities Directorate recommends that you have your financial statements professionally audited; otherwise, your charity’s treasurer should sign them.

Changes to T3010

From time to time the CRA revises form T3010 to reflect changing CRA information requirements on the annual return. You should be sure to use the correct version of the form, based on the year for which you are preparing the return. (http://www.cra-arc.gc.ca/F/pbg/tf/t3010/)

Implications of not filing the T3010

Not filing an annual T3010 is serious. If you do not file your T3010 on a timely basis, the following things will happen:

If the Canada Revenue Agency (CRA) does not receive your T3010 within five months of your charity’s fiscal year end, it will send you a reminder.
If CRA does not receive your T3010 within seven months of your charity’s fiscal year end, it will send you a Notice of Intention to Revoke a Charity's Registration.
In the month after CRA sends out this notice, it will try to contact representatives of your charity by telephone to remind them to file the annual return.
Two months after this, CRA will send your charity a Notice of Revocation of Charity's Registration. This sets out the date the revocation becomes affective and includes Form T2046, Tax Return Where Registration of a Charity is Revoked.

Revocation of a charity’s registration means that the charity:

is no longer exempt from tax;
cannot issue official donation receipts; and
may have to pay a tax equivalent to the full value of its net assets (this is called a revocation tax).

A charity that loses its registration may apply for re-registration. The first time it does so, it will have to pay a $500 penalty for failing to file its T3010.

Governance records

These are the documents that relate to your charity’s legal creation, registration, and operation. (http://sourceosbl.ca/node/7213)

Creation

Documents concerning the legal creation of your organization are usually issued by a government department. You typically receive them from, or have them kept by, the lawyer who helped establish the organization. If kept by the charity's lawyer, the charity should keep photocopies at its office in case anyone needs to refer to them.

Examples of these documents are:

letters patent (and supplementary letters patent, if any) or articles or certificate of incorporation, which are issued by a government department;

a legal constitution or trust deed, if your organization is not incorporated; and
by-laws passed at the time of incorporation and all amendments to them.

A charity must pass by-laws at the time of its incorporation. By-laws form part of the legal historical record of the charity. So do all amendments to the by-laws. These should be kept with the original by-laws so that there is always an up-to-date set available for reference.

Registration

Once your organization legally exists, it typically registers with one or more government or regulatory agencies for various purposes. Registration documents are issued by these agencies and are sent either to your lawyer or directly to you. Examples of these documents are:

a business license (requirements vary depending on location; check your province and municipality of operation for specific details);
a GST/HST/QST registration document; and
charitable registration documentation from CRA.

As with by-laws and similar documents, these documents should be kept in a safe location, with photocopies available for reference.

Operation

The legal operation of the charity is conducted at meetings of its members (if the charity has members) and by a board of directors, trustees, or other governing body appointed by the members (or as set out in its governing documents). Meetings of the members, the board, and the committees that the board designates to fulfill some of its responsibilities are important activities. Minutes of each meeting should be kept in writing, approved at the next meeting, signed by the chair or secretary of the meeting, and filed by date.

Other required governance records relating to your charity's operations include:
annual reports to incorporating agencies (see Requirements of Incorporating Legislation for additional information),
trademark registrations, and
the information sent to CRA (the T3010 Registered Charity Information Return). (http://sourceosbl.ca/node/7819#t3010)
Keeping financial records

The Canada Revenue Agency (CRA) does not say how to set up financial books and records or what accounting systems should be used. However, a charity's books and records must allow CRA to verify:

revenues, including all donations received;
that resources are spent on charitable programs; and
that the charity's purposes and activities continue to be charitable.

Records must be supported by source documents that allow CRA to verify the entries in the books, and must be kept in English or French.

(http://sourceosbl.ca/node/7806)

Bank account

Your charity will need to have a bank account. This account will be the central point of controlling your charity's finances. All money received should be deposited into your bank account, and all payments should be made from it (except for very small amounts).

Choose an account that will provide a statement and return your paid cheques (or copies or digital images of them) every month.
The board of directors must make a motion to authorize the opening of the account and name signing officers. Often, the bank or credit union will provide sample wording for such a motion that satisfies their lawyers.
Choose signing officers. Generally this includes the board chair and the volunteer treasurer, as well as the executive director. Signing officers are the only people who can sign cheques.
Order pre-numbered cheques. You may wish to include your charity’s address and phone number on the cheques.

It is good practice for cheques to be signed by two signing officers. However, you may require just one signature for cheques below a certain (small) limit. Remember that all signing officers will not always be available, so designate more than just two people as signing officers. NEVER pre-sign blank cheques to use when no signing officers are available.

Reconciling the bank account

All transactions will be recorded in both your accounting records and in the bank's records. But, transactions are often recorded in these two places at different times, so the balance shown in the two sets of records will also differ. Reconciliation is the way to be sure that no transactions are missed in either set of records and that your accounting records show the correct balance.

The bank will issue monthly statements showing deposits and withdrawals according to its records. Banks occasionally make mistakes on statements. Reviewing these statements, and reconciling your bank account, will identify any mistakes. Reconciliation should be done monthly, since most banks have time limits on when you can dispute their records.

The bank reconciliation should be prepared by someone who does not write cheques or handle cash deposits. It should also be reviewed and approved by a more senior person.

Recording deposits

The bank or credit union will give you deposit slips to be used to deposit money received into the account. For each deposit, you fill out a deposit slip and present it with the items to be deposited.

Keeping records of donations

A charity should keep a record of all donations received, whether a tax receipt is issued for them or not, in a Cash Receipts Journal or in a computerized accounting program. The record should include:

the donor’s name and address;
the date of the donation;
the amount of the donation;
the amount for which a tax receipt can be issued, if this is different from the donation amount (http://sourceosbl.ca/node/7811) ;
whether or not a tax receipt was issued;
if a tax receipt was issued, the number of the tax receipt; and
the purpose of the donation.
Keeping copies of tax receipt issues

A copy of all receipts must be kept for two years after the end of the year in which the receipt is issued. If the receipt is a paper receipt, a paper copy should be kept in a safe place. The Canada Revenue Agency (CRA) may ask to see this copy. More information about retaining receipts can be found in the Gifts and Receipting section.

Issuing receipts other than tax receipts

The charity may issue receipts that are not tax receipts. These receipts simply acknowledge that an amount has been received; they cannot be used by the donor to claim a charitable tax credit. These receipts should be issued in cases where the charity cannot issue a tax receipt (for example, because there is no eligible amount) or where the donor cannot use a tax receipt. These receipts should include:

the date the payment was received;
the name and address of the person to whom the receipt is being issued;
the amount of the payment; and
the payment reference (for example, the invoice number or a description of the reason for the payment, such as “membership fee”).
Recording memberships & Grants

Membership fees

A common source of funds for charities is membership fees or dues. The charity should keep records of all its paying members. These records should include:

the amount paid;
the date paid;
the expiry date of membership (if it has a fixed term);
the member’s name, address, and contact information; and
the membership category (if applicable).

Government grants

A charity may also receive funds from government grants. The records to be kept and the form of reporting are usually set out in the contract between the government and the charity. The charity must set up its records to track the flow of funds for each separate government grant. This may be done through the general ledger. Remember, each expense entered into the general ledger must be supported by source documents.

A government grant requires very precise tracking of every expense charged against it. Depending on the terms of the individual grant, expenses may be tracked and summarized by type (for example, salaries or travel) or by project cost category (for example, needs assessment or Web site development). Some expenses may be 100% project-related (for example, travel) and some may be allocated to several different activities (for example, the executive director’s salary or the costs of an event that showcased several of the charity’s programs). See Recording and Allocating Expenses for more information on this topic. (http://sourceosbl.ca/node/7818)

Invoicing for goods and services

A charity may invoice members for fees or dues, or invoice customers or clients for products or services provided by the charity. The charity should keep a record of all invoices issued and mark all payments received against this record.

Recording disbursements

Disbursements, or payments, may be made by cheque or cash. Cash disbursements should be limited to very small amounts (generally called petty cash); any large or recurring disbursements should always be made by cheque.

Petty cash disbursements

Records of each petty cash disbursement must be kept, generally on a separate spreadsheet. Be sure that you keep source documents to account for all the cash that has been given out. A source document for a cash disbursement is an invoice, expense chit or cash register receipt that accounts for the cash.

Petty cash disbursement records should be reconciled monthly. This means that the total amount from all the source documents on hand, plus the remaining amount of cash on hand, should be compared to the starting amount of cash on hand (usually called the "float"). These amounts should be equal.

Record of disbursements

Itemized records of all disbursements, or payments, should be kept in a Cash Disbursements Journal or in a computerized accounting program. In addition, if you are writing cheques by hand, be sure to fill out the cheque stub in full; this is your permanent record of cheques issued.

General Leger

The General Ledger is the central “books” of the charity’s accounting system, and every transaction – a purchase, a payment, a donation, a cash transaction – flows through the General Ledger. The information below on setting up a General Ledger applies to both computerized and manual accounting systems.

Setting up a Chart of Accounts

Setting up a General Ledger always starts with setting up a Chart of Accounts. The Chart of Accounts is a listing of all of the General Ledger accounts. There are many ways to set up a Chart of Accounts, but it is important for the charity to think through what will work best for its own situation. The Chart of Accounts should be flexible enough to allow for future expansion but easy enough to use and understand.

Setting up and maintaining the General Ledger

Usually monthly, the General Ledger is updated. This involves recording all accounting activity that affects an account on the relevant page in the General Ledger. All cash receipts that relate to an account are entered from the Cash Receipts Journal, and all cash disbursements that relate to an account are entered from the Cash Disbursements Journal. There may be other sources of information, as well, such as a General Journal.

Summarizing the General Ledger

The General Ledger provides the information used in preparing financial reports. To make this information more easily usable, and also to verify the accuracy of the General Ledger, the information is summarized into a Trial Balance, which lists the ending balance of each General Ledger account. By totaling this information in two columns, and ensuring that the two column totals are equal, the mathematical accuracy of the General Ledger is confirmed. If the totals are not equal, it is essential to go back and find the error that has caused the General Ledger to be out of balance. Once the General Ledger is in balance, information from the Trial Balance is summarized onto financial statements and other reports.

Financial Statements

Financial Statements generally include the following:

the Statement of Revenue and Expenditure (or Income Statement),
the Statement of Financial Position (or Balance Sheet),
the Statement of Cash Flows, and
Notes to the Financial Statements.

Some charities also include a separate Statement of Changes in Net Assets. A very brief introduction of Financial Statements is provided here; for help in setting up these statements for your charity, speak with a professional accountant. This will ensure that the format is correct and that you understand what should go into each line of the statements.

The information that is recorded over the course of the year goes into these reports. This is why accurate bookkeeping and internal control are so important. The quality of the Financial Statements depends on the quality of the information collected throughout the year.

Income statement

Also sometimes called the Statement of Operations or the Profit and Loss Statement, this report shows the amount of revenue that was earned over a period of time (usually a year) and the amount of expenses incurred over the same period of time. The difference between these two amounts is the excess ("profit") or deficiency ("loss") for the period.

Balance sheet

This report shows the total assets, liabilities, and equity of an organization at a point in time, generally at the end of a month or the fiscal year.

Assets are what the organization owns or is owed. They are divided into short term (or current assets), that are expected to be converted into cash or used in a year or less, and long term, which will be converted into cash or used in more than a year.

Liabilities are amounts the organization owes to others. Short-term liabilities (or current liabilities) are those that are payable within one year; long-term liabilities are those that it will pay in more than a year.

Net assets are what is left after the liabilities are subtracted from the assets.

Statement of cash flows

The statement of cash flows shows all the cash flowing into and out of the organization during the year. As well as showing revenue items (such as money received in a fundraising campaign) and expense items (such as salaries paid), it shows other cash coming into the charity (such as proceeds from a bank loan) and flowing out of the charity (such as for purchasing a delivery van). A charity does not have to prepare a statement of cash flows if the information is already apparent in the rest of the financial statements.

Setup financial statements – a few tips

A charity should set up Financial Statements and select reporting categories in a way that shows the most useful information to the statements' users. It should:

prepare statements using generally accepted accounting principles ("GAAP");
use meaningful Financial Statement categories;
ensure that any large amount is in a separate category; and
use plain, clear language and avoid jargon.
Recording & Allocating Expenses

Having accurate and meaningful financial information is essential to properly running your charity, and complying with Canada Revenue Agency (CRA) requirements. An important step in having accurate and meaningful financial information is deciding how to record expenses or costs (these terms are used interchangeably in this section).

Expenses are recorded in specific General Ledger accounts within an organization’s accounting system. There are several ways of organizing these accounts. How you go about this depends on your charity and on what information will be most useful to the people who make use of your financial statements.

Often a single financial transaction relates to more than one expense account. Because of this, you must have a fair and consistent way of splitting costs and recording them in the proper accounts.

Organizing Expense Accounts

One way to organize expense accounts is by type of expense. In this method, expense categories could include items such as:

salaries and benefits;
consultants;
rent;
office supplies; and
travel, and so on.

Organizing accounts by type of expense is quite common and lets you answer questions such as:

How much did we pay in salaries to all of our employees last month?
How much has our office space cost us this year?
How much more does it cost to heat our building this year compared to last?

If your charity is very small and has only one program or activity, this may be all the information you need in order to manage and report on your activities. Most charities will need a different approach to give them more information, however.

Another common way of organizing expenses is by function. This approach bases expense accounts on the functions, activities, or programs of a charity. Depending of the charity and its operations, expense categories might include:

fundraising,
counselling services,
research,
administration, and so on.

Organizing accounts by function allows you to answer questions such as:

What did we spend on fundraising last month?
How much have we spent offering counselling services this year?
How much more did we spend on research this year compared to last?

There are other, less common, ways of organizing expenses that may be useful in some circumstances. For example, accounts can be organized:

by department, for larger charities (for example: communications, member services, finance, human resources, executive office, and so on);
by geography, for multi-location charities (for example: by province, city, or country); or
by organization sub-unit, for federated or other complex, multi-level charities (for example: local chapters, regional offices, provincial offices, etc.)

Each of these approaches provides answers to a different set of questions, but rarely does one approach answer all of your questions. And, none of these approaches by itself is adequate to provide all of the information required in a charity’s annual reporting to the Canada Revenue Agency (CRA). To meet your charity's needs, you will probably have to combine more than one method of allocating expenses.

Combining methods of organizing accounts

In order to meet the needs of more users, expenses can be recorded both by type and by function. Unfortunately, this means a significant increase in the number of expense accounts that you will need to set up. Using the examples above, these would include:

salaries & benefits – fundraising;
salaries & benefits – counselling services;
salaries & benefits – research;
salaries & benefits – administration;
consultants – fundraising;
consultants – counselling services;
consultants – research;
consultants – administration;
rent – fundraising; and
rent – counselling services, etc.

To decide on the right account structure for your charity, keep the following suggestions in mind:

Start by identifying who will use your financial information and what they need it for. Think about the kinds of questions they will ask, and which methods will provide answers to those questions.
Remember that the Canada Revenue Agency (CRA) needs specific financial information about your organization. For example, you need to be able to complete the annual Registered Charity Information Return (Form T3010). See the section Filing the T3010 return for details. (http://sourceosbl.ca/node/7819#t3010)
Remember that it is easier to summarize detailed information than it is to split out details from summarized information.
Think about how you expect your organization to grow. What may be simple today could become more complex in the future. You should try to organize your accounts in a way that will accommodate this growth.

Costs relating to multiple expense categories

It is likely that many expense items will relate to more than one account, particularly if you have a complex or detailed set of expense accounts. For example:

The office supplies your organization purchases may be used in both administration and fundraising activities.
An airline ticket purchased for your charity’s executive director may allow her to attend two meetings; one to monitor your programs and another to solicit funding.
Your charity’s monthly telephone bill covers phones used by both your charity’s counselling service and its education program staff.
Your charity’s rent pays for office space for every staff member and every program and activity of the charity.

When a cost relates to more than one expense account, you will have to split, or allocate, that cost to each relevant account. Depending on the nature of the cost item and your account structure, this may be a simple or a complex task.

Direct Expenses

Direct expenses are the costs you incur when you carry out a specific activity. If you did not carry out this activity, you would not have these costs. Examples include the cost of:

printing flyers to advertise an event,
an instructor's travel to present an education program, or
laboratory supplies used exclusively in a research program.

Recording direct expenses

In principle, it is usually possible to accurately determine direct expenses. This is because the cost is directly related to a specific activity. However, identifying a specific direct expense is not always simple. This is usually because the direct cost for one activity may be included on an invoice with other costs for other activities. For example:

The cost of printing a flyer to advertise an event is included on an invoice from the printer along with other print jobs for other activities. You will have to find the cost of printing the flyer on the invoice and record it in the account for event promotion.

The instructor's travel expenses are included in a larger invoice from the travel agency that booked all the organization’s travel for the month. Each flight, hotel room charge, and so on must be identified and charged to the right activity;

The cost of lab supplies is included on an invoice along with supplies for many other projects. All supplies must be identified and recorded appropriately.

Recording these costs is simply a matter of locating each specific expense and recording it in the relevant account.

In some cases, you may simply be able to estimate the detailed costs of items rather than breaking each one out individually. This is appropriate if the work involved in doing the detailed calculations is large compared to the benefit of the improved information. For example, if an invoice for telephone expenses included hundreds of long distance calls at a few cents each, it would be reasonable to estimate the total value of calls for each activity rather than to individually identify each caller and the purpose of each call and adding these up.

Indirect expenses

Indirect expenses are expenses that support more than one activity of the charity or that permit the charity to carry on its work. Even if you did not carry out a specific activity, you would still incur some or all of these costs. For example:

The charity's telephone system is used to provide counselling services as well as support other services and activities.
The executive director travels across the country, teaching education programs, visiting funders, and doing performance reviews with regional staff members.
A laboratory is sometimes used by several researchers and sometimes rented out to other organizations.

Recording indirect expenses

Indirect expenses typically relate to more than one activity and may be incurred whether or not the activity takes place (for example, even if a charity has no event to advertise, it still puts out a regular monthly newsletter). Because of this, it is usually harder to identify what portion of indirect expenses relates to each of a charity’s activities. In such cases, you need to develop a reasonable basis for spreading the costs – or allocating them – among the relevant activities.

Common way of allocating expenses

Expenses that relate to more than one activity or to the general operations of your charity need to be allocated to the relevant accounts. Generally, this allocation is based on some underlying way of measuring the cost item. For example, the allocation could be based on the:

number of staff or volunteers who work on each activity,
staff time spent on each activity,
floor space taken up by each activity,
direct costs, etc., of each activity, or
revenues of each activity.

These examples present several possible approaches to allocating some common indirect costs. (http://sourceosbl.ca/node/8003)

Principles of allocating expenses

There are many ways to allocate costs. For a given situation, there may be more than one reasonable way. Use the following principles to decide on the best approach for your organization:

The basis for allocating expenses should be reasonable: there should be a clear relationship between the cost of an item, the activities it relates to, and the basis of allocation. For example, it would generally not be reasonable to allocate office heating costs on the basis of staff salaries, since there is simply no relationship between the two.
The amounts allocated should be reasonable in relation to the other costs and value of activities to the charity. For example, if one activity has $5,000 of direct costs and another has $500,000 of direct costs, it is probably not reasonable to divide the indirect costs equally between the two activities.
The allocation method should be applied consistently over time. The approach used one year should continue to be used the next, unless circumstances change significantly and in a way that specifically supports a change in how costs are allocated.
Allocation methods should be consistent for similar items. For example, it is probably not reasonable to allocate rent on the basis of square footage used in each program while allocating property taxes on the basis of the number of staff engaged in each activity.
The basis of allocation should be as simple as possible. Greater complexity should be justified by the improvement in the quality and accuracy of the information. For example, you could allocate costs based simply on the primary function of each staff member or based on details of the actual amount of time each staff member spends on each function each week. If you expect both of these methods to give you similar information, use the simpler method. For example, it is much easier to allocate costs based on each staff member's primary function than it is to have them record their time on time sheets each week and then to analyze these sheets.

Whatever expense allocation method you use, it must be clearly documented. This will help you apply the method consistently, particularly where staff or volunteers change. This will also allow you to explain your allocation process to auditors or the Canada Revenue Agency (CRA).

Keep in mind:

Funded projects may have guidelines on what types of costs can be allocated to them and budgeted levels for such allocations. These guidelines may differ from project to project. You will need to comply with these requirements for each project. This can greatly complicate your accounting.

You may not have to allocate costs invoice-by-invoice. For example, the cost of office administration (such as the receptionist and bookkeeper's salaries and benefits, their associated office supplies and so on) might be accumulated in an Administrative Costs section of the general ledger and allocated to the programs once a month rather than each time a salary cheque is issued or an invoice is paid.

It is possible to allocate costs more than once. For example, the cost of providing and supporting personal computers to staff could be allocated to the staff cost (noted as "1" below); then, the cost of staff (including their allocated PC costs) could be allocated to specific programs (noted as "2" below).

For example:

Cost of employee salaries	$635,000
Allocate (1):
Cost of employees' PCs	15,000
Cost of annual PC maintenance	4,000
Total cost of employees	$654,000
Allocated to (2):
Charitable programs	$534,000
Fundraising	75,000
Management/administration	45,000
Total employee costs allocated	$654,000

In this way, some cost allocation processes in larger organizations can become extremely complex and sophisticated.

Working with CRA

The Canada Revenue Agency (CRA) has regulatory responsibilities for charities in Canada through its enforcement of the charity-related provisions of the Income Tax Act. As such, every registered charity in Canada has to work with the CRA.

Keeping the CRA informed of changes

Your charity will likely experience a variety of changes through the years. Here's what you need to notify the CRA about and how to do so. (http://sourceosbl.ca/node/7821)

Changes that require notification

Some changes do not require approval from the CRA, but do require that you notify them. In many instances it is strongly advised that your modifications be reviewed by a legal professional before being submitted to CRA.

Changing your contact information. If you move your office or change your telephone, fax, or e-mail contact information, tell the CRA promptly by postal mail or fax. You can confirm that the change has been processed by reviewing your information in the CRA's Charities Listings.
Changing your charity's legal name. If you change your charity’s legal name, or plan to operate under a different business name, you should tell the CRA. Do not issue receipts in the new name until CRA has approved it.
Changing or adding charitable activities. When you first applied for charitable status, you listed the specific activities that your charity would undertake to fulfill its charitable objects. If your charity plans to start any new types of activities not mentioned in your original application, you should tell the CRA. They will advise you if your proposed activities are indeed charitable, and whether or not you will need to modify your charitable purposes.
Changing your charity's purposes. If you plan on changing your charity’s legal objects or purposes, you may want to consult with the CRA about your planned change beforehand.
Ceasing your charity's operation. If you no longer plan to operate your charity, you should ask the CRA to cancel your registration. This is known as a "voluntary revocation."
Changes that require CRA Approval
Changing your fiscal year-end. You must receive the CRA's approval before you change your charity’s fiscal year-end. Your charity cannot have a reporting period of more than 12 months. When you change the year-end, you will have a short reporting period to bridge the time from your old to new year-end.
Accumulating funds for a specific purpose. If your charity is planning a major project or activity (for example, constructing a building or buying expensive equipment), it may need to accumulate funds over more than one year. Since charities must generally spend 3.5% of the average value of investment assets every year on charitable activities, it could be difficult to put significant funds aside for such a project while still meeting the disbursement quota requirement. Tell the CRA the purpose of accumulating the funds, how much you need to accumulate, and how long you think it will take to accumulate them. Once they give their written approval, the funds your charity sets aside for the project or activity will be excluded from investment asset and disbursement quota calculations -- even though they are being invested pending their expenditure on a charitable project.
Change your charitable designation. When your charity was first granted charitable status, it was designated as either a charitable organization, a public foundation, or a private foundation. If you disagree with this designation or later think that the designation should change, you can apply for re-designation.
When to Get Professional Help

There are times when charities may want or need professional advice. The following types of professionals may offer services that can help charities comply with Canada Revenue Agency (CRA) requirements.

Bookkeepers perform the routine, day-to-day task of recording transactions in a charity’s accounting records. This includes

paying bills,
depositing money received in the bank,
recording transactions,
preparing tax receipts,
reconciling accounts, and so on.

Accountants generally pick up where bookkeepers leave off. They

reconcile accounts,
prepare and record adjusting entries in the accounting system,
recommend and apply accounting policies and principles,
prepare financial statements and related reports, and
can also help to prepare and analyze budgets for charities.

Auditors perform an independent examination of a charity’s financial statements. They check the work of accountants by performing various tests and other procedures that are designed to see if the financial statements prepared by the accountants present the charity’s financial results “fairly.” Their job is to provide an objective opinion about the presentation of the financial statements that gives third parties (such as funders) assurance that the statements are reliable.

Legal professionals help new charities incorporate and register for charitable status, and advise and assist charities with the interpretation and application of the law, particularly in complex or uncommon situations. Lawyers may also help charities maintain their various corporate records, such as minutes and by-laws.

Appraisal and valuations professionals may be used to establish and document the fair value of large or unusual gifts in kind received by charities. One possible source of identifying qualified professionals would be to speak with an insurance broker in your area. Charities should carefully check the professional experience and credentials of appraisers.

Systems professionals can be of help when setting up accounting systems, particularly if these are computerized. It is important to have someone with the proper information technology and computer skills set up the actual accounting software and supporting hardware. It is also important to involve a qualified accountant, particularly when developing the chart of accounts.

Finding reputable professionals

The most effective means of finding professionals is to ask for referrals from trusted colleagues in other charities. They can give you the names of professionals who have performed to their satisfaction in a situation that is likely similar to your own. Once you have several names, you should interview prospective professionals to assess their relevant experience, abilities, and style.

Penalties and sanctions

Canada Revenue Agency (CRA) is responsible for enforcing the Income Tax Act as it applies to registered charities. There are several actions that CRA can take to encourage and promote compliance with the Act or to punish registered charities that do not comply. (http://sourceosbl.ca/node/7822)

Common non-compliance problems

CRA prefers to educate charities and work with them to achieve compliance when a charity demonstrates that it is willing to do so. But if a charity deliberately breaks the law or ignores an existing compliance agreement, CRA will take stronger action.

(See : Guidelines for applying sanctions) (https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/policies-guidance/guidelines-applying-sanctions.html)

Some common problems that charities have are as follows:

Not filing the T3010 annual return
A charity must file its annual T3010 return within six months of its fiscal year-end. If the charity has not filed within this time period, CRA can revoke the charity's registration. CRA will usually give charities a chance to late-file, however, but failing to file after receiving a reminder notice will generally result in revocation.
CRA also has the right to apply a $500 late-filing penalty at any time after the six months. Currently, however, it does not apply this penalty if the T3010 return is filed before the charity's registration is revoked (see below).
If the T3010 return has not been received by seven months after the charity's year-end, CRA will send a Notice of Intention to Revoke a Charity's Registration (Form T2051A).
In the tenth month after the charity's year-end, CRA will begin the legal process of revoking the charity's registration.
Once a charity's registration has been revoked for failing to file its annual T3010 return, it may apply for re-registration (using Form T2050), at which time it must pay a $500 penalty. Note that re-registration is not guaranteed, and the organization cannot carry on as a registered charity until its re-registration is approved.
Incorrect information on tax receipts
Tax receipts may be incomplete or incorrect due to errors such as omitting CRA's Web site address or accidentally misstating the charity's name or address. In these cases, CRA will generally use an education letter to help the charity avoid these mistakes in the future.
CRA may also choose to apply a penalty of 5% (for the first instance) or 10% (for repeat problems) of the eligible amount on the incomplete or incorrect receipts.
False information on tax receipts
A tax receipt that contains false information, such as an incorrect amount or donation date, is viewed as a serious matter by CRA. In these cases, CRA will generally not use a compliance agreement but will proceed to apply penalties.
A penalty of 125% of the eligible amount on the receipt will be applied by CRA where information on the receipt has been falsified. If the total of these penalties is more than $25,000, the charity's tax receipting privileges will be suspended for a year.
If the infraction involves a tax shelter arrangement or outside parties (that is, beyond the officers and directors of the charity), more serious sanctions, including revocation, can apply.
Inadequate books and records
Problems with books and records can range from minor, inadvertent issues (such as poor housekeeping or occasional mistakes) to very serious matters (such as falsifying or destroying records to conceal other problems, or refusing access to records during an audit).

CRA will generally use a compliance agreement to deal with minor, inadvertent matters, in order to ensure the charity corrects its practices in future.

In more serious situations, CRA will usually impose a one-year suspension of the charity's tax receipting privileges. It can also move to revoke the charitable status permanently.

Penalties and sanctions for non-compliance

If a charity does not voluntarily comply with the Act or if a charity’s non-compliance is serious enough, CRA can choose to use one of the following measures:

Compliance agreements. A compliance agreement is signed by both the charity and the CRA. It lists the problems that CRA sees, the steps the charity will take to solve the problems, the timeframe in which the charity must solve the problems, and the potential consequences to the charity if it does not take these steps.
Sanctions. These include financial penalties or a temporary suspension of the charity's ability to issue official donation receipts.
Revocation of the charity's registration. CRA can remove ("revoke") the advantages of being a registered charity, such as the ability to issue official donation receipts.
Revocation tax. CRA can order a revoked charity to pay all its of its net assets to CRA as a revocation tax, if it does not transfer them on a timely basis to an "eligible donee".

CRA can choose which of these measures to use, depending on the circumstances. In situations where CRA considers there to be a "serious case of non-compliance", it will proceed directly to sanctions or revocation.

If CRA proposes to revoke your charity's status or apply a financial penalty or suspension and you disagree with this decision (with supporting evidence), you may file an objection and, if necessary, an appeal.

Other legislation affecting charities

Charities in Canada must operate within the laws of the land, whether those laws are directed specifically at charities, or at the community in general. There are several pieces of provincial legislation specifically directed at regulating aspects of charitable activity, as well as several types of legislation that commonly affect charities, even though it is not directed specifically at charities.

The Income Tax Act is very significant to registered charities because of its charitable registration requirements and the authority it grants to issue tax receipts. Many aspects of the regulation of charities' activities, however, fall to provincial and territorial governments. A primary focus of provincial charitable-sector legislation is fundraising and solicitation activities.

Charities resident or operating in some provinces should be aware of the provincial laws that may affect their activities. In particular, the following legislation, listed by enacting province, should be reviewed and complied with. Where available, links to online resources describing these legislative requirements are provided.

Other common legislation that may affect you

The charitable sector in Canada is very diverse, and it would be impossible to identify all possible types of legislation that a charity should be aware of. Following is a brief overview of some common areas of legislation that many charities should be aware of:

Taxation. Many charities are affected by federal or provincial taxes of one kind or another. Most common would be the Federal Goods and Services Tax/Harmonized Sales Tax and provincial retail sales taxes. Other types of taxation could arise in specific situations, such as property taxes and land transfer taxes.
Payroll. Charities with employees will encounter a range of payroll taxes, levies, and filing and reporting requirements, ranging from Canada/Quebec Pension Plan and Employment Insurance contributions, to workers compensation, and various provincial levies.
Employment/Workplace. In addition to the above tax and payroll-related requirements, charities with employees also need to be well aware of the requirements of the applicable employment standards and workplace safety and human rights legislation.
CRA’s position on other legislation

The Canada Revenue Agency (CRA) administers the application of the Income Tax Act in Canada, and CRA’s Charities Directorate is responsible for the Act as it applies to charities. CRA does not, however, require, monitor, or enforce compliance with other federal or provincial laws. (CRA does require that registered charities keep their legal corporate status (usually under a federal or provincial act of incorporation) in good standing in order to retain their charitable registration, since failing to do so jeopardizes the charity's legal existence.

It is possible to be in breach of other laws without being in breach of CRA’s requirements under the Income Tax Act. However, CRA may consider a charity’s compliance with other laws in the context of enforcing the Income Tax Act, specifically in deciding how to apply the sanctions at its disposal.

Source : This text is a compilation of subjects relative to the information needed in creating and managing a charity and non-profit organization in Canada presented on the Web by Imagine Canada, a national charitable organization. http://sectorsource.ca/ and http://sourceosbl.ca

Ref : Information to know to operate a Foundation.docx

Document updated: 22 déc 2021