ARCHIVED - Registered Charities Newsletter No. 33 – Fall 2009
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- From the Director General
- New fundraising guidance
- Many charities-related forms are now saveable
- My Business Account for charities
- Small and Rural Charities (SARC) Initiative update
- Charities Information Webinars
- Charities Partnership and Outreach Program update
- Tax shelter-related revocations
- Guide RC4108 is no longer available
- Contact information
From the Director General
This is the last newsletter in which I am writing as Director General of the Charities Directorate. By the time of publication I will have moved on to new challenges and will have been replaced by the new Acting Director General, Cathy Hawara.
Cathy joins the Charities Directorate from the Privy Council Office where she served since April 2007 as Director of Appointments in the Senior Personnel Secretariat, providing advice to the Clerk of the Privy Council, the Prime Minister and his office on all matters related to Governor in Council appointments. Prior to this, Cathy served as Chief of Staff to the Deputy Minister of Social Development and also worked in the Machinery of Government Secretariat in the Privy Council Office. Before joining the Public Service of Canada in 2002, Cathy carried on a general litigation practice with McCarthy Tétrault in Toronto, specializing primarily in medical malpractice.
It is my pleasure to welcome Cathy to her new position. I know she will experience the same degree of excitement and challenge that I have been so very fortunate to experience working with such a wonderfully diverse and dynamic segment of Canadian society—Canada’s charitable sector. But I must add that the pleasure of working with that sector has been matched by the pleasure of working with the wonderful people who comprise the Charities Directorate. I have been continually surprised (and at times, awed) by their dedication to, and the quality of, their work.
Although I am leaving the Charities Directorate, I am not ending my attachment to the work of the charitable sector. In the years ahead, I look forward to working with the sector in varied capacities.
Thanks to all of you who have made my stay in the Charities Directorate such a rewarding experience. I wish you all the very best of success in your charitable endeavours.
Terry de March
The ability to issue official donation receipts is a tremendous tax privilege granted to registered charities and it comes with great responsibility.
One of the Charities Directorate’s main compliance functions is to ensure that registered charities issue tax receipts in accordance with the Income Tax Act (the Act). In recent years, CRA audits of charities have uncovered many cases of improper receipting. Serious cases have led to revocations of charitable status. A charity must be aware of its responsibilities when issuing official donation receipts so that it does not unwittingly find itself in a situation of non-compliance. A charity can avoid problems for itself and its donors by only issuing proper receipts.
Improper receipting occurs when a registered charity issues a receipt in a manner that contravenes the rules of the Act. This involves, for example:
- issuing a receipt with inaccurate or missing information;
- issuing a receipt for a transaction that does not qualify as a gift;
- issuing a receipt on behalf of another organization; or
- issuing a receipt for an inflated amount.
Inaccurate or missing information
A charity must ensure that it issues donation receipts that meet the Act’s regulations about the required contents of an official donation receipt. Charities often issue receipts with inaccurate or missing information. For example, a charity may improperly issue a receipt without the address of the donor. Charities must also be aware of the different requirements for receipts issued for cash gifts and non-cash gifts (gifts-in-kind). For a complete list of these requirements see, What information must appear on an official donation receipt? and sample official donation receipts.
Transactions that do not qualify as gifts
To avoid improper receipting, a charity must know when it can and cannot issue a donation receipt. A donation receipt can be issued only if there has been a voluntary transfer of property by way of gift. Property includes tangible items such as cash, stocks, computers, and sports equipment.
Charities often make mistakes regarding the type of gifts that are receiptable. For example, a charity cannot issue an official donation receipt for a “gift” of service. Gifts of service (donated time, skills, and effort) provided to a charity are not property, and therefore do not qualify as gifts for the purpose of issuing official donation receipts. For more information see, What is a gift?
Receipting on behalf of another organization
A charity is responsible for all receipts issued under its name and registration number. It must account for the corresponding donations on its annual information return and in its books and records. Under no circumstances should a registered charity issue donation receipts on behalf of another organization or lend its registration number to another organization for receipting purposes.
Issuing a donation receipt with a dollar amount that is far in excess of what the charity has actually received as a gift can be a deliberate attempt by a charity to abuse the tax system. However, issuing a receipt for an inflated amount is not always deliberate. For example, establishing the fair market value (FMV) of a non-cash gift is frequently problematic for charities. Charities should not rely solely on the donor to give them a value for the item being receipted. The amount on the receipt should be the FMV, and if the value cannot be determined, a receipt cannot be issued. For more on FMV, see determining fair market value.
A charity’s administrators can learn how to avoid improper receipting by referring to the Charities and Giving Web pages. The pages contain entire sections devoted to receiving gifts and issuing receipts. Anyone involved in an administrative role with a charity, and responsible for issuing receipts, should familiarize themselves with the information on these pages.
Receipts and good governance
Improper receipting can also occur when a donation receipt is issued with the unauthorized use of a charity’s registration number. It may be difficult to prevent an individual or another organization from either using your charity’s registration number to produce counterfeit receipts, or impersonating members of your charity in fraudulent fundraising campaigns. After all, a charity’s registration number is publicly available. However, there are steps a charity can take to minimize these risks.
The governing body (directors, trustees, or like officials) of a charity should develop a code of conduct and administration, and follow it at all times.
The following list of internal controls can be used by a charity to guard against the inappropriate or unauthorized use of its official donation receipts. This is a general list of best practices, and is not a statement of a charity’s legal requirements or of CRA policy:
- Provide training on receiving gifts and issuing donation receipts to your charity’s directors, officers, staff, and volunteers involved in these activities.
- Limit the number of individuals authorized to issue receipts on your charity’s behalf.
- Carefully monitor the delegation of receipting authority to outside individuals, organizations, and fundraising agencies.
- Regularly review the delegation for receipting authority.
- Assign the responsibility for issuing receipts and for banking duties (for example—deposits, signing authority) to different individuals.
- Keep serial numbers in sequential order to help track your receipts.
- Keep receipt books and copies of receipts in a safe and secure place.
- Make sure that any receipt books given to people collecting donations are returned, and make sure you can account for the receipts that have been issued.
- If you discover lost or stolen receipts, notify the Charities Directorate.
- Restrict access to computerized receipting software.
- Ensure that receipting software is tamper-proof and that computer-generated receipts cannot be altered.
- Establish a donation policy and/or receipting guidelines for your charity’s donors, directors, officers, staff, and volunteers.
- Tell your donors about the fundraising campaigns that you will be conducting, and how you normally solicit funds, so they might realize when they’re being approached by an impostor.
- Give contact information (such as a telephone number) on your charity’s Web site so that prospective donors can call to confirm the legitimacy of a solicitation.
- Alert the authorities if your charity becomes aware of persons posing as fundraisers using your charity’s name without consent or if unauthorized receipts are being issued in your charity’s name.
- Get an appraisal from a professional for all non-cash gifts with a possible fair market value higher than $1000 before issuing a donation receipt.
Good governance also involves the maintenance of books and records. Keeping adequate books and records is essential to the financial administration of a charity and beneficial for donors. Furthermore, keeping adequate books and records is required in order to maintain registered status. Adequate books and records allow the CRA to verify donations made to a charity and to ensure proper use of charitable resources. Inadequate books and records can range from minor oversights on the part of a charity, to very serious infractions, including records that are deliberately altered, destroyed, hidden, or not collected in order to conceal non-compliance. For more information, see Books and records.
If a registered charity is found not to comply with its legal requirements for receipts, books, and records, the CRA may apply sanctions (monetary penalties or suspensions) or revoke the charity’s registration.
It is the mission of the Charities Directorate to promote compliance with the Income Tax Act and its regulations related to registered charities. However, charities themselves play an equally important role in maintaining the integrity of the charitable sector. The proper issuance of donation receipts is central to ensuring that Canadians continue to have confidence when giving to charities. It is each charity’s responsibility to understand its obligations regarding donation receipts, and to educate itself about good governance practices to avoid situations of improper receipting.
New fundraising guidance
On June 11, 2009, the new Guidance CPS-028, Fundraising by Registered Charities, was posted on the Charities and Giving Web site. The guidance provides information for registered charities about the CRA’s expectations for reporting fundraising expenditures and the CRA’s approach to determining whether a charity’s fundraising activities are consistent with the requirements for registered charities under the Income Tax Act.
The guidance was developed to:
- provide more information about the requirements of the Income Tax Act and to clarify the CRA’s position on fundraising;
- promote greater consistency in reporting; and
- help charities evaluate and monitor their fundraising activities.
All charities with fundraising activities should familiarize themselves with this new guidance.
During the implementation period, we will continue to accept comments from the public and the charitable sector regarding the guidance. In April 2010, we will review the guidance and consider whether revisions are necessary, taking all comments received into account.
If you have comments regarding the guidance you can email us at:
firstname.lastname@example.org, or you can send your comments in writing to the address or fax number found at the end of this newsletter.
Many charities-related forms are now saveable
In the past, charities could download a blank charities form from the CRA Web site, fill it out, and print it. However, they could not save the information they had entered on the form due to software licence restrictions.
The ability to save certain charities-related forms is a new feature that the CRA has made available for its most commonly used charities-related forms. When using a charities-related form with the saveable feature, you can download the form, complete it, and save a copy to your computer, saving you time and effort, as well as helping you avoid the frustration that comes with losing work you have already completed.
Using the saveable feature is simple. Where the option is available, select the saveable link for the form you want, and save your work as you go. When the form is complete, simply print a copy and mail it to the Charities Directorate. The following charities-related forms are now saveable:
T1235(09), Directors/Trustees and Like Officials Worksheet
T1236(09), Qualified Donees Worksheet / Amounts Provided to Other Organizations
T2046, Tax Return Where Registration of a Charity is Revoked
T3010B, Registered Charity Information Return
T2050, Application to Register a Charity Under the Income Tax Act
- The CRA cannot make certain forms saveable.
My Business Account for charities
My Business Account is a secure and convenient way for businesses and organizations to access their CRA account information online. My Business Account is continually adding new self-serve options. In October 2009, the first phase of My Business Account was launched for charities (RR) accounts. This first phase allows charities to view information about their charity (RR) account, including their name and addresses. Although the functionality of the charities (RR) account through My Business Account will be limited at first, a fully functional service for charities (RR) accounts will be available in the future.
Many charities have already registered for, and make use of, the online tools available through My Business Account for their GST/HST and payroll accounts. Charities that have not yet registered for My Business Account are encouraged to do so. Charities can authorize their employees and representatives to have access to their business accounts by using the "Authorize or manage representatives" online service which gives instant access, or by completing the RC59, Business Consent Form. Once authorized, they can access the My Business Account information and services through the Represent a Client portal.
Why should I register for My Business Account?
My Business Account provides registered charities with many significant benefits. These include:
- ability to view and confirm that information is up-to-date;
- online access to GST/HST accounts charities can file GST/HST returns, check the status of their returns, and more; and
- online access to payroll accounts—charities can complete and file T4 slips, view account balances, transactions, and remitting requirements, and more.
For detailed information and instructions on how to register, see About My Business Account.
Small and Rural Charities (SARC) Initiative update
It has now been a little more than one year since the SARC report was released. Of the report’s recommendations, 82% or 54 have been completed. Most of the remaining short-term recommendations will be addressed within the SARC action plan time frame. Analysis continues for those recommendations in the “further study” category.
Since the last update, the following tools have been developed as recommended in the SARC report:
- Toolbox for directors, officers, and volunteers;
- Important links for directors, officers, and volunteers;
- Maintaining charitable registration – Resource manual;
- Sample information return, financial statements, and worksheets;
- Alphabetical index of topics;
- additions and enhancement to the Applying for registration section and the Glossary page; and
- most of the fillable forms are now saveable.
See the Progress status section for a complete update, broken down by recommendation, including links to the new tools.
Charities Information Webinars
Charities Information Webinars about the new Form T3010B, Registered Charity Information Return, were held as scheduled in June 2009. As part of these sessions, the Honourable Jean-Pierre Blackburn, Minister of National Revenue, formally announced the extension of the pilot webinar project for the next year. The Charities Directorate is looking forward to the continuation of this exciting project and encourages you to sign up for these sessions which will feature a variety of interesting topics related to charities.
The Charities Information Webinars Web pages were also launched in June 2009. The pages include questions and answers, registration information, as well as webcasts of certain recorded webinars and transcripts.
Charities Partnership and Outreach Program update
The Charities Partnership and Outreach Program (the Program) is designed to provide contribution funding to registered charities and non-profit organizations serving the charitable sector in Canada, to assist in developing and delivering innovative compliance-related education and training projects for charities.
Eight new agreements have been signed, totaling more than $2 million in contribution funding, for innovative education and training projects that will be carried out before March 31, 2010. These projects were chosen in response to a call for proposals for projects that would:
- explain the requirements and obligations of charitable registration to organizations that are considering registration;
- teach registered charities how to avoid making gifts to non-qualified donees;
- research best practices, and develop and raise awareness of educational materials, for charities to safeguard against terrorism; or
- develop tools designed to assist small and rural charities in locating resources.
A fifth call for proposals was launched in October 2009. The CRA will be reviewing all submissions and expects to sign new agreements in the spring of 2010. The priorities for the fifth call for proposals are:
- educating charities on compliant fundraising practices;
- educating charities and/or donors about tax shelter donation arrangements and false receipting; and
- promoting transparency and accountability in the charitable sector.
Since its inception in 2005, the Program has signed 21 contribution agreements worth a total of nearly $9.8 million. Projects are chosen in response to proposals and reflect different priorities set by the CRA. Online resources, workshops, DVDs, videos, and in-person mentoring projects have all been supported by this unique contribution program. The projects have been active across Canada, often in both official languages, and are generally free to access for the intended audiences of registered charities, or organizations that are thinking about applying for registered status.
For more information on the projects that have been funded by the Program and to access links (where available) to the resources that have been developed, please visit the Funded projects section of the Charities Partnership and Outreach Program Web pages.
Tax shelter-related revocations
In 2009, the following charities had their registration revoked due to tax shelter-related non-compliance. At each link below, you can read a summary of the related revocation. For more general information about tax shelters, see What is a tax shelter?
The Millennium Charitable Foundation
The Children's Emergency Foundation
Living Waters Ministry Trust
Healing and Assistance Not Dependence Canada
Jesus El Buen Pastor Spanish Pentecostal Church of Toronto
Funds for Canada Foundation
New Hope Ministries Institute
Alberta Distribution Relief Agency Aid Society International
The CRA is reviewing all tax shelter-related donation arrangements (for example—schemes that typically promise donors tax receipts worth more than the actual amount of the donation) and it plans to audit every participating charity, promoter, and investor.
Guide RC4108 is no longer available
Guide RC4108, Registered Charities and the Income Tax Act, is no longer available.
Guide RC4108 was introduced in 2000. Since then, legislative changes have made the information in the guide outdated. For example, the rules about the designation of charities, their disbursement quota, and the eligible amount of a gift have changed. Also, the guide does not give information about the penalty and suspension provisions.
Guide RC4108 was published at a time when the Charities Directorate did not have a significant Web presence. In recent years, the Charities and Giving Web pages have been substantially improved and have essentially replaced the guide. The information that was in the guide has been updated, enhanced, and reorganized and can now be found in the Operating a registered charity section of the Charities and Giving Web pages.
To reduce paper and to improve the timeliness and accuracy of the information we give to registered charities, the Charities Directorate has decided to stop publishing Guide RC4108. Our Web pages will give charities the comprehensive, up-to-date information they need to comply with the requirements of the Income Tax Act.
Obligation to file financial statements with your Form T3010, Registered Charity Information Return
A registered charity must include a copy of the charity’s financial statements with its annual Form T3010, Registered Charity Information Return. The return is due no later than six months after the end of the charity’s fiscal period. In the future, the CRA may revoke the registration of charities that do not include a copy of their financial statements.
At a minimum, financial statements should consist of a statement of assets and liabilities (balance sheet) and a statement of revenue and expenditures (income statement). The financial statements should show the different sources of revenue and the expenditures for the fiscal period being reported. For more information, see our Web page about financial statements.
Reminder to file Form T2081, Excess Corporate Holdings Worksheet for Private Foundations
Form T2081, Excess Corporate Holdings Worksheet for Private Foundations, is sent out with the Registered Charity Information Return packages to private foundations only. Private foundations that hold more than 2% of the issued and outstanding shares of any class of shares of a corporation at any time during the fiscal period must complete the worksheet.
More information about the new rules for private foundations can be found in Guide T2082, Excess Corporate Holdings Regime for Private Foundations.
Charitable organizations and public foundations will not receive Form T2081, Excess Corporate Holdings Worksheet for Private Foundations.
International Volunteer Day
A significant number of volunteers are involved in working with charities and non-profit organizations across Canada. According to Statistics Canada, more than 12.5 million Canadians did volunteer work in 2007. Approximately 2.1 billion volunteer hours were provided, which is the equivalent of 1.1 million full-time jobs.
We would like to take the opportunity to mention that International Volunteer Day took place on December 5, 2009. The Charities Directorate recognizes the incredible work and dedication of volunteers, whose efforts undoubtedly represent an essential contribution to the well-being of Canadian society.
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Articles found in the Registered Charities Newsletter can be reproduced in part or in whole for the benefit of donors, the charitable sector, and the public at large. However, the Charities Directorate asks that anyone intending to reproduce material from our newsletters contact us to let us know what material will be reproduced, when it will be reproduced, and to whom it will be made available. We appreciate your co-operation in this matter.
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