In an attempt to encourage efficiency and reduce administrative burden for filers, the 2017 Federal Budget allows employers to electronically issue T4 slips to active employees, even without obtaining prior consent. Until this announcement, employers could send one copy of the T4 electronically, provided they had the employee's consent ahead of time, (as well as still providing one paper copy), or they could send two paper copies to the employee's mailing address or provide two paper copies in person.
The Budget announcement means that for 2017 T4 slips (and those for any subsequent year), employers now do not have to obtain consent from an employee to distribute their T4 electronically, provided the following considerations are met:
- the employee is currently active (not on leave, has not left the company)
(by the last day of February in the year following the calendar year to which the T4 applies) the employer provides the employee
a secure electronic portal through which the employee can obtain access their T4 slip,
a secure site for printing the T4 slip, and
an option to receive paper copies of the T4 slip, upon request.
The employer must distribute 2 paper copies of the T4:
- if the employee has requested that method
- if the employee is on leave or no longer with the company
- if the employee can not reasonably be expected to access the T4 electronically
- if the employer cannot meet the above conditions for secure electronic transfer (unless the employee had previously provided consent to receive the T4 slip electronically)
It is important to note that Budget 2017 does not consider email to be a secure method of transferring sensitive information included in the T4 slip, and it does not permit employers to use email as a method of distributing the T4 to employees without their prior consent. So, the only case in which a T4 slip is permitted to be distributed to an employee by email is if the employee has previously provided (written or electronic) consent to receive one copy of the T4 by email.
Visit this page on the CRA website for more information.
By Heather Young
See update below on a new CRA form which allows changes to a charity’s director, trustee, or like official information .
Somehow, successfully completing an RC59 Business Consent form – which authorizes access to CRA accounts for HST, payroll and more – has often felt like a hit or miss process. Sometimes there’s no issue, and in other cases it has taken repeated attempts to get account contacts updated.
I had an illuminating conversation with a CRA officer that has helped to resolve some important misunderstandings, and I’d like to share what I’ve learned.
The RC59 form identifies two levels of authorization. Level 1 allows information-only access: that’s what your bookkeeper should have. Level 2 individuals are authorized to make changes to the account and the information it contains: that responsibility should belong to your organization’s senior staff. CRA lists the actions that can be performed by each level here.
One of the potential disconnects to understanding the process is that there’s actually a Level 3 which is not directly referenced on the RC59 form, although you’ll find its powers itemized on the preceding hyperlink. A Level 3 individual is also referred to as a Delegated Authority – a term that appears in the RC59 instructions section under the heading “Part 5 – Certification.” Only individuals authorized at Level 3 are allowed to sign (certify) RC59 forms.
Note that, by virtue of their position, members of your board of directors automatically have Level 3 access to your CRA accounts. Your Executive Director or General Manager does not: they must be appointed by a Director.
The RC59 instructions state, “This form must only be signed by an individual with proper authority for the business, for example, an owner, a partner of a partnership, a corporate director, a corporate officer, an officer of a non-profit organization, a trustee of an estate, or an individual with delegated authority.”
The potential misinterpretation is to fail to recognize “delegated authority” as a legal term with a prescribed meaning. In the not-for-profit world, boards of directors commonly delegate a broad span of authority to their senior staff, who, for that matter, may have the term “officer” in their job title, as in Chief Executive Officer or Chief Financial Officer. The fact that you are responsible for CRA reporting, or that you sign T3010s or any other tax-related documents carries no weight, and the only officers CRA recognizes are the officers of your board of directors, such as the President, Treasurer or Secretary.
Individuals can be appointed to Level 3, Delegated Authority, upon proper completion of an RC321 form, Delegation of Authority. Since staff typically handle the nitty gritty of CRA interactions, it may be convenient for organizations to appoint their ED as a Delegated Authority, so that they have the ability to manage other account representatives.
The whole system rests on CRA having access to a current list of directors and officers of the corporation. We’ve often been in the position of filing an RC59 after a long-serving staff member departs – and learning, after much bother, that the only other contacts on record with CRA are ancient history.
And, here is another disconnect. Registered charities are accustomed to sending CRA a detailed board list annually as part of their T3010 Charities Return. All corporations (commercial and not-for-profit) must also file annual information returns to the appropriate jurisdiction (provincial or federal), naming their directors so that they can be added to the public record. However, CRA’s Business Number (BN) Services Unit does not employ these sources of information.
You need to make a special request to CRA to update your board list for the purpose of BN administration. There is no official form for this task. According to the CRA officer I spoke to, you must write a letter requesting the update, listing your board members, and providing proof of their appointment; for instance, a copy of the AGM minutes including the motion electing the board. A search of the CRA website for confirmation of these verbal instructions yielded this link, which affirms the general intent, but does not specify the process. If you need to update your board list with CRA, perhaps a phone call to the Business Window (1-800-959-5525) would be the best place to start.
Note that CRA can ask board members to provide their Social Insurance Number. The Charities Directorate does not collect this information, but the CRA at large requires it because board members bear a personal liability for amounts held in trust for the Receiver General, such as unpaid payroll source deductions and HST remittances.
With your board list up to date, you will always be able to update the RC59 as needed. Putting this on your AGM “to do” list sounds like a good addition to administrative best practices.
So, class, what are today’s main take-aways?
Well, I hope that this information helps to put RC59 woes behind us – but, really, the most important lesson to be learned is the significance of board members to what we usually classify as an administrative process. I suspect most ED’s would prefer that their board members stay out of the minutiae of CRA dealings – but in fact the law assigns Directors an essential role.
By virtue of their position, they have full access to the corporation’s dealings with CRA, and they are the gatekeepers to staff, who are typically charged with direct responsibility for tax filings, remittances and related matters.
And let’s not forget the financial liability issue. When someone joins your board, they assume personal responsibility – legally, up to the point of being held accountable for payment! – for ensuring that taxes are collected, reported and remitted according to the law.
The issues around processing RC59s serve as a good reminder of board members’ fiduciary responsibilities, the details of which may become lost or blurred in the day to day reality of their role as informed, engaged and active volunteers, supporting the paid professionals who carry out administrative operations.
Some feedback from one of our clients:
Both Young Associates and [redacted] now have Level 1 authorization to quote "interact with the Canada Revenue Agency."
I should give a big thank you for all parties involved, with a special shout-out to Heather for giving us very detailed instructions, and for her written column on the RC59, and for [redacted]'s assistance is helping us submit the forms 7x, or so.
I know more now than I ever wanted to do about this process.
As of December 2016, the CRA has created a form to change or update a charity’s director, trustee, or like official information. The form can be submitted by email, fax, or snail mail. Visit the CRA website for more information.
Note from the CRA:
This form does not replace the requirement to complete Form T1235, Directors/Trustees and Like Officials Worksheet, when you file your Form T3010, Registered Charity Information Return. Form T1235 is used to update the director, trustee, and like official information in the Charities Listings.
By Heather Young
I often teach and consult for artists and arts managers who have limited background in accounting and finance, and who therefore are reluctant (or even fearful) to step into this arena.
The bad news is that, like all relationships, it’s a package deal - once you take on a management role, you must accept decision-making responsibility, even in areas that aren’t your greatest strength. The good news is that there are some simple techniques that will help you feel more comfortable in the driver’s seat, whereas failing to make the attempt (no head for this sort of thing, terrible with numbers… you’ve heard the excuses) can set you on course for disaster.
Case in point: a certain executive director was meticulous in the artistic/programming side of their role; not a detail escaped their attention. And yet, with no apparent irony, the ED declared their inability to do math and therefore complete dependence on the part-time bookkeeper to deal with day to day finances. Financial statements? That’s what the accountant prepared for the government. The ED complained about receiving terrible service, but had trouble articulating the problems or what improvements were needed.
This didn’t stop them from blundering ahead with ill-conceived financial decisions, often based on phone advice from a couple of more economically successful artistic colleagues, and at odds with the advice they were paying for. Later, they would turn to the accountant or bookkeeper to clean up the mess… while making it clear they didn’t want to hear the mechanics of what went wrong. In their view, poor results arose from poor execution by the contractors: “Not my job; just fix it.”
No wonder they felt angry and mistrustful: they didn’t know how to collaborate with accounting staff, let alone tell whether they were doing a reasonable job. And staff heard the unspoken message: there’s no point getting into it with the boss.
Don’t be that guy!
Henry Ford got it right: "One of the greatest discoveries a man makes, one of his great surprises, is to find he can do what he was afraid he couldn't do."
Sit down with your bookkeeper or accountant and review your statements together. Ask them to walk you through the important points. Do it every month. You know your organization; financials are just another way of telling its story. You’ll soon start to recognize features that indicate whether you’re on track financially. If your staff member can’t explain the numbers with confidence – well, maybe it’s time to get a second opinion on the quality of their work.
Expand the conversation with a few good questions, such as:
Are we compliant with the CRA? Can you walk me through our latest remittances or returns? (Your bookkeeper should be able to explain how amounts are calculated and reported to the government.)
When was our most recent bank reconciliation, and can I see the list of outstanding items? (Bank recs prove that cash is stated accurately, and they normally happen monthly. It’s unusual for online or ATM transactions to be outstanding, and uncleared cheques should be recent. In Canada, cheques are stale-dated after six months.)
Are there any particular areas of concern? (This depends on your situation, but you should have a sense of whether the explanation matches your observations.)
You can be a capable financial manager without being an accountant. Some “due diligence” with the financial statements will strengthen your working relationship with accounting staff, and generate that priceless reward, ease of mind.
By Heather Young
In addition to being Principal at Young Associates, I am also a proud member of Arts Consultants Canada / Consultants Canadiens en arts, as are my colleagues Samantha Zimmerman, Anna Mathew, and Jerry Smith. I was privileged to be part of ACCA’s most recent strategic planning retreat, in my capacity as outgoing treasurer. Twelve of us, the current board plus “graduating” directors, shared a day of focused discussion and more than a few bursts of laughter, engaging in a three-year planning process.
As I expect many of us have done with strat planning clients, we began with a review of ACCA’s mission, vision and values. I confess that I’ve always been a little hazy on how to delineate those terms, especially when mandate is added to the mix – so I was relieved that we spent a few minutes confirming a common set of definitions.
At last, it all makes sense!
Mission captures the practical, desired outcome: what should happen because of what we do? Who are we serving, and who benefits from our work? It is an expression of structure, and appeals to the head – our rational side.
The vision is aspirational. It’s a dream that may or may not come true. Captured in a brief, inspiring sentence – think postcard, not novel – it appeals to the heart.
Values are the principles that guide our actions: the compass that helps ensure we stay on the right track.
As for mandate, there was a small difference of views. Some would see it as synonymous with mission. Another view positions it as a legal term that captures our relationship with the government. This makes complete sense to me: for most organizations, the mandate statement in their articles of incorporation or letters patent is drier and more general than the directive they articulate for their strategic plan.
Remember Star Trek?
Well, the vision of the Federation might run something like, “that humanity achieve a more complete understanding of itself through exploring the universe.”
The five-year mission is articulated in Captain Kirk’s iconic opening narration: “to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no man has gone before.”
The values, embodied in the Prime Directive, have inspired endless discussion in fan literature to this day, as a quick Google search will confirm!
And, I expect that somewhere within the files of the Federation’s legal department we could find a mandate statement, couched in formal terms, capturing all of the above from a governance standpoint.
As for ACCA, we had a productive and exciting day that yielded renewed mission and vision statements for the association. ACCA has now released the final version:
Arts Consultants Canada / Consultants canadiens en arts (ACCA) members are valued contributors in a thriving, creative Canada.
Les membres de Arts Consultants Canada / Consultants canadiens en arts (ACCA) contribuent au rayonnement d'un Canada créatif et florissant.
ACCA strengthens the arts in Canada by connecting a network of experts with Canada’s arts community and by encouraging the active exchange of its members’ expertise to advance and promote the development of the sector.
L’ACCA renforce les arts au Canada en raccordant un réseau d’expert(e)s au secteur artistique canadien ainsi qu’en encourageant un échange actif d’expertise parmi ses membres pour favoriser le secteur.
Read more about the ACCA Strategic Plan here.
In December, the Canada Council published their newly redesigned funding model, with which they hope:
...to more strategically support the creation and wide dissemination of excellent Canadian artworks, to more directly and efficiently support Canadian artists, and to more flexibly and effectively support the development of a diversity of high performing arts organizations.
A year ago, the council announced its plan to move away from its pre-existing model, one which was based around artistic discipline, and streamline its funding structure with a goal to more effectively serve grantees and the arts community. The new model is composed of six new programs:
- Creating, Knowing, and Sharing: The Arts and Cultures of First Nations, Inuit and Métis Peoples
- Explore and Create
- Engage and Sustain
- Supporting Artistic Practice
- Arts Across Canada
- Arts Abroad
You can access information about the six new programs, their objectives, candidate and entrance activity requirements, the maximum grant allowance, application deadlines and assessment criteria here: newfundingmodel.canadacouncil.ca and you can email the Canada Council at firstname.lastname@example.org or call them at 613-566-4414, ext. 5060 if you have questions.
You spoke and we listened! We've brought together some of our most popular seminars with new, highly requested, training opportunities. From budgeting and cashflow to data management and software know-how. Join the team at Young Associates for two days of professional development gems! These seminars are small, intimate sessions that allow you to have meaningful discussion with fellow colleagues in the not-for-profit and charitable sector. Bring your laptop and work through samples and templates, and leave with tips, tricks, new skills and strengthened skills. There's something for everyone from board and senior management to entry level staff.
Join us July 6th and 7th at the NEW Young Associates training centre.
Book by June 15th with the coupon code summer2015 to receive $15.00 off each seminar.
Empowering Arts Organizations in an Information Age
By Anna Mathew, Knowledge Associate (Young Associates)
Originally published in the February 2015 ACCA e-bulletin
Technically, I’m a librarian. So why have I joined Arts Consultants Canada?
Well, I work for Young Associates, a team of consultants working primarily with arts organizations in a variety of areas, most significantly financial and data management. I believe the field of library science - now more frequently referred to as information science, information studies, or even just ‘information’, has broad applications to sectors beyond the public, academic, school, and traditional corporate (e.g. legal and medical) settings to which we are accustomed. The information specialist is no longer restricted to within the library walls and now frequently finds him/herself in an embedded role within an organization which has a non-information related mandate but needs someone to perform information retrieval and information management duties to support that mandate. What I’m saying is, in our ‘information age’, a librarian can find him or herself working anywhere.
It’s no surprise that we don’t come across too many arts organizations who can afford to keep a permanent, embedded information specialist on staff. Sure, some of the larger organizations have a researcher or two, but for the most part, arts organizations have too much administrative overload and too many budget constraints to deal with to consider creating a formalized role for an information manager. Enter the arts consultant.
In the Spring 2014 ACCA newsletter, my Young Associates colleague Samantha Zimmerman wrote about how consultants can play a leadership role in getting arts organizations to consider their statistical data as ‘SMART’ data, and to set goals and put systems in place to make data part of a larger picture in preserving and communicating an organization’s story. That sentiment is echoed by Negin Zebarjad, a consultant at Nordicity, a consulting firm that earlier this month hosted a panel for Artscape Launchpad on “The Power of Data on Communicating Your Impact”. Zebarjad focuses on good design and clear goal-setting, and emphasizes that arts organizations need to become aware of what data they are already collecting and think about how it can be threaded into the narrative they want to tell about themselves. During the panel, representatives from major funding bodies stressed the importance of seeing a balance of qualitative and quantitative information from organizations when assessing impact. Smartly organized data - which is collected, preserved, analysed, and presented according to well-designed systems and in support of clearly articulated goals - makes that qualitative-quantitative balance possible; this is becoming more relevant as CADAC is looking for correlations between the financial and the statistical data they receive.
The information specialist’s role in consulting with arts organizations goes beyond accessing and manipulating a client’s database. We can offer arts organizations assistance in understanding how information moves through their organizational ecosystems and how it is affected by software, hardware, and, most importantly, people. By undertaking strategic exercises like organizational data flow visualizations and goal setting, and hands on activities like database design and cleanup, we can increase efficiency and strengthen identity.
A favourite instructor at the University of Toronto’s iSchool said: “A librarian helps people find stuff”. (Full disclosure, he might not have used the word ‘stuff’). Another memorable instructor put forth a ‘cocktail party’ definition for the term information architect (a kind of information specialist) as someone who: “is supposed to make sure that people can find what they’re looking for without getting lost or confused.”
Arts consultants armed with information skills can do both those things by helping organizations become information literate and empowering their stakeholders to use that information to operate efficiently, to advance their mandates, and to extend their reach.
By Anna Mathew
The Canada Council for the Arts has just announced that it is "moving towards the implementation of a new suite of national, non-disciplinary programs", which will reduce the number of funding programs significantly. The Council indicates a number of motivations behind the changes, including increased flexibility and a lessened administrative burden on artists, arts administrators, and Council staff. The Council is working towards a 2017 implementation schedule, with specific plan announcements to be made in summer 2015.
Read more about the Council's announcement on their website.
Update: Read about the New Funding Model
By Anna Mathew, Knowledge Associate
CASL (Canada’s Anti-spam legislation) will become law July 1, 2014. What does this mean for your organization? It means that you can no longer send commercial email to recipients without their consent. Organizations (and individuals) who send unwanted commercial electronic messages (CEMs) are subject to serious financial penalties ($10M for organizations and $1M for individuals). Directors and officers of an organization may also be liable.
There are two types of consent: implied and express. Implied consent is based on a current business relationship (such as a customer or client), and is subject to expiry depending on the changing nature of the relationship over time. Express consent is based on the recipient of a CEM having provided explicit consent to receive the communication, typically through an online sign up. Express consent does not expire, unless the recipient unsubscribes.
The legislation covers other requirements, in addition to the issue of consent, including providing a conspicuous and simple unsubscribe process, and providing clear identification and contact information about the email sender, as well as what classifies an email communication as being ‘commercial’.
One silver lining for charitable organizations: emails sent for the purpose of fundraising are exempt from CASL.
What does your organization have to do to be compliant with the legislation?
- Secure implied or express consent from CEM recipients (BEFORE July 1, 2014). The simplest way to do this is to contact your list and provide them a link to provide their express consent and/or provide their contact information.
- Maintain records about who has provided consent. The onus is on the sender to prove consent.
- Do not send CEMs to anyone who has not consented to receive them.
- Provide an unsubscribe option.
- Identify your organization as the sender and provide contact information.
Here are some further resources on how to become CASL compliant:
DATA SMART: More Than “Show me the Money.”
By Samantha Zimmerman, Practice Manager, Senior Associate & Data Management Consultant (Young Associates)
Originally published in the May 2014 ACCA e-bulletin
We’ve all heard about data: the importance of data; the need to keep data safe; the value of turning raw data into actionable information. But what does it mean for our clients? Most organizations are already comfortable making strategic decisions based on their financial data, because GAAP provides guidelines for maintaining financial data so that it is viewed as SMART (Specific, Measureable, Attainable, Realistic, Timely); but what about our statistical data? Not only is there no one set of rules for dealing with statistical data, there are also privacy laws that dictate how we must collect, store and use data. It can all be very overwhelming.
The arts sector must also conform to CADAC which requires our clients to analyze and report their statistical and financial data to Government funders. CADAC and its partner funders across the country are becoming more rigorous and demanding in reconciling and verifying statistical data, which makes it even more important for organizations to properly track the necessary data required for CADAC reporting. More and more, clients have been reaching out to Young Associates in search of either full service data entry and processing, or targeted data management support with assistance in collecting data, pulling and reviewing periodic reports (monthly, annual), and reconciliation with bookkeeping software, as well as staff training or prospect research.
There is so much potential for data collection, but the majority of small and mid-size not-for-profit organizations often lack the human resources, the technology/software packages or the time to deal with all the data. We’ve all seen those organizations that are tracking their donations, event attendance and other lists in Excel spreadsheets. Much of the data stored in these Excel spreadsheets lives independently from other organizational data, and many of the lists lack standardization in the collection and presentation of the data.
While most of us are using Excel adequately, the majority will never use it to its full potential. Generally it’s seen as a tool for tracking static data; a moment in time, an individual project, or small pieces of information from a single cycle. How many years has a patron attended that event? How many donors are attending our events as well, and vice versa, are program participants returning as supporters? Young Associates has developed a proven system for helping organizations determine their data goals, and develop systems that work within the means of the organization to collect and analyze the data that gives the true picture. Where the mindset needs to change is not thinking of those Excel spreadsheets as a moment in time, but as a piece of a larger picture. Just as the financial information of the organization tells a story, the statistical data of an organization also has a story to tell.
By Heather Young
According to the Canada Revenue Agency, fees for services provided by contract staff should be reported on a T4A slip in Box 048.
CRA’s Guide – titled RC4157 Deducting Income Tax on Pension & Other Income, and Filing the T4A Summary – directs payers to: “Enter any fees or other amounts paid for services. Do not include GST/HST paid to the recipient for these services.”
A couple of observations.
The CRA makes no distinction regarding who provided the services. Many companies assume T4A slips are for freelancers – but that’s not what the Guide says. An email to the Canadian Payroll Association’s InfoLine confirmed that incorporated businesses should also receive T4A slips.
And for sure HST registration makes no difference! Every year, clients’ contract staff tell Young Associates bookkeepers that they don’t want a T4A slip because they have an HST number. Whether or not a contractor charges HST is irrelevant to the payer’s T-slip obligation.
Make no mistake: this has nothing to do with individual preferences. Our job is to do our best to help our clients – the payers – comply with the Income Tax Act.
We hear all sorts of variations from payers too. Some companies are willing to issue T4As to freelancers who work under their own name but not to those who have a company name. Other organizations make apparently arbitrary decisions; for instance, that they’re willing to issue T4As to actors but they don’t want to generate slips for technicians.
Indeed, there’s a lot of confusion out there – and, to boot, a tacit acknowledgement on the part of the CRA that the T4A requirement is unclear.
CRA’s Guide RC4157 goes on to say: “Currently the CRA is not assessing penalties for failures relating to the completion of box 048.”
We don’t take this as a blanket pass for organizations to do whatever they want – and we don’t think you should either.
The wisdom from the Canadian Payroll Association – experts in the field – is that organizations should implement a process for issuing T4A slips to contractors so that when the CRA provides clear guidance they are able to comply immediately.
We can add to this some experience of payroll audits, where CRA examiners have scrutinized companies’ practices around T4A slip preparation.
Young Associates’ position is that clients need to work with their auditors and boards to interpret the Guide as best they can for their own situation. We always advocate for CRA compliance – and, if anything, for a more conservative interpretation that protects you from unwelcome attention from the government.
By Anna Mathew
The proclamation of the new Ontario Not-for-Profit Corporations Act (ONCA) has been delayed. No official date has been set, but it will not be proclaimed prior to January 1, 2014.
Visit the Ontario Nonprofit Network website for more information on the delay and other ongoing developments with ONCA.
By Anna Mathew
Young Associates founder and principal associate has been named one of the four faces of innovation in Canada by Metro News. The article profiles four innovative Canadians, praising Heather for her pioneering work in developing sound financial management best practices in the Canadian arts sector.
At first, Heather Young didn’t know much more about arts administration than the students she taught at Humber College in Toronto 20 years ago.
But what she quickly learned in trying to teach sound fundamentals of arts management was that hard information on the topic was difficult to muster — let alone make available to budding artists and art groups. As good innovators often do, she saw a need and filled it.
Young crafted her own materials, including Finance for the Arts in Canada, a textbook and reference guide to aid in running an arts organization. Her company, Young Associates — with a staff of 12 — now serves as a financial management resource for 90 Toronto companies. She’s soaked in years of knowledge working with arts groups in the city — something she believes is essential for innovation.
“Get to know your subject area as intimately as you possibly can,” she said. “You need to know the upsides and downsides of what you’re working on … and in particular the gaps in the available supports.”
By Jerry Smith
A recent post by Andrew Valentine with the Miller Thomson Law Firm shone some light on a new piece of guidance from the Canada Revenue Agency. If you are currently considering an application for – or already possess – charitable status, the CRA has recently delivered the final version of the Guidance for Arts Activities and Charitable Registration (Reference CG – 018, December 14, 2012).
Building on feedback from the sector, including organizations such as CAPACOA seeking a broader definition of who could qualify, this finalized version attempts to clarify what CRA finds as acceptable examples of appropriate purposes to merit charitable status.
First, there are three broad categories of arts-related activities that could qualify as charitable purposes under one or more of the four heads of charity, including:
- Advancement of education;
- Exhibitions, performances and presentations of artistic works;
- Activities that enhance an art form or style within the arts for the benefit of the public.
In particular, CRA has clarified and expanded details in its arts forms and styles appendix, thus opening the door for more presenter members of CAPACOA to garner or maintain standing as a charity.
If you are interested in exploring these ideas in more detail, these links will be of value:
By Katie Chasowy
Back in November, I attended a symposium called L3C and the Arts at Columbia University in New York City. The event was designed to be discussion around how a new form of incorporation (the L3C) in the US can be used for arts organizations. I Live tweeted the event and the Storify of the tweets from the day can be found below.
Low-Profit Limited Liability Company (L3C) is a form of incorporation that is a hybrid between a for-profit business and a not-for-profit business. It was formed by augmenting the existing Limited Liability Company (LLC. We don’t have the equivalent in Canada; essentially it’s a hybrid of a sole proprietorship and a corporation). The L3C differs from the LLC in that the articles of organization (similar to articles of incorporation in a Canadian Not-For-Profit) must state one of the IRS’s charitable purposes. Because of this, an L3C can receive the money that charitable foundations must give each year (called Program Related Investments, or PRIs).
Basically, an L3C allows a company to accept investment and payout investors while still being able to receive funding from foundations. Champions of L3Cs say that it’s a great way to diversify revenue sources and raise capital to start an organization while critics of L3Cs say the form of organization isn’t so attractive because there isn’t the ability to issue tax receipts for donations.
The L3C and the Arts symposium brought together the co-founder of an L3C organization, a lawyer involved in the drafting of the L3C legislation for several states, the executive director of a theatre arts services organization , the executive director of a theatre organization with an L3C subsidiary organization, and the head of Columbia’s theatre program. After being briefed on the technical aspects of the L3C, the discussion then turned to how the L3C can work in the arts world.
Here’s some main points that brought up for how the L3C can work in the arts:
- The L3C is an interesting new tool to consider when forming new organizations, but will not work for all circumstances.
- An existing NFP should not change it’s form of organization to an L3C. It should be considered for organizing a new company or a new subsidiary business.
- The main drawback for arts companies is the inability to issue tax receipts for donations.
- It may be a good form for independent artist and smaller collectives, such as those who use crowd funding sites like indigogo to raise money.
- Art forms that have a higher capital potential (like film) may be more suited for the L3C than art forms with a lower capital potential (like visual arts organizations). Performing arts falls between film and visual arts.
I tried to keep a Canadian perspective in mind when listening to the discussion. The L3C form would not work exactly in Canada mainly because Canadian not-for-profits do not rely as heavily on foundation revenue as in the US. But, the discussion on how hybrid forms of organization can work in the arts was quite interesting and applicable for Canadian not-for-profits, especially with the introduction of the hybrid Community Contribution Companies in British Columbia.
Here’s the Storify of the event:
By Shelley Cahill
On November 30, I attended the Canadian Payroll Association’s 2012 session on Year-End & New Year Requirements. The binder provided to session attendees has been added to the reference collection at the Young Associates office. It contains a number of sections of information which are of interest to us and our clients:
- Starting with changes to the maximum pensionable earning for both EI & CPP: the maximum pensionable earnings for CPP is raised to$51,100 and $47,400 for EI. The 2013 CPP rate is the same, but the EI rate is going up to 1.88% from 1.83%.
- Additionally, the CRA will, as of January 2013, stop automatically sending out paper copies of the PD7A (payroll remittance forms) to those who are already filing electronically. It is strongly recommended that all companies register for “My Account”; it will allow immediate access to payroll account.
- In order, to set up “My Account”, you will need to have permission to access your company’s information (RC59 filled out) and your2011 Notice of Assessment from your personal return. This is the future of easy access to all your company’s CRA information.
- After 2012, there will be no more mail out of the Web Access Code (WAC) – used to upload T4s/T4As etc. to the CRA – and the WAC will not expire. Employers must keep the final letter in a safe place for reference for following years. Also, T4 Desktop application iscancelled effective January 2013.
- The CRA has made some improvements to the PDOC. It includes: an additional tax bracket for earners over $500k, tax exempt, year-to-date input field, and improvement to the results screens. They have also created a smart phone app for basic personal tax returns and are on Twitter.
- Service Canada is moving away from using ePass. Moving forward, you will need to sign in using either their Sign In Partners (BMO Credit, BMO Debit, Scotiabank Online or TD Canada Trust easy Web) or by setting up a GC Key. This change took effect September 30, 2012.
- There are changes to the way employees and employers contribute to CPP while the employee is receiving CPP payments (aged 65-70). Recommend reading on this topic: the updated information in Section 2, pages 32-35.
- The changes to ROE Web are as follows: there is a new online credentials sign in, as mentioned in paragraph 5; ROEs filed online areno longer required to print off copies for the employees. Employees can access this information through their “My Service Canada Account”.
- There is an interesting program that was introduced in Budget 2011; it is called Working While on Claim Pilot Project. This allows an individual to keep a portion of their EI payment in addition to their other earnings.
Example: Blake has been laid off from his full-time job and is collecting EI benefits of $450.00/week. He has found a part-time job that pays $600.00/week.
Under the new pilot project his EI benefits will be reduced by 50% of his additional earning, leaving him with a combined weekly income of $750.00.
[$450 – ($600.00 x 50%)] + $600.00 = $750.00
- There is a good possibility that SIN cards are going to be phased out in the near future, but at this time there is no deadline.
- There will be changes in GST/HST over the next couple years. The first change will be British Columbia reverting back to 7% on March 31, 2013. Secondly, Nova Scotia is reducing their HST from 15% to 13% over the next 2 years, down to 14% in 2014 and 13% in 2015. Lastly, PEI will be implementing an HST of 14%, effective the date of implementation.
- And, lastly the penny began to be phased out in the fall of 2012 and the Royal Canadian Mint will stop distribution. While the penny will retain its value, gradually cash transactions with be rounded to the nearest $0.05. Non-cash transactions, cheques, EFTs, and debit or credit card payments will still paid to the cent. There is no requirement for employers to round to the nearest $0.05 when paying by cheque or direct deposit; however, employers paying in cash will gradually have to round payments to the nearest $0.05.
- There is a Year End and a New Year Checklist in the binder.
By Shelley Cahill
On November 8, I attended the Annual Sector Update offered by the Not for Profit and Charity Law Group of Borden Ladner Gervais (BLG) at their Scotia Plaza offices. Two key topics this year were the new Ontario Not-For-Profit Corporations Act (ONCA) and the 2012 federal budget.
ONCA was passed by the Ontario legislature in 2010, but is not yet in force. Proclamation is now expected on July 1, 2013. ONCA applies to all provincially-incorporated not-for-profits.
You may also have heard of the new federal act (the CNCA – Canadian Not-For-Profit Corporations Act), which is currently in force, and which applies only to federally-incorporated not-for-profits. There are differences between these two acts – and both of them require you to take certain actions to make sure that you’re in compliance with the new rules. A good first step would be to locate your Letters Patent, and make sure that you know how you’re incorporated and therefore which law applies to your organization.
ONCA will introduce significantly enhanced member rights. Your members have the power to elect your board of directors. Some not-for-profits have paying memberships who are accustomed to voting for your board at the annual general meeting. Other not-for-profits use “membership” as a fundraising category with no vote. This will change under ONCA: if you have “members,” they will have voting rights by law. You need to inform yourself about what this means for your organization.
This year’s federal budget beefed up the Charities Directorate’s ability to respond to fraudulent tax shelter schemes by significantly increasing the potential penalty amount assessed both to the promoters and to the charities that get behind these schemes. Although the Directorate continues to focus on education in response to misuse, it does not hesitate to de-register charities found to be in “serious non-compliance” with the rules. Becoming familiar with charity law is essential to good management.
My point-form notes, following, provide a quick summary of the important details.
Ontario Not-For-Profit Corporations Act, 2010
Timing Update – Proclamation Expected – July 1, 2013
Review of Enhanced Member Rights Under ONCA
- Member Removal of Incumbent Directors (requires 50% of member votes to carry)
- Member Proposals (any one member can make a proposal; but limits!)
- Member Nomination of Directors (nomination requires support of 5% of membership)
- Class Voting (i.e. Members in a Class can now vote as a class to veto any actions to eliminate their rights proposed by other classes)
- What can be done before July 1, 2013:
- File Supplementary Letters Patent (SLP) to eliminate multiple classes of members (will not trigger class vote)
- File SLP to opt out of class vote going forward on: Creating new classes of members with voting rights superior to existing classes; Effecting an exchange, reclassification or cancellation of membership of an existing class
- What can be done after July 1, 2013:
- Articles & By-Laws can manage and control processes to minimize surprises
- Use concepts like record date to control membership campaigns
Implementation final date is expected to be October 17, 2014.
Budget 2012 Update
Tax shelter promoter penalty
- Change from a penalty of 25% of purchase price to 25% of alleged donation
Tax shelter information return penalty
- Failure to file annual tax shelter information return – change from $2500.00 to 25% of greater of promoter’s fee and alleged donation
Government is putting a lot of resources towards “Educate”, but CRA has indicated reassessment could lead to de-registration in cases of “serious non-compliance”.
- CRA has agreed to stop issuing letters to audited organizations, as it had an adverse effect on NPOs, despite no formal sanctions.
By Heather Young
I’ve been asked for advice on the least-expensive way to manage credit card processing.
Over the last number of years, sales by cash and cheque have dwindled, and the majority of earned revenues and individual donations are received by credit and debit cards and other forms of electronic transfer. In the past, processing fees applied only to a slice of our revenue base: now the “bite” can be significant.
On the plus side, the market is becoming more and more competitive. It’s not that long ago that we all had to have multiple bank accounts if we wanted to accept multiple payment methods, because some banks were allied with Visa and others with MasterCard. These days, numerous payment processors accept all major credit cards and funnel them to the bank of your choice
The array of payment methods continues to multiply. A quick Google search turned up the factoid that direct debit was invented only in 1984. More recently, arts organizations started wrangling the 24/7 payment universe as they put their box offices online. The next generation includes methods of accepting payments by smartphone – and the evolution will continue.
If you haven’t examined your payment processing costs (and methods) lately, maybe it’s time to shop around.
I put the question of inexpensive processing for Canadian non-profits to a number of LinkedIn groups, which provide a forum for sharing knowledge among colleagues internationally. The summary that you’re reading is therefore not the product of systematic research, but rather the contributions of a number of generous folk from Canada and the US who offered their recommendations, with a little fact-checking on my end.
I’m sure this list is far from exhaustive, but it’s a good starting point for comparison shopping. Readers will need to investigate which options are best suited to their needs.
The grid below captures an array of processors. It is followed by additional tips and recommendations from LinkedIn members. Thanks to them for these great ideas!
|Name of Service||Operating in…||Website||Accepts (per website description)||Comments|
|5LINX Credit Card Processing / Pivotal Payments||Canada||http://everyswipecounts.5linx.com||Credit and debit cards||They promise the lowest discount rates in the industry.|
|Canada Helps||Canada||http://www.canadahelps.org||Can accept gifts of securities as well as credit cards.||A registered charity in their own right. Processes donations for other charities. Not the best rates, but you don’t have to establish your own accounts.|
|Chase Paymentech Canada||Canada||http://en.chasepaymentech.ca||Credit cards, debit cards, online payments.|
|Elavon Merchant Credit Card Processing||Canada||http://www.elavon.com/acquiring/costco-canada/main.aspx||MasterCard, Visa, AmEX, Discover, Debit||Offered through Costco.|
|FirstData Canada||Canada||http://www.firstdatacanada.ca||MasterCard, Visa, AmEx, Discover, Interac|
|Global Payment Systems||Canada||http://www.globalpaymentsinc.com/Canada/||Credit and debit cards.|
|IATS||Canada||http://www.iatspayments.com/english/about_IATS/index.html||Credit, debit, point of sale, QR codes and mobile giving.||Canadian company, focused on non-profits. A Ticketmaster subsidiary.|
|MOCA (Momentum Canada) Payment Systems||Canada||http://www.mocapayments.com||Visa, Mastercard, AmEx, Discover, chip and pin ATM cards.||Geared to small and mid-sized retailers in Canada.|
|Moneris||Canada||http://www.moneris.com||All major credit and debit cards and all major point of sale solutions.|
|Optimal Payments||Canada||http://www.optimalpayments.com||Card and non-card payments; chanels like IVR, MOTO and virtual terminal.||LinkedIn user reports no hidden fees; just one monthly charge and credit card fee.|
|PayPal||Canada||https://www.paypal.com||MasterCard, Visa, AmEx, Discover|
|Square||Canada||https://squareup.com||MasterCard, Visa||New in Canada, October 2012. Card reader attaches to iPhone or iPad. See YouTube demos.|
And now a few comments from LinkedIn contributors:
Usually if you are a member of the local chamber of commerce or other similar association they have better rates than being on your own.
…Gwendoline Turpin, via Bookkeepers Club
You need to be careful when investigating payment processors. Many that we looked at offered an attractive rate but then hit you with additional fees and monthly charges that make it more expensive.
Ian Hayes, via Non-Profit Professionals Toronto
I have approximately 150 arts clients across Canada using our Theatre Manager software and the majority of these (95%+) are non-profits. We’ve built 3 PCI compliant payment gateway interfaces into the software. This allows our clients options on which merchant account provider they want to use. Predominantly, Canadian clients use either Global Payment Systems or Chase Paymentech for merchant accounts. Based on the feedback, I’ve received the fee structures are fairly comparable, but as in indicator, we’ve noticed a growing number of our clients switching to Paymentech. I’m not aware of any ‘special’ rates for non-profits. From what I’ve been told, each organization is vetted based on the merchant account provider’s risk criteria.
…Tod Wilson, via Performing Arts Administrators
I’ve been quite successful negotiating with other processors (Moneris and Global Payments) and obtaining rates equal to or better than those available through Costco. Not just for NPOs and Charities of which I have quite a few, but also for regular retail operations.
The applied rates vary quite a bit depending on the “type” of card – it’s not just about credit card vs. debit card, but affiliate, international, non-VISA/MC cards, etc.
Global Payments (at least) refers to these as Interchange Downgrade Fees (IDF) and produces two tables E5 (enhanced) and E1 (standard). Typical differences between these are between .1% and .5% depending on transaction. E1 is generally what most retailers receive. In addition, they will generally also provide free (or reduced-price) terminals.
The details of the fees are complex as there are 31 card categories. It depends on which your client receives most – and the average value, volume etc. of these.
…Don Hobsbawn, via Sage 50 Canadian Edition Sage Accountants Network Members
Don is absolutely correct. If you know the number of monthly transactions, monthly volume in $, average transaction amount and types of cards being used you can negotiate better rates from your Merchant Account Provider (MAP).
If you already have a merchant account you should compare the numbers at the end of your first year with the numbers forecast when the agreement was put in place. You may be able to renegotiate the contract for a better rate if the numbers are higher than the initial projections.
It also doesn’t hurt to let your existing MAP know that you are shopping around. That can motivate them to offer better rates, or even to match the best rate you can find.
To provide the most flexibility in payment types NFP’s & Charities can look at a Paypal Merchant Account that offers many donor / payment options through a website gateway.
If the NFP / Charity is small, and don’t want to carry the monthly fees and equipment rental costs they can look at “Card Not Present” or online based systems that may offer reduced rates.
There are also fee based organizations that provide payment options for Registered Charities that may not have the infrastructure to provide payments, anonymous or recurring donations and tax receipts. They take a percentage of each donation, then EFT the balance to the Charity.
Before you recommend any of these options you’ll need to conduct a thorough assessment of the needs of the organization to help find the best fit! If you’d like to evaluate the different MAP’s there’s a guide on building a spreadsheet to do so at:
…Dave Greene, via Sage 50 Canadian Edition Sage Accountants Network Members
(Note on Dave’s last suggestion: the link takes you to the website of FirstData, which of course wants you to use their service! However, they provide useful generic information on how to evaluate your options.)
By Anna Mathew
Sage, the makers of Simply Accounting, have announced several brand changes, including a new naming structure for their products.
From the Sage website:
In 2012 the names of many of our core accounting and ERP lines, including those designed for nonprofits and the construction industry, are changing. These products will be identified with a numbering approach where higher numbers denote increasing levels of product capability or sophistication. Our product numbering sets include Sage One, Sage 50, Sage 100, Sage 300, and Sage 500.
However, these changes are more than in name alone. Each product family will offer integration to common business solutions such as CRM, Fixed Assets, HRMS, and Payroll. Sage Connected Services provide additional capabilities, including online payment processing, mobile access, and data security, while product support through Sage Business Care and Sage Advisor technology ensure you get the most from your Sage investment.
You can read more at the new Sage website.