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Charities Working with Intermediaries

Registered charities are held to high standards of behaviour. Through the T3010 and its compliance program (read: audits) the CRA’s Charities Directorate monitors how charities receive and spend money. As a charity manager, you need to be careful about how you work with non-charities. Of course charities work with nonprofits and other organizations all the time! It is your responsibility to ensure that your working arrangements are compliant.

The CRA recently issued a new guidance document concerning charities working with non-charities in Canada, and we wanted to draw your attention to this new version of the plain-language guide to help you clarify your internal policies. Specifically, the issue is charities accepting money for the purpose of passing it on to another organization. In these cases, charities are accepting money on behalf of non-charities — often in situations where the non-charity solicits the funds — and are transferring the funds to the non-charity to use in various projects. 

Sometimes people refer to this as a “charitable trusteeship” (not language that CRA uses), and an avenue whereby a charity can help a non-charity to attract donations. Be careful! If this is how you’re thinking about it, quite likely you are not complying with the regulations.

According to the CRA, the Income Tax Act allows a charity to operate in only two ways:

  1. carrying on its own charitable activities

  2. making gifts to qualified donees

Qualified donees include registered charities and other organizations that have been granted status by CRA.

The worst-case scenario is an arrangement whereby the charity acts as a conduit by simply passing on the funds with no meaningful oversight.  CRA states, “a conduit is a charity that funnels its resources to a non-qualified donee without direction or control. Acting as a conduit contravenes the Income Tax Act, and could jeopardize a charity's registration.”

The key to remaining compliant is a written agreement — an “intermediary agreement” — drafted specifically with reference to CRA’s guidelines. 

The intermediary arrangement brings the relationship under point 1, above, making clear that it’s part of the charity’s own activities, and that the activity falls within the charity’s mandate. The agreement must specify how the charity will exercise direction and control over the project. This includes monitoring and supervising the activity throughout the duration of the project.

In order to comply with the Income Tax Act, you need to state, first, that your organization is a registered charity, set out how the proposed activities further your organization’s charitable objects, and then how you will monitor and supervise the project as it unfolds.

When these criteria are met, it is possible to remain compliant when entering into the agreement. Failure to comply with the CRA guidelines can result in temporary or permanent revocation of your charitable status, and we want to make sure that that doesn’t happen. 

Part of our service to you is to be conversant with applicable CRA rules, and alert to possible non-compliance risks. If you have any further questions, we are happy to assist in your research and share resources that may help in your decision-making. 

How Young Associates can assist

A consultation with us may make all the difference to your comfort level and confidence that your accounting system is up to the challenge of the pandemic. 

We’d also be happy to give you a quote for full-service bookkeeping

We work on the basis of fixed price agreements, so you’ll know going in how much our work will cost — and we always offer a money-back guarantee: if you’re not completely delighted with our service, we will, at your option, either refund the price, or accept a portion of said price that reflects your level of satisfaction. 


This tip sheet was created by the Young Associates team based on the best information available to us as of the date of posting.

Although every effort has been made to provide complete and accurate information, Young Associates makes no warranties, express or implied, or representations as to the accuracy of content in this tip sheet. Young Associates assumes no liability or responsibility for any error or omissions in the information contained in the tip sheet. 

Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, with a focus on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005, 2020), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.