Young Associates is thrilled to be partnering with WorkInCulture to launch Take the Lead: Principles for Administrative Leadership for the Arts, a new two day seminar series for increasing managerial and governance skills in arts administration. Running October 12 & 13, 2017, instructors from Young Associates and WorkInCulture will deliver sessions on understanding financial statements, payroll, WSIB, and HR. Get more details here.
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.
The Charities Directorate of the Canada Revenue Agency does, indeed, have rules around accumulation of property. The particular rule that charities are probably thinking about if they’re worried about the size of their accumulated surplus is the disbursement quota (DQ). The purpose of the DQ is to establish a minimum requirement for spending on charitable activities, with reference to the wealth that a charity has accumulated. As long as you maintain an appropriate level of charitable activity – measured through your spending – you are compliant with this rule.
CRA provides guidance about its spending requirements here. Note that there are separate rules for charitable organizations, which exist to deliver charitable programs and services, and foundations, which exist to support charitable programs and services.
Young Associates works with many smaller charitable organizations. Most groups in this category are unlikely to have accumulated property at a level that would cause non-compliance with the CRA. However, this is an issue that may involve complex legal and financial concepts. If you have concerns, it is wise to discuss your situation with a professional.
CRA defines its requirement for charitable organizations as follows:
If the average value of a registered charity's property not used directly in charitable activities or administration during the 24 months before the beginning of the fiscal period exceeds $100,000, the charity's disbursement quota is:
3.5% of the average value of that property.
The interpretation of this hinges on what property is not used directly in charitable activities or administration. CRA lists real estate and investments as examples.
A charity, for instance, may hold long-term investments such as units in a mutual fund, and use the resulting interest revenue in its operations. However, the principal sits intact for multiple years, not directly used for charitable activity. (This is distinct from the case of a charity that places short-term investments to earn some interest revenue before the investment matures and the principal winds up in a chequing account, available for spending.)
A charity may also own a building that it doesn’t currently occupy; this may be the case for institutions such as hospitals, universities and churches, which may have considerable real estate holdings and needs that change over time.
Once you have identified property that meets CRA’s definition of “not used directly in charitable activities or administration,” you must calculate its average value over the two years before the start of the current fiscal year. CRA provides some latitude in how the average may be calculated. If your organization needs to make this calculation, the method for assessing value and calculating the average over time would be a good topic for discussion with your CPA.
Last step: calculate 3.5% of the average value. That yields the amount your organization is obliged to spend on its charitable activities or administration during the current year.
Let's say your charity owns an investment portfolio, and you determined that its average value over the last 24 months was $100,000. Your DQ for the current year would therefore be $3,500.
You can see that this is actually a pretty low bar to jump over! Most organizations with the capacity to build a $100,000 investment portfolio would have operations that demanded more than $3,500 in program and admin spending. CRA’s rule is set at a level that catches inactive charities, but that is unlikely to cause compliance issues for most charities that are actively carrying out their mandates.
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.
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 email@example.com or call them at 613-566-4414, ext. 5060 if you have questions.
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