Top Compliance Issues from the CRA Charities Directorate

As part of the quarterly updates from the Charities Directorate, the CRA notes their top compliance issues from the 2023/24 year. We've summarized them here for you!

Books and records

Reason to educate - minor errors:

• Non-material and/or unintentional errors and/or omissions in the books and records

• Not having a travel log to support minor expenses

• Not maintaining a copy of current governing documents

Examples of high-risk non-compliance:

• Having no books and records available

• Refusing to provide books and records

• Committing culpable conduct (falsified books and records)

Official donation receipts

Reason to educate - missing minor elements:

• A statement that it is an "official receipt for income tax purposes"

• The place or locality where the receipt was issued

• The name Canada Revenue Agency and the website address (canada.ca/charities-giving)

Examples of serious non-compliance:

• Issuing falsified/fraudulent/inflated receipts

• Issuing receipts for services

• Lending registration number to other organizations

T3010 information return

Reason to educate - unintentional minor errors:

• Allocating fundraising expenses to the wrong reporting line

• Incorrectly reporting line 5010 “Total expenditures on management and administration”

Examples of intentional/serious errors:

• Significant inaccuracies, beyond what is reasonably considered minor*

• Willfully omitting information from the T3010 and/or financial statements

• Failing to file a return as and when required (which results in a revocation for failure to file)

*Opportunities for the Disabled Foundation v MNR, 2016 FCA 94 at paras 50-51.

CRA typically addresses minor errors without an audit, through communications like education letters.

Audits tend to be reserved for situations where a high risk of potential non-compliance has been identified. CRA uses stronger corrective measures, such as sanctions or revocations, in cases of serious non-compliance.

If you’re concerned about the compliance of your books and records, read Finance for the Arts in Canada to learn all about best practices for keeping your books up to date and accurate.

2024 Charitable Donation Deadline Extension Update

Recently, there's been some confusion around the announced extension of the deadline for making charitable donations eligible for tax support in the 2024 tax year. The extension allows individuals to include donations made between Jan 1 and Feb 28, 2025 on their 2024 tax returns. The Canada Revenue Agency (CRA) recently sent out an update on this matter which can be found here: Extension of the deadline for making 2024 charitable donations.

According to this CRA guidance, individuals may claim the eligible amount of certain gifts made to charities or other qualified donees up to February 28, 2025, on their 2024 personal income tax and benefit return. The gift must be in the form of cash, or transferred by way of cheque, credit card, money order, or electronic payment.

More importantly for our clients, CRA states that charities can issue receipts as normal according to receipting rules, and the CRA will work on their end to administer the extension. Charities are not required to issue official donation receipts specific to the extension period; however, they may wish to do so as a courtesy to its donors, especially if they generally receive only one annual receipt for multiple donations.

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Charity Oversight and Compliance in the News

A recent Toronto Star/Investigative Journalism Bureau article has revealed discrepancies between a Canadian cancer charity's claims about its charitable spending in its T3010 and its actual financial records. Mark Blumberg has shared his comments on the article, and offers further analysis on his website, CanadianCharityLaw.ca.

Blumberg notes that the Canada Revenue Agency (CRA) only audits a small fraction of charities each year—around 200—which limits the ability of the public to trust that issues are being effectively addressed. He also points out the CRA’s inability to publicly comment on its audits unless a charity faces penalties, suspension, or revocation. Even if the CRA audits a charity and finds no wrongdoing, they still cannot comment on the situation.

Blumberg urges charities to prioritize compliance and transparency to maintain public trust and avoid potential regulatory scrutiny.

Compliance and transparency arise from expertly managed internal systems that respond to regulatory requirements. 

Young Associates’ bookkeeping and payroll professionals can assist your organization in navigating the complexities of financial reporting and CRA compliance while supporting you and your board of directors in achieving best practices. .

To hone your financial statement reading skills, considering ordering a copy ofFinance for the Arts in Canada!