Leslie Milton, CPA, CA, LPA, Associate Partner
One of your many responsibilities as a director, or executive director, of a registered charity, is to protect your status as a registered charity. How do you accomplish this?
This is not an all-inclusive list, but rather basic information for directors and management.
File your registered charity information return on time (Form T3010). You must file form T3010, together with a copy of the financial statements, no later than six months after the end of your fiscal year. Failure to do so could be result in “revocation,” which means you will no longer be exempt from Income Tax under the Income Tax Act, can no longer issue official donation receipts, and may be subject to a revocation tax.
Losing your registration for failure to file could lead to $500 non-refundable penalty once you apply for re-registration.
Keep your charitable objectives, or purposes, in mind. All of your programs must be consistent with your objectives or purposes. You should refrain from engaging in unrelated activities.
Meet your disbursement quota. A disbursement quota is the minimum amount you must spend in a year on your charitable objectives or purposes. There are slightly different calculations for the disbursement quota depending on whether you are classified as a charitable organization, or a public or private foundation.
Your accountant should advise you of your disbursement quota for the following year when you prepare your T3010. This will help you plan the current year’s expenditures appropriately.
Follow Canada Revenue Agency’s (CRA) rules for donation receipts. CRA has specific guidelines for what should appear on a donation receipt. CRA’s penalties for issuing donation receipts with incomplete information amount to five per cent of the eligible amount on the receipt and 10 per cent for repeat offenders.
Keep proper books and records. CRA can suspend your tax-receipting privileges if you either do not provide the records to a CRA auditor when requested, or if CRA feel the records are inadequate.
Corporate requirements. CRA expects to receive any information with respect to a change in your name, address, phone number or governing documents. You are also required to follow certain guidelines under the Canada or Ontario Corporations Act to maintain your status as a legal entity. Speak to your lawyer to ensure you are aware of these requirements.
Your status as a registered charity, and the ability to issue official donation receipts, is a powerful fundraising tool. Following the list outlined in this article each year will help you preserve your special status under the Income Tax Act.
