In January 2017, the CRA released its Report on the Charities Program 2015–2016 (the Report), which provides interesting insights into Canada’s charitable sector. A common thread weaving through issues related to obtaining and maintaining charitable status is the need to create, maintain, and report/file information required by the Charities Directorate and the Income Tax Act.
According to the Report:
- 86,193 charitable organizations and public and private foundations constitute the charitable sector.
- The top 3 fundraising methods, first to third, are collection plates/boxes; fundraising dinners, galas and concerts; and sales.
- 5,395 charities engaged in foreign activities.
- Most (64,312) charities filed their returns ahead of the deadline.
- 6,571 organizations filed returns with no financial statements attached, contrary to the filing requirements.
- There were 3,815 applications for registration or re-registration in 2015–2016.
- The Directorate made 3,670 application decisions in 2015–2016.
- Of the 3,670 applications, 54% (2,000) never made it to registration, because they were turned down (84); incomplete (1,165); or withdrawn or abandoned (751). Of those that were turned down the most common rejection reason was lack of information (45 applications or 54%), including, inadequate information on the applicants’ structure, purpose, activities, and finances.
- Of the 726 audits by the Directorate in 2015-2016, among the most common concerns:
- Incorrectly issued donation receipts—for instance, mandatory information was missing, or the name and address of the charity on the receipts did not match CRA’s records.
- Annual return errors – for example, fields in the returns had errors or were left blank (including the fields for the amount of gifts for which the charity issued tax receipts, and the date of birth of each director/trustee).
- Inadequate books and records—including, missing copies of donation receipts, missing expense receipts, and banking and accounting details that did not match the annual returns.
- Non-charitable purposes and/or activities—registered charities occasionally changed their programs or activities and the changes were not authorized by their governing documents or were not charitable.
- Non-filing of T4A and T4 slips—many organizations either did not issue or maintain these records.
- The Directorate revoked the registration of 1,429 charities. Most (701) were voluntary, but significantly, 708 (50%) of the registrations were revoked because of the failure to file an annual return. Only 20 (1.4%) were revoked after an audit.
A common thread is that there are basic but essential record–keeping and reporting obligations that require improvement.