By Adam Aptowitzer
Volunteering for a charity can be a rewarding way to help out in the community but it can bring with it a number of legal responsibilities. Legal responsibility is often assigned on the basis of the role an individual serves within an organization. Volunteering, though, can muddy the waters about the position of the individual within an organization. This is particularly true in circumstances where the charity does not keep corporate records of its directors.
As most Canadians will know, an employer must deduct the amounts owing for Income Tax, Employment Insurance, and Canada Pension Plan Premiums from an employee’s paycheque. The directors must then remit these amounts to the CRA. Employers will point out that the easy part is keeping the money from the employee – the hard part is sending it on to the CRA. This is especially true for an organization that has run into cash flow problems; the temptation is to use the funds that should have been sent to the CRA for operations. When the money is misused, the directors can be assessed as being personally responsible.
In fact, an individual can still be liable as a director even if they are merely acting as a director without having been legally elected as one. It should go without saying that directors of a charity are just as liable as directors of for-profit enterprises for deductions. Of course, in the charity situation many individuals volunteer to take on responsibilities in the management of the charity and so could be construed as being a director. In fact, charities often seek out individuals with specific expertise to help with the management of the organization in those areas. Where these volunteers then hold themselves out as a director or engage in the management of the group they may end up being classified as an acting director. In those circumstances, these individuals may be just as liable as elected directors for unremitted source deductions.
We have written often of the need to be careful of the technical requirements of keeping books and records in order to comply with the requirements of being a charity, but it should be obvious to all that there can be unforeseen consequences when these obligations are not met diligently.
This is yet another reason why it behooves any organization to keep meticulous books and records to ensure that, should the organization run into trouble, responsibility lies where it should and not on some unsuspecting volunteer.
By Adam Aptowitzer