Record-Keeping Requirements
• Accuracy and Completeness:
◦ Charities must maintain accurate and complete financial records. This is a fundamental legal obligation. Records must fully document all financial transactions, including income, expenses, assets, and liabilities.
• Supporting Documentation:
◦ Charities should keep all supporting documentation, such as receipts, invoices, bank statements, and contracts. These documents serve as evidence of the transactions and are essential for audits and compliance reviews.
• Retention:
◦ There are legal requirements for how long financial records must be kept. Both federal and provincial regulations may specify retention periods. Charities must ensure they have policies and procedures in place to comply with these requirements.
Reporting Obligations
• Canada Revenue Agency (CRA):
◦ Registered charities must file an annual information return with the CRA (Form T3010). This is a key legal reporting requirement.
• The T3010 includes detailed financial information, such as:
◦ Revenue and expenses
◦ Assets and liabilities
◦ Information on programs and activities
• The CRA uses this information to ensure that charities comply with the Income Tax Act and maintain their charitable status.
• Failure to file or providing inaccurate information can have serious legal consequences, including financial penalties and revocation of charitable status.
Provincial Reporting
• In addition to CRA reporting, charities may have reporting obligations to provincial or territorial governments, especially if they are incorporated under provincial legislation.
• These reporting requirements may vary depending on the province or territory and the type of organization.
Audit Requirements
• Legal Requirement for Audits:
◦ Depending on the charity's size, structure, and the regulations in the relevant jurisdiction, an audit of the financial statements may be legally required.
◦ Audits must be conducted by qualified, independent auditors.
Purpose of Audits
• Legal Requirement for Audits:
◦ Depending on the charity's size, structure, and the regulations in the relevant jurisdiction, an audit of the financial statements may be legally required.
◦ Audits must be conducted by qualified, independent auditors.
• In addition to CRA reporting, charities may have reporting obligations to provincial or territorial governments, especially if they are incorporated under provincial legislation.
• These reporting requirements may vary depending on the province or territory and the type of organization.
Compliance with Accounting Standards
• Charities must ensure that their financial record-keeping and reporting comply with Canadian accounting standards, such as the Accounting Standards for Not-for-Profit Organizations (ASNPO).
Governance and Legal Oversight
• Board of Directors' Responsibilities
◦ The board of directors has a legal responsibility to oversee the charity's financial management and ensure compliance with all applicable laws and regulations.
This includes:
- Establishing financial policies and procedures
- Reviewing financial statements
- Ensuring that audits are conducted when required
Legal Consequences of Non-Compliance
• Failure to comply with legal requirements related to financial record-keeping, reporting, and audits can result in various consequences, including:
◦ Financial penalties
◦ Legal action
◦ Loss of charitable status
◦ Damage to the charity's reputation