Obligations of Charities

Once a charity is registered, there are things it must do to keep that status. To do this, charities need to:

• file the Registered Charity Information Return within 6 months of their fiscal year end
• use all their resources, such as money, people and property, for their stated charitable purposes and activities
• be in control of and direct the use of all of their resources
• meet their annual spending requirement
• keep adequate books and records and make them available to the Charities Directorate on request
• issue complete and accurate donation receipts for all donations
• maintain their status as a legal entity
• inform the Charities Directorate of changes to the way they operate or their legal structure

The Registered Charity Information Return must be done every year. Charities must send it to the Charities Directorate within 6 months of the charity's fiscal year end. The return must be completed even if the charity is not active in any given year. Failure to file this return could result in the charity's registration being revoked. The following information is required…

In this part of the return, you put:

• the name of the charity
• the fiscal period that the return covers
• the charity’s business or registration number
• some other basic information about the charity

This part requires you to complete a separate worksheet and attach it to the return. This form lists the various officials of the charity as well as their contact information. The names and positions of the officials are made public. The contact information is kept private.

This part includes information on the activities of the charity. This includes things like:

• providing details on new and ongoing charitable programs
• details about various types of transfers and gifts made or received by the charity
• all fundraising methods that were used
• if an external fundraiser was used, information related to them
• compensation of any directors, trustees of official who are not at arm’s length for any services they provided
• whether the charity allowed any donor to use its property

Charities must include their latest financial statements with the return. They must also provide financial information directly on the return. This information includes:

• total assets and liabilities
• revenue and its sources
• expenditures

A registered charity should report changes to the Charities Directorate. Not doing so can make things difficult or put the charity at risk. Report changes to the charity’s:

• purposes or activities
• legal name
• legal status
• bylaws
• fiscal year end
• authorized representative information
• directors, trustees, or like officials
• public contact information

A charity can also apply to re-designate as a different type of charity. For example, a charitable organization may wish to change to being a public foundation.

Charities must spend a certain amount of money each year on charitable purposes. The amount is a percentage of the value of property not used directly for charitable purposes or administration. This property could be things like money in bank accounts, stocks or real estate. The percentage is different depending on the charity’s designation.

The value of any building does not have to be included in the calculation if it used for a charitable purpose. For example, there may be a church where regular services are held or a school that is used for educational purposes. If a portion of a building is not used for a charitable purpose, the value of that portion should be included.

For more information, see the Canada Revenue Agency's webpage on the annual spending requirement.

Charities must keep books and records so that the Directorate can check on the revenue a charity receives. This allows them to verify that resources are spent on charitable programs. Books and records also help confirm that the purposes and activities of the organization are still charitable.

Books and records are anything that relates to the workings of the charity. This includes:

• governing documents, such as articles of incorporation, bylaws and minutes of meetings must be kept for as long as the charity is registered and, if the charity is no longer registered, for at least two more years after that
• financial statements, source documents, such as bank statements, ledgers, payroll records and annual information returns must be kept for six years
• copies of official donation receipts must be kept for two years
• written agreements and contracts
• inventories
• promotional and fundraising materials

Documents that support the information in the books and records must also be kept. This includes things such as invoices, vouchers, formal contracts, work orders, delivery slips, purchase orders, and bank deposit slips.

Books and records must be kept at a Canadian address that the charity has on file with the Directorate. Copies of paper books and records should also be kept off site in case the originals are destroyed.

Registered charities may issue donation receipts, but they are not required to. Issuing receipts so that donors can claim a tax deduction is one way to encourage donations. If a charity is not going to issue receipts, donors should be informed about this.

To issue a receipt, a charity must know:

• that the donation meets the definition of a gift
• the fair market value of the donation
• the fair market value of any advantage the donor received
• the name and address of the donor
• the date the donation was actually received by the charity

A receipt can only be given for a gift of property. Property includes things like money, art, clothing and real property such as a house. Receipts cannot be issued for gifts of services. Certain things are not considered to be gifts…

• If a business gives a charity a gift certificate for their business, this is not considered a gift.
• A pledge or promise to make a gift is not a gift.
• If the donor receives something in exchange for the donation, all or some of the donation may no longer be considered a gift. Things a donor may receive include a ticket to an event, the use of property, advertising, a lottery ticket or other goods or services.
• If the donor controls how a gift can be used, it is no longer considered a gift. A donor can ask that the gift be used for a particular program, but not how it is used within that program.
• If a condition must be met for the charity to receive the donation, it is not considered a gift until after that condition has been met.
• If a gift is given on the basis that the charity will do something in the future, it is considered a gift. However, if the condition is not met, the money must be returned and the Directorate must be notified.
• Giving a charity the use of property is not considered a gift.

When the donor receives any advantage from the gift, the fair market value of the advantage must be subtracted from the fair market value of the gift. The donation receipt can only be for that difference. If the advantage is 80% or more of the fair market value of the gift, no donation receipt can be issued. If the value of the advantage cannot be determined, no donation receipt can be issued.

The fair market value of the advantage is determined in the same way it is determined for the gift itself. For example, if the donor received a theatre ticket, then the fair market value of the advantage would be the ticket price.

Advantages that are minimal do not affect the fair market value of a gift. If the advantage is less than 10% of the value of gift up to a maximum value of $75, a receipt can be issued for the full value of the gift.

The minimal advantage rule does not apply if the gift is cash or the equivalent of cash, such as a gift certificate. It also does not apply if the advantage relates to the activities at a fundraising event. For example, if the donor receives their meal for free at a fundraising dinner or does not need to pay green fees at a charity golf tournament. In these cases, the value of the advantage must be subtracted from the value of the gift.

There is no set form for a charitable receipt, but certain information must be included. The information must also be readable and not easily altered.

The following must be included:

• a statement that it is an official receipt for income tax purposes
• the name and address of the charity as on file with the Canada Revenue Agency (CRA)
• a unique serial number
• the registration number issued by the CRA
• the location where the receipt was issued (city, town, municipality)
• the date or year the gift was received
• the date the receipt was issued
• the full name, including middle initial, and address of the donor
• the amount and description of any advantage received by the donor
• the amount of the gift less any advantage
• the signature of a person authorized by the charity to acknowledge gifts
• the name and website address of the CRA

For non-cash gifts, a brief description of the gift must be included. If the gift was appraised, the name and address of the appraiser must also be included.