CCRA Charity Audits

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CCRA Charity Audits

• Robert B. Hayhoe
• rhayhoe_at_millerthomson.ca
• 416.595.8174
• Canadian Council of Christian Charities
• 2001 Annual Conference
• September 26, 2001

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CCRA Audits

• CCRA Charities Directorate
• Charities Directorate staff
• Consulting and Audit Canada staff
• Other audits
• GST/HST
• payroll

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CCRA Audit Authority

• ITA 231.1
• power to inspect records to ensure compliance
• ITA 231.2
• requirement to provide information
• ITA 231.3
• search warrants

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CCRA Audit Philosophy

• Designed to ensure ITA compliance
• financial compliance
• activity compliance
• Designed to educate
• Confidential

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CCRA Audit Selection

• 400-500 audits / year
• Random
• Problem areas
• Complaints
• public record
• constating documents
• T2050 application for registration
• T3010 information returns

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Your Audit Philosophy

• The auditor is not your friend (or enemy)
• Disclose only required information
• Pre-audit compliance

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ITA Recordkeeping Requirements

• ITA 230(2)
• records necessary to confirm grounds for
  revocation of registration
• essentially records to show that all activities
  have a charitable purpose
• duplicate receipts
• information to verify donations
• ITA 230(4.1) electronic data acceptable

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ITA Record Retention Requirements

• IT Reg. 5800 minimum retention
• 2 years after deregistration (if ever)
• directors and members meeting minutes
• all governing documents
• records of 10 year trust gifts
• 2 years from end of year
• duplicate receipts and supporting documents
• ITA 230(4) minimum retention
• 6 years from end of year
• records to show charitable status

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Privilege

• Legal advice privilege
• communications related to obtaining legal advice
• documents prepared by clients agent for legal
  advice
• Canada-wide
• No accountant privilege
• No consultant privilege

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Claiming Privilege

• ITA 232
• procedure for lawyer to claim privilege for
  client documents
• no ITA procedure for charity to claim privilege
• probably covered by ITA 232
• safest to deliver privileged files to lawyer

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CCRA Audit Concerns

• Political activity
• Foreign activity / grantmaking
• Art donations
• Receipted fundraising events
• Deputised fundraising
• Student aid

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Audit Response Planning

• Initial CCRA letter or call
• Charity contacts professional advisors / CCCC
• advice - not representation
• Charity contacts auditor

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Audit Parameters

• Specific or general audit?
• Designed to help collect the desired information
• Confirm parameters in writing
• Draft CCRA Audit Protocol
• no provision for limitations
• three year moratorium on re-audit

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Pre-Audit Review

• Legal issues
• Accounting issues (to assist lawyer)
• consider privilege issues

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Audit Day

• ITA 231.1 requires all reasonable assistance
• Civility
• Limited staff access
• Privileged documents
• Written questions

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Post-Audit

• Auditor returns file to Charities Directorate
• slow CCRA turnaround
• Audit meeting to deal with draft audit report
• CCRA audit report letter
• Confirmation of Compliance, or
• Education Letter
• minor issues

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Post-Audit (Issues Raised)

• Revocation is always threatened - rarely carried
  out
• First offense / clean operation
• Undertakings Letter
• correct for future
• Subsequent offense / serious violation
• Administrative Fairness Letter
• revocation of registration
• Legal representation and submissions

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Revocation of Registration

• Only penalty available for most offences
• no intermediate sanctions
• ITA 168 revocation for
• ceasing to comply with requirements for
  registration
• improper receipting
• interfering with audit

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Result of Revocation

• Penalty tax equal to assets
• unless transfer assets to another registered
  charity
• pre-register transferee in cases of risky
  activities
• appeal to FCA
• expensive and cumbersome

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Resources

• Professional advisors
• CCCC
• CCRA documents (www.ccra-adrc.gc.ca)
• CCRA Information Circular IC78-10R3 Books and
  Records Retention / Destruction
• CCRA Guide T4118 Auditing Charities
• Draft CCRA Audit Protocol

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CCRA Charity Audits

• Robert B. Hayhoe
• rhayhoe_at_millerthomson.ca
• 416.595.8174
• Canadian Council of Christian Charities
• 2001 Annual Conference
• September 26, 2001