It is always wise to ensure that a charity’s public information return is filed on a timely basis. Now, with the number of CRA audits of charities on the rise, timely filing is even more important.
While there are many more charity audits being done now than in prior years, few charities need worry about being selected unless there have been complaints made about them or where there have been prior alleged transgressions which have brought them to the CRA’s attention. If a charity has in the past given undertakings to change some aspect of its operations or has signed a compliance agreement, it is fairly certain that at some stage an auditor will show up to check on whether the undertakings have been fulfilled.
It is true that there may also be spot audits which are based on the (bad) luck of the draw but given the number of registered charities, well over 80,000, this is not a serious concern.
Charities should be aware that the T3010s of all charities are published on the CRA website. However, the information is inputted without anyone vetting the contents in any substantive way; they are examined seriously only when something raises questions about the charity’s operations.
The Charities Directorate takes the filing of the T3010 very seriously. In its guidelines relating to the imposition of intermediate sanctions, the Directorate has this to say:
There are two other cases where we are likely to move directly to revocation. The first is when a charity does not file its annual return. The Directorate will continue its zero tolerance policy for non-filers – if a charity does not file its return after we have reminded it to do so, we will simply revoke its registration. In our view, filing is a fundamental obligation for all registered charities. In its annual return, a charity accounts to donors and Canadians generally for its tax-advantaged status. The return also provides the Directorate with key information needed to administer and enforce the legislation. The second are serious cases for which there is no appropriate sanction, such as engaging in non-charitable activities. However, we intend to exercise some discretion in these instances, as it is not our intention to move directly to revocation in those cases where it is possible and appropriate to work with the charity to get its operations back onside. It is our goal, in cases where the non-compliance is less severe, to work with charities through a compliance agreement as a first measure.
By far the greatest number of revocations are for failing to file the form, an offence for which there are few if any defences.
Increasingly, we are seeing cases where a charity’s registration is revoked for failing to file the T3010. Rather than just requiring the charity to file a new application, file previously unfilled returns and pay a fee (referred to as a fine), the CRA acts as though the charity must be vetted just like a new application. The situation is exacerbated in that the CRA will go through the whole history of the organization’s operations and require justification for re-registration. In one instance, we dealt with a case of a revocation for failure to file. The organization was called upon to justify past disbursement quota reporting based on the reviewer’s belief that many of its activities were in fact political. However, the reviewer did not appear to be following the Charity Directorate document on what were acceptable political activities and focused on the organization’s appearances before legislative committees.
Until just a few years ago, a re-registration where revocation was based on a failure to file was a routine and mundane matter. We know of one very large public foundation that had its registration revoked three times in twelve years for failure to file simply because their auditors who were doing the work on a pro bono basis kept missing deadlines and the board member who received the notices had assumed the auditor would do its job properly. The foundation decided to get new auditors, pay them, and has not had a problem since.
Most charities do, in fact file on time. Among the most careful are those that may feel that some part of their operations might generate questions if they had to apply for a re-registration. But all charities should make compliance a high priority so as to keep a low profile with the Directorate. Although CRA revised the T3010 form in 2009 in hopes of easing the administrative burden faced by smaller charities (which rely frequently on volunteers) in completing the return, the T3010 return remains one of the most difficult of all CRA forms to fill out.
When faced with the frustrations of filling in the form, keep in mind the potential consequences of a revocation. Charities with fiscal years ending on or after March 4, 2010 should file using form T3010-1, which is the most recent version of the form, amended to take account of the 2010 Budget changes.