Financial statements and books and records
Questions and answers
The following consists of questions that were not answered during the English webinar and questions from the French Webinar. Additional questions, which were answered during the English webinar, can be found by viewing the Financial Statements and Books and Records, or by reading the transcripts.
If you would like to ask other questions, contact our Client Service Section at 1-800-267-2384.
Books and records
1. If the charity keeps its current books and records at one location and its previous-year records at another location, how should this be reported?
The charity's records must be kept at its place of business or at a residence in Canada, as recorded with the CRA, unless it has received permission to maintain them elsewhere. When permission has been granted to maintain records elsewhere, they must be made readily available for review by the CRA upon request. For more information, see Keeping records.
2. Is the location of books and records, as recorded in section F1 of Form T3010B, Registered charity information return, made public? Even if the location is different from the physical address of the charity?
The information in sections F1 (physical location of charity and address for the charity's books and records) and F2 (name and address of the individual or organization completing the return) of Form T3010B is confidential. The mailing address of the charity, as listed on the CRA Web site, is the only address available to the public.
3. Can bank statements be kept with source documents for financial statements or must they be kept with the books?
You can keep your bank statements with the source documents for financial statements. That is sufficient.
4. How do Web-based databases have to be maintained?
Electronic records can be maintained on a computer file server or on server space, and they can be maintained outside the premises of the charity. However, they must be located in Canada. Electronic records kept outside Canada do not meet the requirements. Electronic records are subject to the same requirements as paper records, as described in Keeping records.
Charities should back up all their business information that has been recorded on rewriteable media just in case the original information is accidentally lost, deleted, or erased.
5. What is the difference between a return using accrual accounting and one using cash accounting?
Let me give you an example to help you understand the difference. A charity knows that it will receive $1,000 in the year for services provided to its community. Using accrual accounting, it can already report the $1,000 as revenue, whether or not it has received the money, because the service has already been provided by the organization. It must be noted that all revenue earned but not received on the date of the return will be included with accounts receivable at that time, as a current asset on the balance sheet. However, if the organization were to use cash accounting, only the amount actually received by the end of the year is recorded in the financial statements. Thus, even if the service has already been provided by the charity, the $1,000 owed by the person cannot be included in the year if it has not yet been received.
6. What is the actual difference between a balance sheet and an income statement? They seem to be the same thing, but using different terms. Asset = revenue, liability = expenditure, surplus or deficit = net income?
A balance sheet presents the organization's situation at the end of the year. It therefore shows the assets that you have in your accounts and the capital property that you own. The balance sheet does not necessarily show what you received during the year or what you expended in the year. In reality, it only shows all the assets that you have accumulated over the years. Thus, at the end of the fiscal year, what you have in your accounts, what you own, is what is on the balance sheet. An income statement, on the other hand, only presents income received in the year and expenses incurred in the year. You do not see what you received ten years ago in an income statement, only what happened in the year.
7. Must financial statements be prepared by a chartered accountant?
I mentioned at the beginning of the presentation that the Agency does not require that you submit financial statements that have been audited or prepared by a chartered accountant. What is strongly suggested, however, is that you have your financial statements audited before submitting them if you have annual revenues in excess of $250,000. If your revenue is less than $250,000, you can easily prepare your financial statements yourself and submit them to us without them being audited.
8. For how many years should a charity keep its books and records?
A charity must keep books and records as follows:
- Copies of official donation receipts (other than for 10-year gifts) - Must be kept for at least two years from the end of the calendar year in which the donations were made.
- Records for 10-year gifts - Must be kept for as long as the charity is registered and for at least two years after the date the charity's registration is revoked.
- Minutes of meetings of the directors/trustees/executives - Must be kept for as long as the charity is registered and for at least two years after the date the charity's registration is revoked. In the case of a corporation, they must be kept for two years after the day the corporation is dissolved.
- Minutes of meetings of the members - Must be kept for as long as the charity is registered and for at least two years after the date the charity's registration is revoked.
- Governing documents and by-laws relating to the charity - Must be held for as long as the charity is registered and for two years after the date the charity's registration is revoked.
- General ledgers or other books of final entry containing summaries of year-to-year transactions and the accounts necessary to verify the entries - Must be kept for six years from the end of the last tax year to which they relate, while the charity is registered, and for two years after the date the charity's registration is revoked. In the case of a corporation, they must be kept for two years after the day the corporation is dissolved.
- Financial statements, source documents, and copies of annual information returns(T3010 forms) - Must be kept for six years from the end of the last tax year to which they relate. If the charity's registration has been revoked, they must be kept for two years after the date of revocation.
9. We have a good software package to track donations. How long do we have to keep photocopies of donations?
Please see the answer to question 4 above.
10. I have to keep copies of official donation receipts for a minimum of two years. How long should I keep a record of my receipts? I know that for 10-year gifts I have to keep the records for life, but do I keep my records for other gifts for the same length of time?
For a registered charity, a record containing a summary of transactions carried forward from one year to another and the accounts needed to verify entries has to be kept for six years after the last day of the tax year to which the receipts relate.
When a charity's registration is revoked, the charity has to keep the above-mentioned record for two years after the date the registration is revoked. When a corporation is dissolved, it has to keep the above-mentioned record for two years after the date of the dissolution.
11. How many years must we keep bank documents?
Bank documents are included with supporting documents, so you need to keep them for six years from the end of the year in which you received the bank statement or, of course, until two years after revocation of your charity. So bank statements, six years.
12. How long do we keep financial statements?
Financial statements must be kept for six years from the end of the year for which they were prepared.
13. Could you detail specifically what WE as the charity need to get to prove receipt of an expense payment for a mission's project?
The Canada Revenue Agency (CRA) does not specify what type of document is required to prove having received an expense payment, but it does say that all transactions must be supported by source documents (for example, sales invoices, purchase receipts, contracts, guarantees, bank deposit slips, cancelled cheques, cash register slips, credit card receipts, purchase orders, work orders, delivery slips, emails, and general correspondence in support of the transaction) to substantiate the information in a charity's records. This includes expense payments for mission projects.
For more information, see Keeping records.
14. Do registered charities require a year-end audit?
If a registered charity has income over $250,000, the Charities Directorate recommends that its financial statements be professionally audited. If they are not professional audited, they should be signed by the treasurer of the charity. If the charity is incorporated, it should also determine if it has audit requirements under its incorporating act.
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