Books and records: CRA requirements and the importance of books and records - Segment 4


Every charity is obligated under the Income Tax Act to keep adequate books and records at a physical location in Canada. So that physical location, the address as identified in the T3010 at section F1, so you'll provide us that address there. For anybody interested in looking at these requirements in detail, you can look in section 232 of the Income Tax Act, and that outlines the requirement to keep adequate books and records.

If a charity is engaging activities outside of Canada, so you might be carrying on some foreign programs, you still must keep books and records and they must be kept in Canada. You can keep copies or documentation in the country that you're operating, but you must keep your official books and records in Canada, even if your activities are abroad. CRA officials are authorized to inspect, audit and examine charities' records. They're also authorized to have copies made, including any copies of any of your electronic records. Because of this requirement, and because of this authorization, books and records must be kept at a permanent address in Canada for which a CRA official could gain access. So it needs to be a physical location. A P.O. Box is not acceptable; it needs to be a place where a CRA auditor could visit.

The CRA does not specify what must be kept in your books and records. We have examples of what we expect to see, but we don't have a specific list, so it really does relate to the organization. It's organization specific. So, you' will include records to support your transactions and your activities. Some examples of documents are included on this slide here. So you'll see things such as your bank statements, vouchers, purchase vouchers, inventories, any contracts, fundraising contracts, your governing documents, your by-laws, your meeting minutes, your financial statements, all of those types of documents that support your activities should be included in your books and records.

If the charity fails to keep their books and records and we perform an audit, let's say, and we determine that the books and records weren't kept in an adequate manner;, we can specify at that point what books and records you must keep. So, while we don't specifically recommend what -- we do recommend, but we don't specifically outline what you must keep. We can, and reserve the right to specify at a later date what you should keep.

Why are books and records so important? Well, they're important for the obvious reasons in that they allow the CRA to verify your revenues. They allow us to verify the charitable donations that you've received. They allow the CRA to verify the expenditures and that those expenditures were on charitable programs. They allow us to confirm your activities and purposes remain charitable as your books and records provide additional context and information about your activities.

In addition to the reasons for CRA, the reasons why we consider them to be important, it also makes good business sense to have adequate books and records. As your volunteers and board members change, keeping complete books and records will help manage that change, will help keep your charity organized, will help with your succession planning in terms of training up new people that come in. If you have those books and records there, it helps them learn about the organization and learn about the decisions that have been taken. It helps maintain your corporate history. It helps justify activities that you've undertaken. It helps explain particular courses of action that the board may have chosen to take in a particular year.

The books and records explain, in detail, your activities and your operations. They give context to the reader about what the charity is undertaking. They help you be organized. If you're applying for financial assistance, having books and records won't necessarily guarantee you a loan but showing that you're organized and understanding your financial position will help you secure that financial assistance. So it's in your best interest to maintain those books and records and understand where your charity is at that particular time. You might have a provincial obligation to maintain books and records outside of the CRA's obligation. Keeping your charity in good standing by having -- in good standing with the province, in good standing with CRA, will also help to maintain a good donor base. So it's in your charity's best interest to keep books and records up to date and accurate.

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