BR16. What happens if a charity’s records are inadequate

BR16. What happens if a charity’s records are inadequate?


Short answer

Keeping inadequate records may risk your registration as a charity. If a charity’s records are considered inadequate, the Minister may

  • issue a requirement that adequate records be provided
  • suspend the charity’s tax-receipting privileges
    and/or
  • revoke the status of a charity that has not provided adequate records.
Long answer

Under subsection 230(3) of the Income Tax Act,

the Minister of National Revenue may require the registered charity to keep such records and books of account as the Minister may specify and that the registered charity shall thereafter keep records and books of account as so required.

Suspension is a new CRA sanction. Under new subsection 188.2(2) of the Income Tax Act, a charity may have its tax-receipting privileges suspended for a year if it contravenes any of sections 230 to 231.5 of the Act, which include providing information as required. While the CRA may generally use education and compliance agreements first, it anticipates instances where records are deliberately not compiled or are altered, destroyed or hidden in order to disguise a serious infraction. In such cases, the CRA will likely move directly to an intermediate sanction or even revocation of the charity’s registration.

More…

See the CRA’s
Income Tax Information Circular on Books and Records Retention/Destruction.