BR17. Why is it so important for my charity to maintain adequate books and records?
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There are many good reasons to maintain adequate books and records:
- You need adequate books and records in order to maintain a healthy happy donor base.
- You’ll operate more efficiently and effectively with good records.
- The CRA reviews financial records of registered charities for compliance, and you could be audited at any time.
- Certain federal, provincial, and territorial legislation demands it.
- Funding agencies may require it.More…
The public increasingly asks that registered charities they support be transparent and accountable. Maintaining adequate books and records and ensuring proper financial statements relates to this public awareness. Prospective donors to a charity may also wish to personally review the charity’s financial information prior to making a contribution.
The federal Canada Corporations Act and some provinces have legal requirements for charities to maintain proper books and records. Failure to comply with the requirements of federal or provincial legislation can result in penalties and possible director liability.
The Canada Revenue Agency reviews financial records of registered charities to make sure they comply with the requirements of the Income Tax Act. Audits are an important element of this process. Having all the books and records in order will lessen the burden on the charity’s staff and resources when a CRA audit occurs.
For all of these reasons maintaining proper books and records is essential. To assist with meeting the requirements of keeping proper books and records, the Canadian Institute of Chartered Accountants (CICA) has developed generally accepted accounting standards for charitable and not-for-profit organizations.