S6. Can an official donation receipt be issued to volunteers for expenses incurred on behalf of our charity if they bear the cost of those expenses?
Yes, your charity can issue an official donation receipt as long as there is proper documentation to support the expenses and certain requirements are fulfilled.
The requirements are that
- the volunteer has incurred the expenditures on behalf of the charity
- the volunteer has a right to be reimbursed for such expenditures by the charity under an agreement between the volunteer and the charity
If the requirements are met, there are two options:
- the charity issues the volunteer a cheque for the amount of the expenses claimed by the volunteer and which are supported by receipts and the volunteer freely chooses to give some or all of the reimbursement back to the charity
The CRA encourages the charity and the volunteer to exchange cheques: that is, the charity issues a cheque to the volunteer covering the expenses and the volunteer then writes a cheque to the charity for the same amount. Using this cheque exchange results in proper financial records for the charity and a document confirming the volunteer’s gift.
- the charity may treat the reimbursement as a gift in kind and issue a receipt for income tax purposes. In this case, the charity should have written direction from the volunteer.
For example, the volunteer might write and sign:
“I [name written out in full] donate as a gift to [name of the charity in full] $[the amount owing] to which I am entitled as reimbursement for [purpose of the expenses] and would otherwise be given to me by cash or cheque.”
If the charity issues a donation receipt, it should report the amount of the eligible amount as an expense and the gift or donation as revenue on its Registered Charity Information Return (Form T3010).
A charity should have a policy in place on reimbursing volunteers. Such a policy should specify both the type of expenses the charity is prepared to repay (for example, for materials purchased for the use on a charitable activity or for reasonable accommodation if the volunteer is travelling on the charity's business) and appropriate procedures to document the volunteers' payments, such as submitting credit-card slips. With such a policy in place, the charity can demonstrate that it is controlling the use of its resources for charitable purposes.