1. CCRA Charity Audits Robert B. Hayhoe rhayhoe@millerthomson.ca 416.595.8174 Canadian Council of Christian Charities 2001 Annual Conference September 26, 2001

2. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP CCRA Audits CCRA Charities Directorate –Charities Directorate staff –Consulting and Audit Canada staff Other audits: –GST/HST –payroll

3. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP CCRA Audit Authority ITA 231.1 –power to inspect records to ensure compliance ITA 231.2 –requirement to provide information ITA 231.3 –search warrants

4. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP CCRA Audit Philosophy Designed to ensure ITA compliance –financial compliance –activity compliance Designed to educate Confidential

5. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP CCRA Audit Selection 400-500 audits / year Random Problem areas Complaints –public record: constating documents T2050 application for registration T3010 information returns

6. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Your Audit Philosophy The auditor is not your friend (or enemy) Disclose only required information Pre-audit compliance

7. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP ITA Recordkeeping Requirements ITA 230(2) –records necessary to confirm grounds for revocation of registration essentially records to show that all activities have a charitable purpose –duplicate receipts –information to verify donations ITA 230(4.1) electronic data acceptable

8. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP ITA Record Retention Requirements IT Reg. 5800 minimum retention: –2 years after deregistration (if ever): directors’ and members’ meeting minutes all governing documents records of 10 year trust gifts –2 years from end of year: duplicate receipts and supporting documents ITA 230(4) minimum retention: –6 years from end of year: records to show charitable status

9. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Privilege Legal advice privilege –communications related to obtaining legal advice –documents prepared by client’s agent for legal advice –Canada-wide No accountant privilege No consultant privilege

10. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Claiming Privilege ITA 232 –procedure for lawyer to claim privilege for client documents –no ITA procedure for charity to claim privilege probably covered by ITA 232 safest to deliver privileged files to lawyer

11. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP CCRA Audit Concerns Political activity Foreign activity / grantmaking Art donations Receipted fundraising events Deputised fundraising Student aid

12. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Audit Response Planning Initial CCRA letter or call Charity contacts professional advisors / CCCC –advice - not representation Charity contacts auditor

13. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Audit Parameters Specific or general audit? Designed to help collect the desired information Confirm parameters in writing Draft CCRA Audit Protocol –no provision for limitations –three year moratorium on re-audit

14. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Pre-Audit Review Legal issues Accounting issues (to assist lawyer) –consider privilege issues

15. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Audit Day ITA 231.1 requires “all reasonable assistance” Civility Limited staff access Privileged documents Written questions

16. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Post-Audit Auditor returns file to Charities Directorate –slow CCRA turnaround Audit meeting to deal with draft audit report CCRA audit report letter: –Confirmation of Compliance, or –Education Letter minor issues

17. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Post-Audit (Issues Raised) Revocation is always threatened - rarely carried out –First offense / clean operation Undertakings Letter –correct for future –Subsequent offense / serious violation Administrative Fairness Letter –revocation of registration Legal representation and submissions

18. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Revocation of Registration Only penalty available for most offences –no intermediate sanctions ITA 168 revocation for: –ceasing to comply with requirements for registration –improper receipting –interfering with audit

19. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Result of Revocation Penalty tax equal to assets –unless transfer assets to another registered charity pre-register transferee in cases of risky activities –appeal to FCA expensive and cumbersome

20. Toronto Vancouver Calgary Edmonton Markham Whitehorse Washington, D.C. M I L L E R T H O M S O N LLP Resources Professional advisors CCCC CCRA documents (www.ccra-adrc.gc.ca) –CCRA Information Circular IC78-10R3 “Books and Records Retention / Destruction” –CCRA Guide T4118 “Auditing Charities” –Draft “CCRA Audit Protocol”

21. CCRA Charity Audits Robert B. Hayhoe rhayhoe@millerthomson.ca 416.595.8174 Canadian Council of Christian Charities 2001 Annual Conference September 26, 2001