By Jacqueline M. Demczur and Esther S.J. Oh

CRA Releases Report on Charities Program 2022 to 2023

On September 4, 2024, the Charities Directorate of the Canada Revenue Agency released a Report on the Charities Program 2022 to 2023 (the “CRA Report”).

a) Overview

High level highlights of the CRA Report include the following: implementing a new way for charities to work with non-qualified donees by making grants; making changes to the Form T3010 Registered Charity Information Return; and decreasing the average processing time for final decisions on applications for registration from 213 days to 147 days.

The CRA Report stated that in 2022, there were 74,544 charitable organizations, 6,549 private foundations and 4,862 public foundations in Canada, totaling 85,955 registered charities.

b) Breakdown of Assets, Revenue and Expenditures of Registered Charities

The following chart provides a break-down of the assets, revenue, and expenditures of each type of registered charity (in billions of dollars) based on information obtained through the Registered Charity Information Returns which were submitted by registered charities for the 2021 calendar year (which is self-reported by registered charities) (“2021 Charity Returns”):

In 2021, funding from the government was the main revenue source for all charities, totaling 69% of all revenue. Revenue from the sale of goods and services (7%), tax-receipted gifts (6%), non-tax-receipted revenue (3%), and revenue from other registered charities (3%) and the combined amounts in the “other” category made up 12% of charity revenue. Regarding expenditures in 2021, 73% of expenditures reported by charities were allocated to charitable activities, 23% on “other” expenditures (such as administrative, management, and professional fees) and 4% of expenditures were on gifts to qualified donees. Charities spent approximately $3.8 billion on activities outside of Canada in 2021 (which is required to be reported on line 200 of the T3010). Again, the above information is based on the 2021 Charity Returns. 

c) Applications for Charitable Status

During the 2022 to 2023 fiscal year, the CRA Report stated that 88.1% of applicants for charitable status used online services to submit applications, documents, and correspondence. The CRA received 2,058 applications for registration as a charity and 115 applications for registration as other qualified donees. In total, 2,398 decisions on applications for registration were made by the CRA.

Of the applications for charitable status reviewed in the 2022-2023 fiscal period, 90.1% were new applications, and 9.9% were re-registrations. Approval of registration represented the majority outcome for both charities and other qualified donees in this time period, while denial of registration was the least common, representing 1% in each category. Reasons for denial of charitable status included a lack of information provided on proposed activities, the carrying on non-charitable activities, acting as a conduit and/or a lack of direction and control over the use of resources. 

d) CRA Audits

During the 2022-2023 fiscal year there were 222 audits done by CRA. The CRA Report stated that common non-compliance findings included:

• Incomplete or incorrect T3010 return
• Incomplete or inaccurate donation receipts
• Inadequate books and records

The CRA Report stated that outcomes of those audits were as follows:

*such as pre-registration and revocation tax audits 

e) Advisory Committee on the Charitable Sector

The Advisory Committee on the Charitable Sector (“ACCS”) is described by the CRA Report as a “consultative forum for the Government of Canada to engage in meaningful dialogue with the charitable sector.” The CRA Report stated that the ACCS was established in order to “improve the Government’s relationship with the charitable sector and modernize the regulatory framework under which charities operate.”

The CRA Report noted that 11 new members from the charitable sector were onboarded between May and October 2022. The ACCS met five times over the fiscal year. 

f) Technical Issues Working Group

The Technical Issues Working Group (“TIWG”) was established in 2004 to serve as “a forum … to discuss trends and technical issues, explore workable administrative solutions, and expand the CRA’s understanding of the charitable sector.”

Membership on the TIWG membership is refreshed every two years and includes key stakeholders from the charitable sector, including umbrella organizations and professional associations, academics, and accounting and legal experts.

Most recently, the committee was consulted on a variety of topics including the CRA guidance Registered charities making grants to non-qualified donees (CG-032), the CRA’s approach to promoting compliance, and the CRA’s policy priorities. 

g) Office of the Taxpayers’ Ombudsperson Review

On March 27, 2023, the Office of the Taxpayers’ Ombudsperson released a report titled Charity Begins with Fairness: More to Explore, which examined how charity audit files are selected, the quality of services provided to charities audited by the Charities Directorate, and the CRA’s efforts to make its employees aware of their potential unconscious biases that could lead to discriminatory behavior toward charities run by racialized communities.

The CRA Report stated that the Ombudsperson had found that “CRA’s risk assessment criteria is reasonable and that its auditors carried out audits professionally and courteously. Overall, the CRA follows fair processes and the report did not identify any indicators that were problematic or could unfairly affect certain charities.”. It recommended that the CRA create a mandatory unconscious bias training course for all employees, targeting the course to make it mandatory for all employees involved in the CRA audit process. The CRA Report indicated that CRA agreed with the above recommendations, and developed a three-phased approach that goes beyond the Ombudsperson’s recommendations. For the full text of what the Ombudsperson said in his report on this matter, click here.

CRA Reminds Charities of September 30 Deadline for T3010 Filing

With the September 30^th filing deadline fast approaching, charities whose fiscal year ended on March 31 must submit their T3010 annual information return. The CRA has urged charities to file their returns online through My Business Account (MyBA) or Represent a Client for faster processing and easier form completion.

The CRA has provided various tools to assist in the filing process, including an updated T3010 charity return page, a guide on completing the return Completing the Registered Charity Information Return (Form T4033), and a webinar which walks charities through the steps to completing the T3010 online.

Charities that need to update their information, such as adding a new director or changing their mailing address, can do so through MyBA. For those new to the online system, the CRA offers resources and webinars to help get started.

For assistance, charities can contact the Charities Directorate client service team at 1-800-267-2384, available Monday to Friday, 8 am to 5 pm Eastern time.

CRA Releases Latest Quarterly Update

The Charities Directorate has published its second edition of quarterly updates on September 5, 2024, highlighting significant developments and ongoing efforts to support the charitable sector as the fall season begins.

The update coincides with the International Day of Charity, and summarizes various initiatives undertaken since the last update. These include a webinar on maintaining books and records, an announcement regarding the ACCS’ open call for new members, and the publication of refreshed content aimed at educating charities about compliance and the risks of terrorist abuse.

In its update, the CRA recognized that while most charities strive to operate within legal requirements, some engage in high-risk non-compliance areas. The update identifies the CRA’s top three high-risk non-compliance areas of focus as follows: aggressive tax planning, offshore activities and ineligible individuals. The CRA also re-iterated its commitment to ensuring compliance through education, audits, and stakeholder engagement.

Looking ahead, CRA announced upcoming webinars focused on public policy dialogue and development activities. Charities are encouraged to stay informed and participate in these educational opportunities.

For more details and to view past webinars, charities can visit the Charities media gallery. The CRA also invites stakeholders to spread the word and encourage others to subscribe to their mailing list for future updates from CRA.

CRA Posts “Charitable purposes and activities: Useful tips to draft and describe them”

Recently, the CRA posted an update to their News and events for charities page which provides tips on drafting and describing charitable activities. The update stated the tips are intended to assist those applying for charitable registration or for those registered charities that are wanting to change their purposes or carry on new activities.

The update began by explaining that a registered charity must be constituted exclusively for charitable purposes and conduct charitable activities that support those purposes. Purposes, also known as objects, are the goals an organization aims to achieve and should be clearly outlined in the organization’s governing document. The update briefly explained that charitable purposes must fall into one of four categories: relief of poverty, advancement of education, advancement of religion, or other purposes that benefit the community. Registered charities can also be constituted to make gifts to qualified donees.

For further guidance, charities can refer to the CRA’s resources or contact the Charities Directorate client service team.

​Read the September 2024 Charity & NFP Law Update