ccra charity audits robert b. hayhoe [email protected] 416.595.8174 canadian council of...
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CCRA Charity Audits
Robert B. Hayhoe
416.595.8174
Canadian Council of Christian Charities
2001 Annual Conference
September 26, 2001
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
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
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
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
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
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
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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
Toronto
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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
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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
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
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
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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
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
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
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
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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
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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
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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
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”
CCRA Charity Audits
Robert B. Hayhoe
416.595.8174
Canadian Council of Christian Charities
2001 Annual Conference
September 26, 2001