Essential Rules for Keeping Proper Books and Records

Books and records

A registered charitable organization is obligated to maintain sufficient books and records. These books and records must enable the Canada Revenue Agency (CRA) to:

 • Substantiate revenues, including all charitable donations received;

 • Authenticate that resources are allocated to charitable programs; 

• Confirm that the charity's purposes and activities remain charitable in nature and are in alignment with its stated objectives.

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Books and records consist of:

Documents that may be classified as books and records for a registered charity can include governing papers (e.g., incorporation documents, constitutions, and trust agreements), internal regulations, financial reports, duplicates of official donation acknowledgements, copies of yearly data submissions (such as Form T3010, Registered Charity Information Return), written contracts, agreements, records of board and employee meetings, annual summaries, account books, banking records, expenditure accounts, inventory lists, investment arrangements, accounting professionals' work documents, salary records, marketing materials, and fundraising resources.

Additionally, source documents are also considered part of the books and records. Source documents serve as evidence to support the information in the books and records and can consist of statements, receipts, official agreements, work directives, shipping notices, procurement forms, and bank deposit slips.

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What is the appropriate location for maintaining books and records?

Books and records must be maintained at the address in Canada that the organization has on file with the relevant authority. This requirement extends to all books and records pertaining to any activities conducted outside of Canada. It is not permissible for a registered charity to keep its books and records at a foreign address.

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What is the duration for which a charity must retain its books and records?

A charity is required to maintain certain books and records:

• Official donation receipt copies (excluding ten-year gifts) - These source documents must be retained for at least two years from the conclusion of the calendar year in which the contributions were received.

• 10-year gift records - These should be preserved for the entire duration of the charity's registration and a minimum of two years following the revocation of the charity's registration.

• Directors/trustees/executives meeting minutes - These must be stored for the entire duration of the charity's registration and at least two years after the charity's registration has been revoked. For corporations, the records must be maintained for two years following the dissolution of the corporation.

• Members' meeting minutes - These should be held for the entire duration of the charity's registration and a minimum of two years after the revocation of the charity's registration.

• Governing documents and bylaws associated with the charity - These must be stored for the entire duration of the charity's registration and for two years after the charity's registration has been revoked.

• Final-entry record books, such as general ledgers, which consolidate annual transactions and provide essential accounts for entry validation - These must be preserved for six years following the end of the relevant tax year. This retention period is required while the charity's registration is active and ongoing. Furthermore, these records must be preserved for an additional two years after the charity's registration has been revoked, or for corporations, two years after the dissolution of the corporation.

• Financial reports, original documents, and duplicates of yearly data submissions (T3010 forms) - These are required to be preserved for a duration of six years following the end of the relevant tax year to which they correspond. If the charity's registration is revoked, these records must be preserved for an additional two years from the date of revocation.

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Is it permissible to store books and records electronically?

Yes, but the following conditions apply:

• The same regulations and retention periods apply to electronic records as mentioned earlier.

• Books and records that are created and maintained electronically must be stored in a format that can be readily accessed and read, even if paper copies of the electronic records are available. An accessible and usable format refers to information that is compatible with a system capable of generating a copy that can be easily processed and analyzed by auditors using CRA equipment.

• If any original documents are created, transmitted, or received electronically, they must be preserved in an electronically readable format.

• Scanned images of paper documents, records, or books of account maintained in electronic format are acceptable, provided that appropriate imaging practices are employed and documented.

Note

Books and records that are stored outside of Canada, yet can be accessed electronically within the country, do not fulfill the criteria for being considered as kept in Canada.

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What are the obligations involved in appropriately maintaining books and records?

A registered charity must not only maintain and store its books and records but also ensure their proper handling, retention, and protection as outlined below:

• Even if the charity employs a third party for record management, the charity remains accountable for fulfilling all requirements. Third parties may consist of bookkeepers, accountants, online transaction managers, and application service providers.

• To facilitate straightforward access, the charity should consolidate all its books and records in a single location. This approach simplifies the process for the charity during audits or when changes occur within the governing board.

• For backup purposes, the charity should also maintain duplicates of its books and records at a separate, preferably off-site, location.

• The charity bears the responsibility of making its books and records accessible to CRA officials. These officials hold the authority to inspect, audit, or examine a charity's records and create or obtain copies of any records, including electronic ones.

What are the repercussions of inadequate record management? 

Insufficient maintenance of books and records can lead to the suspension of a registered charity's ability to issue tax receipts, or even the revocation of its registered status.

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