How Does the Canada Revenue Agency Safeguard Charitable Compliance and Address Potential Disputes in the Audit Process?

The audit process for Charities in Canada aims to ensure they comply with the regulations set forth by the Canada Revenue Agency (CRA).

The CRA use various tools to encourage compliance, including outreach initiatives, client services, reminder letters, audit programs, and the Charities Education Program.

Charities can be selected for audit based on several factors, such as 1. random selection, 2. public complaints,3. information from media articles or other public sources, and 4. insights derived from their annual return or past instances of non-compliance.

The audit process thoroughly reviews the charity's finances and programs to ensure they align with regulations and charitable purposes. The nature of the audit varies based on the size and complexity of the charity. The CRA works closely with charities and allows them to submit additional information throughout the audit.

There are two types of audits conducted:

Field Audits occur at the charity's premises and scrutinize files, publicly available information, and all books and records.

Office audits are carried out at CRA offices, examining the charity files, some publicly available information, books, and documents.

More than 90% of audited charities can continue their charitable activities after an audit.

Depending on the findings, different actions are taken:

• if there are no concerns, then no action is taken
• minor concerns result in an educational letter
• Moderate concerns lead to a compliance agreement
• While serious problems may result in sanctions, registration revocation, or registration annulment.

Charities who disagree with the CRA's conclusions can respond, and the CRA will review the rebuttal and determine the appropriate course of action.

If the CRA proposes sanctions or registration revocation, the charity has a 90-day window to file an objection with the CRA's Appeals Branch.

In case of disagreement with the objection's outcome, the charity can appeal to the Federal Court of Appeal or the Tax Court of Canada.

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