1	The Regulator’s Perspective: Steering Clear of Compliance Concerns Church and Charity Law Seminar November 14, 2013
2	Seminar Outline Understanding the Regulator Our Approach to Compliance Common Compliance Issues Steering Clear of Compliance Concerns
3	Understanding the Regulator - Legal framework Two sources of law: Income Tax Act - outlines requirements and obligations of charitable registration Court decisions - determines what purposes and activities are charitable Canada Revenue Agency’s interpretation of the law expressed through policy guidance
4	Understanding the Regulator - Broad stakeholder interests Charitable sector Diverse range of entities Public Donors, taxpayers/Canadians Professionals/ Intermediaries Lawyers, accountants, fundraisers
5	Our Approach to Compliance - Compliance continuum Facilitating voluntary compliance Education - website, guidance products, webinars Client services, including telephone support Assisting compliance Application review and advice Annual information return follow-up Enforcing compliance Field audits and litigation (outcomes - education letters, compliance agreements, sanctions, revocation)
6	Our Approach to Compliance - Charities audit program Audit Program Approximately 1% of charities audited each year Types of Audits Office Audits - conducted out of headquarters Field Audits - conducted at the charity’s premises
7	Our Approach to Compliance - How are charities selected for audit? Random audits High risk files Audit projects to review specific issues or concerns Compliance agreement follow-ups Exploratory audits
8	Our Approach to Compliance
9	Our Approach to Compliance - Educate first Provide opportunity to correct compliance issue Consider whether non-compliance is intentional or unintentional Utilize compliance agreements Apply sanctions or revocation where warranted
10	Our Approach to Compliance - Audit Outcomes
11	Common Compliance Issues - Receipting issues Improper receipts - important elements missing; Receipting for services - not permitted; Not properly establishing fair market value; Inadequate books and records to verify receipts, revenue and expenditures
12	Common Compliance Issues - Religious tuition fees Schools that are registered charities may issue receipts for religious tuition fees if they: Teach religion exclusively; or Operate in a dual secular/religious capacity Receipts may be issued for the religious portion of tuition fees See IC 75-23 for more information
13	Common Compliance Issues - Gifts to non-qualified donees Registered charities may only use their resources in two ways: By carrying on their own charitable programs; or By making gifts to qualified donees Gifting to non-qualified donees is a serious issue
14	Common Compliance Issues - Direction and control A charity that operates through an intermediary must maintain direction and control over its resources A properly structured agreement helps demonstrate direction and control Even when agreement exists, charities sometimes fail to properly implement and monitor
15	Common Compliance Issues - Political activities Charities cannot have political purposes A charity may carry out a limited amount of political activity provided they are: Connected to the charity’s purpose Subordinate to the charitable purpose Non-partisan in nature
16	Steering Clear of Compliance Concerns Establish internal controls and policies for receipting and expenditures Ensure direction and control by: Written agreements Monitoring and supervising Clear and complete instructions Separation of funds
17	Steering Clear of Compliance Concerns Client service Call centre, written enquiries Website Guidance products, information on operating a registered charity Sector outreach Information sessions, webinars, electronic updates and newsletters
18	Thank you! Client Services - General Inquiries 1-800-267-2384 Charities Information on the Web: www.cra.gc.ca/charities Charities Electronic Mailing List: To connect, go to our Website main page, bottom right, and click on “Email list sign-up”