Accounting. Transparency. Integrity.

Bookkeeping is crucial for charities to ensure accurate financial records, maintain transparency with donors and stakeholders, and comply with Canada Revenue Agency (CRA) regulations. Proper bookkeeping also helps in preparing for audits and demonstrating accountability.

Charities in Canada must maintain:

• Detailed records of all donations, including receipts issued.
• Expense records, including invoices, bills, and payment receipts.
• Payroll records (if applicable).
• Investment records.
• A general ledger summarizing all financial transactions.
• Minutes of board meetings, especially regarding financial decisions.

The T3010 is the annual Registered Charity Information Return that every charity in Canada must file with the CRA. It provides details about the charity’s activities, revenues, expenditures, and compliance with CRA regulations, including whether it meets the disbursement quota. Failure to file accurately and on time can result in penalties or loss of charitable status.

Failure to file the T3010 within six months of the charity’s fiscal year-end can result in penalties, including revocation of charitable status. Without this status, a charity loses the ability to issue donation receipts and may face financial penalties.

The disbursement quota is the minimum amount a charity must spend on charitable activities or grants each year, based on a percentage of its investment assets. This rule ensures that charities actively use their resources to further their mission. Failing to meet the quota can attract CRA scrutiny and penalties. For more information visit the official page.

Charities are generally exempt from charging HST/GST on most of their activities. However, certain goods and services may require HST/GST collection. Charities may also be eligible for partial rebates on the HST/GST they pay, making it important to track these transactions. More information on the official page.

A bookkeeper handles the day-to-day financial transactions of a charity, including recording donations, managing expenses, reconciling bank accounts, and ensuring accurate data entry. Their work ensures that financial reports are prepared properly and that the charity is ready for audits and annual filings.

Accurate bookkeeping allows charities to provide detailed reports to donors about how their funds are being used, fostering transparency and trust. It also helps in budgeting for future projects and demonstrating the charity’s financial health, which can be crucial in grant applications and fundraising campaigns.

Charities should reconcile their bank accounts monthly to ensure that financial records match the actual bank balances. Regular reconciliation helps catch errors, fraudulent transactions, or discrepancies early on.

Popular accounting software like QuickBooks, Sage, or Xero can be customized for charity bookkeeping. Some platforms have specific non-profit/charity versions to manage donations, track expenses, and prepare necessary financial reports. It's important to choose software that aligns with CRA requirements and the size of the charity.

Charities should prepare the following reports:

• Income statement (statement of operations)
• Balance sheet (statement of financial position)
• Cash flow statement
• Donor reports and fundraising activity summaries These reports help the board and stakeholders understand the financial health of the charity and ensure transparency.

Yes, charities can outsource bookkeeping and accounting to professionals who specialize in non-profit and charity financial management. This ensures accurate compliance with CRA regulations, saves time, and allows the charity to focus on its mission. We can help you decide whether outsourcing is the right option for you. Contact us.

Bookkeeping errors can lead to inaccurate financial reports, mismanagement of funds, missed tax filing deadlines, and CRA penalties. It may also erode donor trust if financial discrepancies are uncovered.

Charities in Canada are not required by law to undergo an annual audit unless certain conditions are met. However, whether or not a charity must do an audit depends on the following factors:

1. Gross Revenue Thresholds:

• Charities with gross revenues exceeding $250,000 in a fiscal year are required to conduct an audit.
• For charities with gross revenues between $100,000 and $250,000, a "review engagement" is typically sufficient, which is less detailed than an audit but still involves a review of financial statements by a professional accountant.

2. Provincial Requirements:
Some provinces have additional requirements regarding audits, particularly for charities that are incorporated or registered under provincial legislation. For example, in Ontario, charities with annual revenues above certain thresholds may need to undergo an audit or a review engagement.

3. Donor and Stakeholder Requirements:
Some major donors, government grant programs, or other funding agencies may request an audit as part of their funding conditions, even if the charity doesn't meet the legal thresholds for an audit.

4. Internal Governance:
A charity’s board of directors may voluntarily choose to have an annual audit for transparency and accountability purposes, especially if they want to build trust with donors or ensure financial oversight.

5. Public Accountability and Trust:
While not legally required for smaller charities, some organizations opt for audits to enhance public trust, increase transparency, and demonstrate sound financial management to stakeholders.

Alternatives to Audits:

• Review Engagement: Less costly and less detailed than an audit, this is often sufficient for charities with moderate revenues.
• Compilation (Notice to Reader): A very basic form of financial statement preparation, typically done by an accountant, but it doesn’t provide the same level of assurance as an audit or review.

In summary, most smaller charities do not need to conduct an annual audit unless their gross revenues exceed $250,000, or it's required by donors, funders, or their provincial regulations.