Using Intermediaries in Canada

June 22, 2011

What is a gift to a qualified donee under CRA’s Guidance on using intermediaries?

A qualified donee is a number of organizations that can issue official donation receipts.  In general a Canadian registered charity is allowed to make a gift to another qualified donee.  On the other hand a Canadian registered charity is not allowed to make a gift to a non-qualified donee ie. an organization that is not able to issue an “official donation receipt” for Canadian Income Tax purposes.

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June 22, 2011

What is required by CRA for a written agreement between a registered charity and an intermediary?

A written agreement between a Canadian charity and an intermediary is important but not sufficient to show direction and control.  Also CRA has certain requirements for agreements.

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June 22, 2011

What is a description of activities for charitable activities carried out by an intermediary?

What is a description of activities for charitable activities carried out by an intermediary?  A “clear, complete, and detailed description ” desciption of activities is a ery important part of showing that a Canadian charity has “direction and control” over resources transferred to an intermediary.

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June 22, 2011

What is a conduit? under CRA’s Guidance on Registered Charities Using an Intermediary In Canada

What is a conduit under CRA’s Guidance on Registered Charities Using an Intermediary In Canada?  It is important for charities to understand the concept of “conduit”.  Registered charities cannot just flow funds through from the registered charity to a non-profit that is not a charity - if a registered charity does that then it would be considered a conduit.

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June 22, 2011

What are the requirements when a Canadian registered charity works with an intermediary?

It is important that any intermediary have the capacity to do the job and that there be a “strong expectation” that the funds or resources transferred from the charity will be used appropriately.

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June 22, 2011

What are the most common types of intermediaries used by Canadian registered charities?

The most common types of intermediaries are agent, contractor, joint venture, and co-operative participant.  Here is further information on each of them.

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June 22, 2011

What is “direction and control” for a Canadian charity using an intermediary?

Understanding “direction and control” is very important for understanding the permissible relationships between a Canadian charity and a non-qualified donee.  CRA’s guidance sets out how a charity should have “direction and control”.

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June 22, 2011

How should a Canadian registered charity have direction and control over the use of its resources?

How and how much direction and control varies depending on the circumstances.

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June 22, 2011

What is monitoring and supervision of an intermediary by a Canadian registered charity?

One of the measures of control is that a Canadian charity monitor and supervise its activities carried on by the intermediary.

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June 22, 2011

What is ongoing instruction between a Canadian charity and an intermediary?

A Canadian registered charity needs to have a “real, ongoing, active relationship with its intermediary.”  Part of that is that a Canadian charity should be apprised of developments and be involved in decision making about the project as it evolves.

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June 22, 2011

What are periodic transfers between a Canadian registered charity and its intermediary?

One of the measures of control is that a Canadian charity should provide periodic transfers of funds to an intermediary.

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June 22, 2011

What are separate activities and funds when dealing with an intermediary?

A Canadian charity’s activities, when carried out by an intermediary, must be distinguishable from the intermediaries activities and in some cases a Canadian charity should ensure that its intermediary segregates its funds.

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June 22, 2011

How does a Canadian charity have to keep books and records when dealing with an intermediary

It is very important that charities not only do “good work” but that they can show afterwards that they do good work.

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June 22, 2011

Can a Canadian registered charity carry out capacity-building activities within Canada?

Can a Canadian registered charity carry out capacity-building activities within Canada with a non-qualified donee such as a non-profit without charitable status?  The short answer is perhaps and it has to be done very carefully.

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June 22, 2011

Can a Canadian registered charity use an intermediary in Canada to carry on its own activities?

Yes.  A Canadian charity can use an intermediary in Canada to carry on its own activities as long as the Canadian charity maintains direction and control over how its funds are used.  On June 20, 2011 the Charities Directorate of the Canada Revenue Agency released a guidance entitled “Using an Intermediary to Carry out a Charity’s Activities within Canada” (Reference number CG-004)

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Do you require legal advice with respect to Canadian or Ontario non-profits or charities?

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Charity Lawyer Mark Blumberg

Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

mark@blumbergs.ca
416.361.1982
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