This is a commonly asked question.  For some it is very simple – the Prime Minister is up late at night and decides who will live and who will die!   Others probably think that there is a big wheel like in a game show and charities are picked that way.   Well, neither is right.

CRA answers the question of “how is a charity selected for audit?

The most common reasons a charity will be selected for an audit are:

  • random selection;
  • referral from another area of the CRA;
  • complaints from the public;
  • articles in the media or other publically available sources;
  • review of specific legal obligations under the Income Tax Act;
  • information from their T3010 annual information return; and
  • follow-up on a previous compliance agreement

There are many things that charities can do to reduce the likelihood of audit.  Most importantly is making sure your receipting is done correctly and that your T3010 filing is accurate.  We work with charities to conduct informal legal reviews to spot issues, minimize the likelihood of audit and if audited reduce the likelihood of penalties, suspensions or revocation.