The CRA expects that Canadian charities using intermediaries in Canada such as non-profits that are not charities or business will maintain direction and control over their resources. What is “direction and control”?
In CRA’s Guidance “Using an Intermediary to Carry out a Charity’s Activities within Canada” it notes:
“1.2. Direction and control when using intermediaries
The Canada Revenue Agency (CRA) requires that a charity take all necessary measures to direct and control the use of its resources when carrying out activities through an intermediary. When carrying out activities through an intermediary, the following steps are strongly recommended:
• Create a written agreement with the intermediary, and implement its terms.
• Communicate a clear, complete, and detailed description of the activity to the intermediary.
• Monitor and supervise the activity.
• Provide clear, complete, and detailed instructions to the intermediary on an ongoing basis.
• For agency relationships, segregate funds, as well as maintain separate books and records.
• Make periodic transfers of resources, based on demonstrated performance.
A charity must maintain a record of steps taken to direct and control the use of its resources, as part of its books and records, to allow the CRA to verify that all of the charity’s resources have been used for its own activities.
For more information on conduits, see section 3.5. For more information on direction and control, see section 5.”
For more information on the CRA Guidance “Using an Intermediary to Carry out a Charity’s Activities within Canada” (Reference number CG-004) see:
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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.