Books and records for Canadian charities operating abroad should generally be either English or French and kept in Canada. From the CRA point of view, books and records are required to be able to substantiate the qualification of the Canadian charity for registration and to permit verification of donations. As well, in terms of foreign activities, the books and records show how the charity’s funds and resources are used, show that the charity is actively involved with the activity, and assist in the accurate completion of the T3010.

RC4106 requires charities to keep records of the regular direction that the charity provides to the foreign intermediary, to monitor the structured arrangements, and to obtain “reasonable reports on the progress of its projects and programs.” What is reasonable in one circumstance may be different in another. These reports should be supported by backup evidence such as copies of written agreements, deeds, financial statements, invoices, photos, minutes of meetings, and any other materials that reflect the charity’s ongoing participation and that show how the charity’s funds are used. The frequency of reporting will depend on the agreement, but CRA suggests that progress reports should be received before sending payments by installment and that many charities have these reports filed quarterly. 

In RC4106, CRA makes specific suggestions for recordkeeping with respect to Agents, Contractors, Joint Ventures, Cooperative Partnerships, and CIDA projects.

RC4106 suggests for agency relationships: “Copies of these books and records should be forwarded regularly to the charity, and the originals should be available for inspection at the place where they are being kept by the agent.” With fax, scanning, and e-mail, it is ever easier for agents to provide copies of all necessary documents.

RC4106 suggests for contractors: “As with agency agreements, a Canadian charity that employs contractors should obtain regular progress reports. The charity should also obtain a final complete report on the work that has been done on behalf of the charity, along with documentary evidence, such as invoices, receipts, and photographs, that the project has been completed. The reports should also show the amounts received from the charity and the expenses incurred.”

RC4106 provides: “In the case of joint ventures, the Canadian charity should ensure it regularly receives a copy of the full and complete financial information relating to the entire venture or program, along with other documentation that will enable the charity to demonstrate that it has devoted its resources to its own charitable activity.”

RC4106 provides: “A Canadian charity involved in co-operative partnerships should maintain adequate records relating to its particular share of the program. It should also have available sufficient documentation to establish that the program as a whole is charitable and to show how the charity’s contribution fits into the overall undertaking.”

CRA’s publication IC78-10R4 also has further details. If a charity needs to request books and records prior to an audit, instead of receiving information on a regular basis, then it will be more difficult to demonstrate to CRA that the charity is monitoring its own activities.

In terms of records retention, charities are required to keep duplicates of receipts for at least two (2) years from the end of the calendar year in which the donations were made. Most other documents need to be kept for six (6) years from the end of a fiscal year. Some other records must be retained in perpetuity or until two (2) years after the charity is no longer a charity, such as “ten-year gifts,” minutes of meetings, and all governing documents, such as letters patent.

Failure to keep adequate books and records is a ground for revocation. As well, without adequate books and records, a charity will have a difficult time monitoring the intermediaries’ activities and convincing a sophisticated or observant donor that the funds donated to the charity were properly spent. If in doubt, it is better to keep more information rather than less.