Keeping Proper Books and Records: A Guide for Charities

Maintaining accurate books and records is a fundamental responsibility for registered charities. Proper record-keeping ensures compliance with the Canada Revenue Agency (CRA) and helps organizations track their financial activities effectively. This guide breaks down the essentials of maintaining and safeguarding these records.

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Why Are Books and Records Important?

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A charity's records must be detailed enough to allow the CRA to:

• Verify income, including charitable donations received.
• Ensure that funds are being used for charitable purposes.
• Confirm that the organization's activities align with its charitable mission.

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What Records Should a Charity Keep?

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Books and records include various documents supporting financial transactions and organizational decisions. Some key records include:

• Governing documents (including bylaws, incorporation papers, and trust agreements).
• Financial statements, general ledgers, and bank statements.
• Copies of official donation receipts and annual information returns (T3010 forms).
• Meeting minutes from the board of directors and members.
• Agreements, contracts, and payroll records.
• Fundraising materials and promotional content.

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Additionally, source documents—such as invoices, contracts, and bank deposit slips—are essential for verifying financial activities.

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Where Should Records Be Stored?

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All books and records must be kept at the Canadian address listed with the CRA. This rule applies even if the charity operates outside Canada. Records cannot be stored in a foreign location, though electronic access to documents from Canada is permitted.

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How Long Should Records Be Retained?

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The retention period for records varies depending on the type of document:

• Donation receipts (except for 10-year gifts) – Keep for at least two years from the end of the calendar year the donation was made.
• Records of 10-year gifts – Keep as long as the charity remains registered and for at least two years after its registration is revoked.
• Meeting minutes (board, trustees, executives, and members) – Retain as long as the charity is registered, plus two years after revocation.
• Governing documents and bylaws – Keep as long as the charity remains registered, plus two years after revocation.
• General ledgers and transaction records – Maintain for six years from the end of the last tax year they relate to or two years after revocation.
• Financial statements, source documents, and T3010 forms – Retain for six years from the end of the tax year or two years after revocation.

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Can Records Be Kept Electronically?

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Yes, electronic records are allowed, but they must:

• Be stored in a format that remains accessible and readable.
• Retain original electronic source documents if they were initially created in digital form.
• Follow proper scanning and storage practices if paper documents are converted to digital files.

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Simply having paper printouts of electronic records is insufficient; the original electronic format must be preserved. Additionally, records stored outside Canada but accessible online do not fulfill the requirement of being physically kept in Canada.

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Responsibilities for Proper Record-Keeping

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Charities are responsible for not only keeping records but also maintaining and safeguarding them. Key practices include:

• Ensuring that records are stored in a secure and easily accessible location.
• Keeping backup copies, preferably at a different site, to prevent data loss.
• Making records available for CRA audits or reviews when requested.

If a third party, such as an accountant or bookkeeper, manages the records, the charity remains responsible for compliance.

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What Happens If Records Are Not Maintained Properly?

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Failing to keep adequate books and records can lead to serious consequences, including:

• Suspension of the charity's ability to issue donation receipts.
• Loss of registered status with the CRA.

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Common Questions About Record-Keeping

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1. What if our treasurer refuses to return our records?

Since the charity is responsible for its records, you should notify the CRA in writing. You may also need to take legal action to recover the documents.

2. What if we lose our records due to a computer crash?

You should attempt to recover them with the help of an IT specialist. If you have backup files, they should be used to restore lost information. Keeping regular backups is essential to prevent data loss.

3. Can we keep records in a language other than English or French?

No, the CRA requires records to be maintained in either English or French. If the original records are in another language, they should be translated.

4. Can we destroy records before the retention period ends?

Only with written permission from the CRA. To request approval, charities must submit Form T137, Request for Destruction of Records.

5. Do churches need to keep envelopes from donations?

Yes. If envelopes are used as source documents, they must be kept for at least six years from the end of the tax year they relate to.

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Final Thoughts

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Maintaining accurate books and records is not just a CRA requirement—it's essential for transparency, financial stability, and donor trust. By keeping thorough records and ensuring compliance, charities can continue to operate smoothly while fulfilling their mission.

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