This article provides an overview of the current recordkeeping obligations of Ontario registered charities, such as school board foundations, under the Ontario Corporations Act (“OCA”), the not-yet-enacted Ontario Not-for-Profit Corporations Act, 2010 (the “ONCA”), and the federal Income Tax Act (the “ITA”). It should be noted that any foundations incorporated under the Canada Not-for-profit Corporations Act will need to follow the recordkeeping in that federal Act, although such requirements are beyond the scope of this article.
What records should be kept?
The following records are currently required by the OCA and will remain necessary for proper recordkeeping when the ONCA is proclaimed into force:
- copy of the Letters Patent and of any Supplementary Letters Patent issued to the corporation (note that “Letters Patent” in the OCA are renamed “Articles of Incorporation” in the ONCA);
- minutes of meetings of members and any committees of members;
- resolutions of the members and of any committees of members;
- minutes of meetings of the board of directors and of any committees of the board;
- the resolutions of the board of directors and of any committees of the board;
- register of directors;
- register of officers;
- register or members;
- accounting records adequate to enable the directors to ascertain the financial position of the corporation on a quarterly basis; and
- register of ownership interests in land in Ontario.
The Canada Revenue Agency (“CRA”) requires that a registered charity’s books and records be reliable and complete, provide correct information to assist in fulfilling tax obligations or entitlements, and be substantiated by source documents, such as sales invoices or bank statements. The CRA specifically requires that all registered charities retain records that verify the following:
- an organization’s revenue, including all charitable donations received;
- that resources are spent on charitable programs;
- that the charity’s purposes and activities continue to be charitable; and
- all donations that give a tax credit or deduction to the donor.
How should the records be kept?
Records are most commonly held in paper format, although the CRA allows records to be created, processed, maintained and stored electronically, provided that they are kept in an electronically readable and useable format to allow the CRA to process the records using CRA equipment.
Regardless of how the records are kept, a corporation is not relieved of any recordkeeping obligations by contracting recordkeeping duties out to a third party. The corporation is still responsible for keeping, maintaining, retaining and safeguarding its own records.
Where should the records be kept?
The OCA and ONCA require that records be kept at the registered office of the corporation. Records may be kept outside Ontario if they are accessible electronically at the registered office of the corporation during regular office hours.
The ITA requires that records be kept at the corporation’s place of business unless the CRA grants permission to store the records elsewhere, in which case the records must remain within Canada and be made available for review by the CRA upon request.
How long should the records be kept?
The OCA does not specify a time requirement for record retention. The ONCA will require that all records listed above be retained for six years.
The ITA generally requires records and supporting documents necessary to determine one’s tax obligations and entitlements to be kept for a period of at least six years from the end of the taxation year to which the records and documents relate. When a corporation is dissolved, it must keep all records and supporting documents to satisfy tax obligations and entitlements and all other required records for two years following the date of dissolution.
The CRA prescribes the period of time for which registered charities are required to keep books and records as follows:
- Copies of all donation receipts – a minimum of two years from the end of the calendar year in which the donations were made;
- All records concerning 10-year gifts – as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked;
- Minutes of meetings of the directors – as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked;
- Minutes of meetings of the members – as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked;
- All governing documents and bylaws – as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked;
- General ledgers or other books of final entry containing summaries of year-to- year transactions and the vouchers and accounts necessary to verify the entries – six years from the end of the last tax year to which they relate, for as long as the charity is registered, and for two years after the date the registration of the charity is revoked; and
- Financial statements, source documents, and copies of T3010 returns – six years from the end of the last tax year to which they relate or, if the charity is revoked, for two years after the date of revocation. Source documents may include invoices, vouchers, formal contracts, work orders, delivery slips, purchase orders, or bank deposit slips.
Compliance with the statutory requirements outlined herein will assist school board foundations in avoiding the imposition of a penalty, loss or charitable registration, and even prosecution. Thorough records will also assist with organizational efficiency, public accountability, provide reliable sources for decision-making, and facilitate a smooth transition to the ONCA when that statute is enacted.