Audit process for charities - Infographic

Our approach

The CRA uses a risk-based approach to promote and enforce compliance.

• Early education and outreach are used to address lower risk non-compliance activities
• Audits are reserved to address charities engaging in activities at higher risk of non-compliance

How a charity is selected for audit

Charities are selected for audit based on their risk of non-compliance. The CRA uses the following information to assess risk:

• self-reported information on a charity’s annual T3010 information return
• history of non-compliance identified in previous audits

Information about a charity’s potential non-compliance (such as from public sources or complaints) may also be considered alongside other available information when assessing risk and determining whether an audit is warranted. Multiple submissions about the same issue do not increase the likelihood of an audit; the CRA considers whether information it receives is relevant and describes a potential non-compliance issue.

How the CRA audits a charity

The CRA reviews the finances and programs of charities to make sure they follow the rules and operate for charitable purposes.

The audit, which may be conducted on the charity’s premises or virtually, examines:

• CRA’s records on the charity
• publicly available information
• books and records

The CRA works closely with charities throughout the audit process and may request additional information as part of our review. A charity generally has 30 days to provide the information requested.

What happens after an audit

• The CRA will send the charity a letter outlining the audit findings.
• If non-compliance is identified as a result of an audit, the severity of non-compliance will guide the appropriate outcome.
• The CRA will generally give the charity the chance to self-correct lower-risk non-compliance through education or a compliance agreement.
• Other outcomes, such as sanctions or revocation, are reserved for more serious findings of non-compliance.
• Where the audit findings indicate that the charity may not be meeting its registration requirements, the CRA will start by sending the charity an administrative fairness letter, outlining the audit findings.
• Generally, the CRA gives a charity 30 days to address and respond to the audit findings and provide any additional information.
• If, after considering the charity’s representations, the CRA finds it is reasonable to impose a sanction, or revoke the charity’s registration, it will send the charity a letter outlining the basis for the decision.

What a charity can do if the CRA proposes sanctions or revocation

• If the CRA proposes sanctions or to revoke or annul a charity’s registration following an audit, and the charity believes the CRA has not interpreted the facts or applied the law correctly, a charity can avail itself of its recourse rights by filing an objection, in writing, to the CRA’s Appeals Branch. The Appeals Branch undertakes formal and impartial reviews of decisions made by other areas of the CRA.
• A charity has 90 days from the date of the CRA’s Notice of assessment, Notice of suspension, and/or a Notice of intention to revoke charitable registration to file an objection with the CRA’s Appeals Branch.
• If the charity disagrees with the result of the objection, it can appeal to the Federal Court of Appeal or the Tax Court of Canada.
• A charity can file an application with the Federal Court of Appeal to seek an order staying the publication of the revocation notice. A charity can also file an application with the Tax Court of Canada for a postponement of the unexpired portion of its suspension period after filing an objection.