Don’t Get Audited over Charitable Donations

Manning Elliott’s Catherine Miller explains the ins and outs of corporate giving

If one thing unites the estimated 85,000 registered charities in Canada, it’s that the Canada Revenue Agency (CRA) rules governing their operation are complex. Even the most basic administrative functions such as issuing donation receipts have numerous stipulations, more than most managers could be expected to know.

And therein lies a Catch-22: the people running charitable organizations are usually too busy with their daily workload to learn all the rules – yet violating CRA regulations could result in the loss of their charity registration. CRA audits around 900 charities annually and finds some level of errors in many of them.  

“Ensuring registered charity clients remain compliant also means our accountants and business advisers are in constant touch with them,” Manning Elliott partner Catherine Miller adds. “Donation receipts is one area in which our in-depth knowledge comes into constant play.”

Issuing receipts may seem straightforward, but it’s not. For example, sometimes charities give donors token gifts like coffee mugs, T-shirts or other perks to thank them for their cash donation. “But if these items are worth more than $75 or more than 10 per cent of the money donated, the value of those gifts has to be deducted from the donation receipt,” says Miller. “In other words, if the cash donation is $100 and the donor receives a T-shirt worth $20, this is more than 10 per cent and the receipt should therefore be only $80. Or, if the cash donation is $1,000 and the perk awarded in return is worth $80, then this exceeds the $75 limit and the receipt should be for $920.”

No donation receipt can be issued for gifts of services such as time, skills or effort. Often, people make crafts or baked goods that they donate to charities for auction. “But for any item whose fair market value cannot be determined, the only receipt that can be issued is for materials – not for the item itself or the person’s time making it,” explains Miller.

Similarly, those who provide gifts of services – such as a carpenter who builds bookshelves for a church basement – may only be awarded a receipt for the cost of the materials, not the labour.

Charitable organizations associated with hospitals frequently stage lotteries in order to raise funds. “But buying a ticket is not a donation, because you’re getting something in return for your money – and therefore it’s not eligible for a receipt,” says Miller.

Just as many charitable organizations are not aware of the complex regulations governing receipts, they may not be aware of the many ways they can encourage donations by providing the donor with tax advantages. “For example, a donation of stock rather than money is a great strategy to focus on, because the donors don’t pay tax on the capital gains on those shares,” says Miller by way of conclusion. “Plus, they get a receipt for the value of the shares on the day they were donated.”


Catherine Miller provides accounting, and assurance services for private companies, not-for-profit organizations, and charities. She also prepares tax returns for corporations, individuals, charities, not-for-profit organizations and trusts.

Manning Elliott LLP is one of the province’s largest independent regional accounting and business advisory firms with offices in downtown Vancouver (604-714-3600), Burnaby (604-421-2591), Surrey (604-538-1611), and Abbotsford (1-604-557-5750). The firm has been around for more than 60 years and employs over 200 professionals and staff.

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