17 records for the organization to obtain as they are created by third parties. The challenge for most charities is to orga- nize these records into some logical for- mat in order that their T3010 can be produced at the end of the year. This role generally falls to a bookkeeper or some other individual prepared to keep these records. On the assumption that the bulk of these records are being created by a third party, and that the charity simply needs to keep them, the charity will not face any difficulty in ensuring that its transactions are properly maintained. However, there are situations in which a charity faces difficulties because it is in a non-commercial or non-traditional set- ting. Charities that engage in relief of poverty may find it difficult to track the expen- ditures with which they give alms to the poor. This can be obvious in a situation where the charity distributes food to individuals that simply need it or seem to need it. While the CRA is obviously aware that a charity is engaged in the provision of food for the hungry, it may ask how it can be certain that food is being given only to the poor and is not, for example, being distributed to the employees of the organization or being sold. While the CRA can be forgiving in such situations, it can, in some cases, be extremely difficult to ensure that records are maintained, to demonstrate that the charity’s resources are being properly used. Some foreign countries present another problem in that often the normal trans- actional records we would expect in Canada – say on the purchase of office supplies – simply may not exist there. Receipts and invoices are simply not used in some parts of the world. Charities should seek alternate means to track their resources. Additional Records Again, while there is no legal definition of ‘additional records’, these may include emails or letters to the organiza- tion — and they may include records that the organization purposely creates in order that the CRA, if it ever looks to see, will accept as proof that the organi- zation is properly meeting its responsi- bilities. Emails to and from the organization and letters to the organization must clearly be maintained. Charity officials should be careful to separate out their personal from official comments as an official may be unable to claim privacy over these emails. Moreover, emails between individuals may not necessarily be entered into the charity’s records (say in a situation where they are not being saved by a corporate server). In these circumstances, directors should make sure to copy the charity so that the char- ity’s obligations to keep records is met. Creating Records The organization may also seek to create records to show that it meets the legal tests involved. For example, to ensure that a charity’s resources are properly used in a foreign country the charity may have the volunteers make reports, take pictures or record videos that are not otherwise necessary. Obviously, a charity must first understand the legal principle that it seeks to establish before creating the record. On this point, the charity should seek legal advice before proceeding. Fundamentally, it is important that a charity understand what it must show in its records to comply with the law should the CRA investigate. Continuous education regarding a charity’s obliga- tions is critical so that the administra- tion of the organization understands when to ask for reports of directors or others in whatever circumstances. Where must they be kept? The books and records of an organiza- tion must be kept, by law, at its regis- tered office address. This, however, is often an impossible task because the legal documents may be more easily kept at a lawyer’s office, accounting records may be with the accountant, and other records may be with the organiza- tion. It can be inconvenient and costly to keep all the records in one place – particularly if they are voluminous. The CRA seems to understand the prac- tical difficulties in this aspect and does not, as a matter of course, seek to con- firm the location of these records. During an audit, CRA auditors generally either ask for information to be provid- ed to them or meet at a mutually conve- nient location where the records are produced. Nevertheless, we have seen instances where charities lose track of the location of their documents and so it would be wise for an organization to be aware of its records should they have to be produced. Electronic Record Keeping Nowadays, more and more records are either created in paper format for con- version to electronic format or in elec- tronic format able to be printed at any time. Obviously, the CRA is as much interested in easy record-keeping as any- body else, and rules do exist for doing so electronically. These rules are out- lined in two technical documents from the CRA – IC78-10R5 and IC05-1R1. An organization that keeps electronic records must be able to provide them in an electronically readable and useable format to the CRA auditors so that they can be read on CRA equipment (although not every CRA department will accept electronic documents). For most modern records this is not an issue if they can be produced in PDF format. A regular problem is that the organiza- tion uses a bookkeeping or accounting software unknown to the CRA. However, as these records can often be converted from one format to another, there is usually a workaround. Electronic files can be encrypted, but the password must be provided to the CRA if requested. If a record was originally created in paper format and then converted to electronic, the paper does not need to be kept. However, an electronic record must always be kept, even if converted from one format to another. The CRA does allow for the keeping of these records online in the cloud. However, their requirement is that the server be located in Canada or at least that a copy of the records be maintained on a server in Canada. One difficulty that arises from time to time — and it does not apply only to electronic records — is the accidental destruction of records. With paper records this can happen in terms of a fire or some other disaster. But with
