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Financial OversightResponsibility

MODULE

Strengthening the Capacity ofMilitary Family Resource Centre

Boards of Directors

Strengthening the Capacity ofMilitary Family Resource Centre

Boards of Directors

The information contained in this module is intended to serve as a guideline only for MFRC Boards of Directors. The legislation under which MFRCs are incorporated and which guide the fiduciary responsibility of the Board may be Federal or Provincial and vary from jurisdiction to jurisdiction. The onus is on the Board of Directors to be aware of the legislation that applies to their MFRC.

Requirements for such things as incorporation documentation, letters patent and bylaws will vary with the legislation in the jurisdiction in which the MFRC is incorporated.

Policies and forms presented in the modules are samples only. MFRCs are not required to use these documents. MFRCs are permitted to customize any samples contained herein.

Contents

Introduction ....................................................................................................................................... 7Learning Objectives ......................................................................................................................... 8Governance: Preparing for Fiduciary Responsibility ................................................................... 8Fiduciary Responsibility ................................................................................................................. 8

Fiduciary .......................................................................................................................................8

Fiduciary Relationship .................................................................................................................8

Financial Oversight Responsibility ..............................................................................................8

Approval of Financial Policies .....................................................................................................9

Banking Resolution and Signing Authority .................................................................................9

Human Resources Responsibilities ............................................................................................... 9Risk Management ........................................................................................................................... 10Finance and/or Audit Committee ...................................................................................................11Treasurer .......................................................................................................................................... 12Approval of the Annual Operating Budget .................................................................................. 13Monitoring Financial Performance ............................................................................................... 14

Financial statements ..................................................................................................................14

Revenue and Expenditure Statement ......................................................................................14

Balance Sheet ...........................................................................................................................16

Statement of Changes in Financial Position .............................................................................16

Management of Restricted Funds .............................................................................................17

Management of Investments .....................................................................................................17

Statutory Requirements ................................................................................................................ 17Taxation ......................................................................................................................................17

Registered Charity Information Return .....................................................................................18

Fraud Prevention ............................................................................................................................ 19Dealing with Fraud .....................................................................................................................20

Approval of the Annual Audited Financial Statements .............................................................. 21Appointment of an Independent Auditor ..................................................................................21

Working with the Auditor ...........................................................................................................22

Annual General Meeting ................................................................................................................ 22Fund Development.......................................................................................................................... 23

The Role of the Fundraising Committee ...................................................................................24

The Role of Staff in Fund Development ....................................................................................24

Annex 1 – Sample Banking Resolution ........................................................................................ 26Annex 2 – Sample Financial Committee Terms of Reference ................................................... 27Annex 3 – Sample Finance/Audit Committee Board Report Template ..................................... 29Annex 4 – Sample Revenue and Expenditure Statement .......................................................... 30Annex 5 – Sample Variance Statement ........................................................................................ 31

Annex 6 – CRA Charity and Giving – Checklists......................................................................... 33Basic guidelines .........................................................................................................................34

Engaging in allowable activities ...............................................................................................35

Issuing complete and accurate donation receipts ..................................................................36

Filing the annual T3010 information return ..............................................................................37

Keeping adequate books and records ....................................................................................38

Meeting the disbursement quota .............................................................................................39

Changing the charity’s mode of operation or legal structure .................................................40

Maintaining the charity’s status as a legal entity .....................................................................41

Annex 7 – CICA Director Alert: New Canadian Standards – questions for directors to ask . 42Glossary ........................................................................................................................................... 51

Strengthening the Capacity of Military Family Resource Centre Boards of Directors | MODULE 1 | Financial Oversight Responsibility 7

Introduction

The Board of Directors is responsible for the highest level of decision making and legal authority for the Military Family Resource Centre (MFRC). Being a Board member for an MFRC is a voluntary position; but to be a volunteer does not mean that the Board member is not accountable. Rather it means that the Board member believes in and supports the mission and vision of the MFRC and it means that you proudly want to be the “Strength Behind the Uniform”.

The Board of Directors is responsible in five key areas:

Vision, Planning and EvaluationThe Board establishes the MFRC’s mission, vision, values and direction. This includes planning for the future of the organization, developing goals that help move the MFRC toward its vision and monitoring how effectively the MFRC is achieving its strategic plan.

Financial Management and FundraisingThe Board is responsible for ensuring that sufficient financial resources are available to pursue the organization’s mission and goals. The Board oversees fundraising, fund allocation, and ensures the funds are accounted for appropriately.

Human ResourcesThe Board ensures the MFRC has sufficient human resources and is responsible for the conditions of employment. An MFRC Board hires, provides direction to and evaluates the performance of the Executive Director and delegates to that person, the authority for managing all other staff. The Board also ensures the capability, suitability and vitality of its own membership through Board recruitment and succession planning.

Community RelationsThe Board ensures effective community relations and responds to changing needs in the community. It develops marketing and communication strategies to promote awareness and is accountable to the community for the operations of the MFRC.

Organizational Operations and Self-governanceThe Board ensures that the organization and its directors are in compliance with legal requirements and that it has effective risk management practices in place. It ensures a strong Board structure is in place, and that the Board works effectively by acting in accordance with its constitution and bylaws, and governance policy.

This Board training module focuses on the role of the Board in Financial Managementandprovidesinformationregardingfinancialoversighttoensure thefinancialhealthoftheMFRC.ItiscrucialthateachBoardmemberbecomes familiarwiththeBoard’sfinancialresponsibilities.

Strengthening the Capacity of Military Family Resource Centre Boards of Directors | MODULE 1 | Financial Oversight Responsibility8

Learning Objectives

1. To understand the fiduciary responsibility of the Board of Directors. 2. To recognize and experience using the various financial tools available to Board members. 3. To be aware of the legal and statutory financial obligations of not-for-profit organizations.4. To learn strategies to manage the risks of being a Board member.

Governance: Preparing for Fiduciary Responsibility

Board members must be familiar with the legislation, bylaws and any governance policies that dictate or assist with their fiduciary responsibility. The MFRC should have governance policy that describes the fiduciary responsibility of the Board. This would include the legislation under which the MFRC is incorporated and current governance policies, bylaws and financial policies.

Fiduciary Responsibility

FiduciaryFiduciary is a legal term that means you are in a position of trust. Typically, a fiduciary prudently takes care of money for another person.

Fiduciary RelationshipA fiduciary relationship exists when a person or group, such as the MFRC’s membership, places complete confidence in the Board of Directors for the transaction of its general affairs or business.

Board members act primarily on behalf of the membership.

The Board has responsibility for the funds entrusted to the MFRC on behalf of its funders. Therefore, the Board must act in good faith, trust and confidence and exercise high standards of care in managing the affairs of the MFRC. All Board members share in this fiduciary responsibility. (See Fiduciary Responsibility in Module II Legal Responsibility)

Financial Oversight ResponsibilityThe following are specific financial responsibilities:

• Approval of financial policies• Banking resolution and signing authority• Human resources responsibilities• Risk management• Appointment, as required, of a finance and audit committee• Approval of the annual operating budget• Monitoring financial performance• Management of restricted funds• Management of investments


• Ensuring statutory requirements are met• Fraud prevention• Approval of the audited financial statements• Appointment of an independent auditor

Approval of Financial PoliciesThe Board develops and approves financial policies that deal with the above areas of financial oversight responsibility, including setting the Executive Director’s spending authority and limit.

Banking Resolution and Signing AuthorityWhen opening a bank account for the MFRC, the Board must:

• pass a resolution to authorize the opening of a bank account, which includes the need for two signatures to withdraw funds or sign cheques,

• adopt the banking resolutions required by the bank chosen, • designate signing officers, and• determine the processes for conducting other banking business.

By putting these controls in place, the Board demonstrates that it is practicing due diligence in protecting the MFRC’s funds from possible misappropriation by anyone in a position which allows them access to the MFRC’s funds. The need for two signatures ensures that no one person from the MFRC can divert funds. A policy dictating that cheques should not be signed in advance as well as a procedure for accounting for all cheque numbers are additional measures to safeguard funds.

See Annex 1 for a sample Banking Resolution.

Human Resources Responsibilities

The Board has key responsibilities in the area of human resources that can create financial liabilities.

Although the Board itself is the employer of record for all MFRC employees, it has only one employee, the Executive Director (ED), reporting directly to them. The Board delegates authority to the ED for the management of all other staff and does not become involved in supervision or providing direction to these staff. In addition to hiring the ED, setting ED compensation, managing ED performance and succession planning for the ED, the Board is responsible for:

• overseeing human resources policies and practices for employees, contractors and volunteers, and

• approving the budget related to employee compensation and benefits.

Employees and volunteers are an MFRC’s greatest asset but at the same time they can be its greatest areas of liability.

Federal and provincial laws confer specific duties on directors and officers.

HELPFUL HINTCheck the Legal Responsibilities

Module for more information.


Board members can be held liable for things such as unpaid wages of employees and failure to submit payroll deductions. Examples are:

• Income tax, • Canada Pension Plan, • Employment Insurance, • GST/HST, and• pension plans, other than the Canada Pension Plan.

Board members must ensure that the organization is compliant with the following federal and provincial laws and regulations that govern the employment relationship:

• Employment and Labour Standards • Human Rights • Occupational Health and Safety • Workers Compensation Legislation• Pay equity

These laws vary from province to province and change from time to time. It is the Board member’s responsibility to make sure the MFRC is compliant with all laws and regulations; it is the responsibility of the ED to keep Board members informed of any changes to these laws and regulations.

Just as is the case with the taxation requirements, failure to comply with any of the laws can result in fines, penalties and lawsuits. The best way to comply with statutory and human resources requirements is to make sure the MFRC has regularly updated policies and procedures in place.

The HR Group is an organization that provides HR related advice and guidance to MFRC Executive Directors and Board Chairs or their designate. A certified HR professional can guide you through any HR related issues.

You can contact the HR Group Helpline at 1.888.474.5463. Some Boards of Directors chose to have an HR Committee to oversee these responsibilities and functions.

Risk Management

(See Risk Management in Module II Legal Responsibility)

Risk management is the proactive identification and management of potential risks to which an MFRC may be exposed. The document “Good Practice and Resource Guide: Risk Management Planning for Military Family Resource Centres” demonstrates extremely well how every-day risks should be managed on the operational level. This guide may be found at:

https://www.cfmws.com/en/AboutUs/MFS/ResourcesMFRCs/Pages/Reference-Documents.aspx


Failure to properly manage the financial responsibilities covered throughout this module can create potential risks and liability for Board members. Board members can manage risks related to these areas of governance by:

• knowing and adhering to the mission, vision and values of the MFRC,• acting primarily on behalf of the membership • fulfilling the roles, responsibilities and financial obligations as set out in the Memorandum

of Understanding (MOU)and the Service Delivery Agreement (SDA), and • performing the required oversight responsibilities.

In addition, managing risks associated with being Board members includes the purchase of Directors’ and Officers’ Liability Insurance as stipulated by the Department of National Defence (DND); this requirement can be found in the Memorandum of Understanding (MOU). This type of insurance covers Board members for non-negligent mismanagement of assets and statutory and human resources related issues.

When purchasing or changing insurers, it is important to disclose any information regarding risky situations or potential lawsuits to the prospective insurer. Failure to do so will result in the insurance company denying coverage for those prior events or potential lawsuits.

Finance and/or Audit Committee

Depending on the size of the MFRC and the size of the Board, the Board might choose to have a finance and/or audit committee, also called the finance committee. Having such a committee can be useful in ensuring that a Board’s financial responsibilities are being met without the necessity of having all Board members involved at the same level. The terms of reference (see Annex 2) for a finance and/or audit committee should include:

• its purpose and mandate,• the duties and responsibilities of the committee,• definition of the membership (i.e. is it entirely Board members or do some staff members

sit as members of this committee),• frequency of meetings, and• reporting mechanism back to the full Board of Directors (Annex 4).


The finance and/or audit committee supports the Board’s work by:

• ensuring the MFRC’s accounting practices are in accordance with Generally Accepted Accounting Principles (GAAP),

• assisting in the preparation of the budget and reviewing it on a regular basis,• monitoring revenues and expenses and determining the reason for any variance,• reviewing the draft audited financial statements, and• ensuring statutory requirements are met.

The finance and audit committee makes recommendations to the Board about:

• matters affecting financial control policies,• the budget review process,• risk assessment,• financial systems policies,• auditor selection, and• special audits.

The finance and audit committee reports and makes recommendations to the Board. All Board members, however, must be conscious of the fact that delegating the Board’s financial obligations to a finance and audit committee does not absolve other Board members from their responsibility for financial oversight. When satisfied with the content of a report, the Board will hold a vote to receive the report for information. Should the information contained in the report be unacceptable to the Board, the report will be sent back to the committee for revision; and then, the committee will bring the amended report back to the Board who will hold another vote to receive the report as information. (See Annex 3 for a sample Finance/Audit Committee Board Report Template)

Treasurer

The chair of the finance and audit committee is usually the Board Treasurer.

MFRC Boards have an Executive Director and an accountant or bookkeeper to manage day-to-day finances. The duties of the Treasurer should not interfere with the responsibilities of staff.


HELPFUL HINTThe Board must make sure

programs and services delivered will meet the needs of the local Canadian Armed

Forces (CAF) community.

Approval of the Annual Operating Budget

The budget is a tool used to assess and plan for the human and financial resources required to achieve the goals of the MFRC.

The role of the Board is to approve the budget that contains an estimate of revenues, including funds from all sources, and operational expenditures including Board expenses. The Board must make sure programs and services delivered will meet the needs of the local Canadian Armed Forces (CAF) community to ensure responsiveness to the local Commanding Officer as per the MOU.

When the budget is presented to the Board, Board members must make sure that they:

• understand the expected sources of revenues and projected expenses,

• agree with what they are approving, and

• support the strategic priorities to which funds have been assigned.

Board members should not hesitate to ask for clarifications about any budget item. Sources of clarification could be a member of the finance committee, the Treasurer or the Executive Director. It is very important that Board members understand any explanation provided.

Once the draft budget has been approved, the Executive Director creates a funding request. The Board must approve the funding request prior to its submission to MFS as it will need to ensure that the financial obligations as set out in the MOU are fulfilled. If the MFRC has other sources of funding it will also need to meet the provisions as outlined by those funders.

The budget is finalized via the Service Delivery Agreement (SDA) process after all funding request to MFS have been reviewed and the MFRC has been officially notified of approved funding levels.


Monitoring Financial Performance

To ensure the continuous financial health of the MFRC, the Board is responsible for periodically monitoring the financial status of the organization. Therefore, Board members must:

• read and understand the financial statements, and• approve the financial statements according to the bylaws and governance policy of

the MFRC.

Financial statementsThe financial statements are a set of records that show the activities of the MFRC in terms of dollars. They are tools to help Board members identify trends, progress or concerns; checking the financial reports on at least a quarterly basis is one way of overseeing the MFRC’s financial position.

The Revenue and Expenditure Statement and the Balance Sheet are two important financial reports which give Board members a clear picture of the MFRC’s financial status at any given time. The Statement of Change in Financial Position is usually part of the annual auditor’s report.

Revenue and Expenditure Statement The Revenue and Expenditure Statement also called the Income Statement or the Profit and Loss Statement, shows revenues and expenses for a specific period of time. These include:

o Revenues generated from:• MFS allocation• Base Commander’s funding• provincial or municipal funding • other funders, such as United Way or foundations• donations/grants, and• fees

o Expenses incurred such as:• personnel costs (wages, benefits, etc.)• volunteer service delivery costs, such as volunteer recognition• program delivery costs• fund development costs• administrative costs, and• others

It is very useful for Board members to have this statement show year to date (YTD) figures for:

• Amounts budgeted• Actual revenues and expenditures• The difference between actual amounts and amounts budgeted, and • Figures from the previous year as a comparator

A good example is found in Annex 4.


If budgeted amounts, actual amounts and differences are not included in the report, Board members cannot examine the difference. This difference is called the variance; checking this difference is called a variance analysis. Board members should ask the ED to have the budgeted and actual amounts and the variance included in financial reports.

The Revenue and Expenditure Statement also shows the net profit or loss incurred for the period. This figure is calculated by subtracting the actual expenses from the actual revenues.

To monitor the budget, Board members should ask three questions for each line of the Revenue and Expenditure Statement. Doing so allows Board members to identify potential financial challenges. 1. Are revenues and expenses equal?

• If yes, revenues balance with the expenses.• If no, there is a variance, a difference between the dollars budgeted and the dollars spent.

If there is a variance, the questions which follow need to be asked.

2. Do revenues exceed expenses?If yes, the MFRC has more money than expected at this point in time; this is a positive variance. This may be either good or bad; the ED should explain the reason for this discrepancy. The ED’s answer should make sense and be acceptable to you.

Examples of acceptable reasons for a positive variance:

• Programs that are scheduled to take place later, during the fiscal year• Fundraising events which bring in more money than budgeted• Unexpected donations

Examples of problematic reasons for a positive variance:

• Inability to deliver programs• Staff turnover resulting in lower payroll costs

3. Do expenses exceed revenues?If yes, the MFRC has less money than expected at this point in time; this is a negative variance. Again, the ED must justify this difference and the explanation must be satisfactory.

Examples of acceptable reasons for a negative variance:

• Expenses scheduled early during the fiscal year• One-time annual expenses such as insurance premiums

Examples of adverse reasons for a negative variance:

• Fundraising events which bring in less money than budgeted• Unexpected expenditures

Monitoring the budget allows Board members to adjust the budget by either increasing revenues or decreasing expenses. See Annex 5 for a sample Variance Statement.


Examining the variance, positive or negative, makes it easier to:

• assess the progress of planned community-based services, • identify issues related to the delivery of programs,• plan future programs, and• monitor that spending priorities continue to be aligned with strategic priorities as set by

the Board.

Therefore, monitoring the budget gives Board members the opportunity to make adjustments before the MFRC finds itself in a potentially serious situation. As well, it provides significant information about services offered by the MFRC.

The MOU requires the Board account to MFS on a quarterly basis for funds received from MFS. Other funders will likely have similar reporting requirements.

Balance Sheet The Balance Sheet may also be called the Statement of Financial Position. The balance sheet shows the total assets and liabilities of the MFRC at a fixed point in time.

Assets are what the MFRC owns or is owed, such as:

• money in the bank • investments • accounts receivables• prepaid expenses• capital assets

Liabilities are amounts of money the MFRC owes to others, such as:

• accounts payables such as invoices for supplies• payroll• debts

Equity is what is left after the liabilities are subtracted from the assets, plus any reserves.

Statement of Changes in Financial PositionThe Statement of Changes in Financial Position illustrates the actual flow of money in and out of the MFRC during a certain period of time, usually at year-end; it is often called the Cash Flow Statement. It shows:

• excess of revenues over expenses• amortization• investments activities• cash at the beginning of the year and at year end

The reference Finance and Accounting PolicyProMD found at www.firstreference.com can be helpful.


Management of Restricted FundsRestricted funds are funds that must be used for a specific purpose or in a particular way as requested by individual donors or funders. The MFRC must respect the intent of the donor; if the funds are used for something other than what was stipulated by the donor or funder, the MFRC could be asked to return the funds. In the case of large donations, the donor could require that only the interest earned on the donation is to be spent. Restricted funds need to be accounted for separately.

Management of InvestmentsManagement of the investment portfolio is usually delegated to the ED. However, if the size of the investment portfolio is large, its management can be delegated to a bank manager or an investment management firm that has the competency to deal with large investment portfolios. The Board can direct the ED or the finance committee to seek professional expertise if required. However, remember that the Board cannot delegate its responsibility for oversight. That means that as Board members monitor the budget, they should ensure that they are also monitoring the performance of the investment portfolio.The Board should have an investment policy dictating:

• types of accounts and financial instruments approved by the MFRC, and• maximum length of time of investment.

The Board should also, through a motion, give the ED specific investment guidelines as to the management of reserve funds.

Statutory Requirements

(See Duty to Maintain the Organizations’ Legal Status in Module 2 Legal Responsibility)

Every not-for-profit organization is subject to statutory requirements and Board members must be aware of these legal requirements. In addition to the obligations set in the bylaws, such as the annual audit, there are statutory requirements for which Board members are liable such as taxation, registered charity return and human resources requirements.

TaxationIn the Income Tax Act, the Canada Revenue Agency (CRA) defines a not-for-profit organization as “a club, society or association that was organized and operated exclusively for social welfare, civic improvement, pleasure or recreation or for any other purpose except profit”. So, the MFRC is a not-for-profit organization. However, this status does not exempt the MFRC from filing an income tax return unless the MFRC benefits from charity status (See information below under Registered Charity Information Return).

HELPFUL HINTCheck the Legal Responsibility

Module for more information.


All corporations including not-for-profit organizations, like an MFRC, have to file a Corporation Income Tax Return every tax year even though there is no tax payable. Penalties and interest will apply for:

• failing to submit a return, and• filing a return after the due date.

CRA will charge a penalty if a corporation, either knowingly or under circumstances of gross negligence:

• makes a false statement or omission on a return, • or does not report an amount of income.

The MFRC can be audited by the CRA within 6 months of its fiscal year end. Financial records and returns must be kept for at least 6 years.

In addition to federal statutory requirements, there is provincial legislation governing not-for-profit organizations. The fiduciary responsibility of the Board is to ensure the organization is compliant with legislation. This can be confirmed to the Board by the Auditor at the time of the annual financial audit.

Registered Charity Information ReturnA charity is a not-for-profit organization that has applied for and received authorization from CRA to issue charitable donation receipts. Therefore, not all not-for-profits are charities. MFRC Board members should ensure that they are aware of the exact status of their MFRC.

CRA defines registered charities as charitable organizations, public foundations, or private foundations that are established in Canada and are resident in Canada. They must have charitable purposes that fall into one, or more, of the following four categories:

• the relief of poverty,• the advancement of education,• the advancement of religion, or• other purposes that benefit the community in a way the courts have said are charitable.

CRA also requires that, in order to keep its registered status, a charity must continue to operate for charitable purposes and to comply with the requirements of the Income Tax Act. This means the charity must:

• engage only in allowable activities,• keep adequate books and records,• issue complete and accurate donation receipts for all donations received, whether or not

they are requested by the donor,• meet annual spending requirements,• file the annual Registered Charity Information Return,• maintain its status as a legal entity, if applicable, and• inform the Charities Directorate of any changes to its mode of operation or legal structure.

Though not required by CRA, the board should exercise its duty of diligence by making a motion on an annual basis authorizing employees responsible for issuing donation receipts.


The MFRC must ensure that all charitable receipts are provided and maintained in accordance with CRA regulations. This is a key area that will be closely examined during any CRA audit. Failure to comply with all CRA regulations around the issuance of charitable receipts can result in revocation of charitable status.

MFRCs that benefit from a registered charity status are not required to file a Corporation Income Tax Return. Instead, the MFRC must file a Registered Charity Information Return. The return must be filed no later than six months after the end of the MFRC’S fiscal period. Non-filing can lead to revocation of the MFRC’s registered charity status.

There may also be provincial or territorial legislation governing the activities of charities including its business activities and fundraising. These regulations vary depending on the province or territory. Board members are responsible to make sure the MFRC is compliant with the current laws and regulations governing registered charities; it is the responsibility of the ED to keep Board members informed of any changes to these laws and regulations.

CRA’s website is a useful resource, providing a number of policies to guide operators of registered charities. For instance, the website includes policies related to Donation of Gift Certificates or Gift Cards or Guidance for Fundraising by Registered Charities.

www.cra-arc.gc.ca/chrts-gvng/menu-eng.html

See Annex 6 for CRA Charity and Giving – Checklists

Fraud Prevention

Financial fraud may involve theft, forgery or misappropriation or misuse of funds or property.

Examples of fraud may include:

• misstatement of accounting or financial reports,• alteration of employees’ records (i.e. income tax, benefits plans or other documents), • submission of false business expenses for reimbursement,• acceptance of kickbacks from suppliers or contractors,• misrepresentation in financial reporting to the Board, donors, funders or the membership,• misappropriation of intellectual property, or • other similar wrongdoings.

Details regarding the above list are found in Annex 6 – Annual Charity and Giving Basic Guidelines Checklist.


Financial controls should be in place to prevent fraud and detect errors. A primary financial control is the segregation of financial duties: no one individual should handle all aspects of a financial transaction, i.e.:

• authorizing, accessing, and keeping record of expenditures,• approving expenses and signing the cheques, and• bank reconciliation.

More specifically, the following are examples of segregation of financial duties:

• the person who opens the mail and prepares the list of cheques for deposit should not be the same person who makes the bank deposit.

• the person who makes requisitions to purchase goods should not be the same person who approves the purchase.

• the person who approves the purchase should not have access to cheques.

By segregating the duties related to financial transactions, the Board is ensuring that there are a number of people responsible for various tasks, thereby reducing the risk of one staff member being able to commit fraud.

Other financial controls include:

• ensuring management has hiring policies and processes in place which include reference and police record checks,

• reducing the risk of theft by keeping a minimum of cash on site and in a safe, locked place, and

• having a fraud prevention policy.

These financial controls create a system of checks and balances to mitigate the risk for fraudulent activities.

Dealing with FraudIf the Board suspects that fraud has occurred, it should seek immediate legal advice, investigate thoroughly and prosecute to the fullest extent of the law. Even with the strictest financial controls in place it is possible for fraud to occur. A policy dealing with financial misconduct will guide Board members to handle the situation in a practical way instead of reacting emotionally. The content of the policy should include:

• an introductory statement outlining the culture of the MFRC, • a list of activities which constitute fraud,• a reporting process, • the investigation protocol, and• a statement of the consequences for the individual(s) committing the fraud.

After resolving a situation involving fraud, a debriefing session should take place to assess if:

• the fraud could have been prevented,• existing financial controls are adequate,


• the situation was dealt with appropriately, and• the fraud prevention policy needs to be revised.

Approval of the Annual Audited Financial Statements

The financial audit is one of the financial tools Board members use to ensure the financial health of the organization. The Audited Financial Statement must be presented to the membership at the MFRC’s Annual General Meeting (AGM) after approval by the Board. The Auditor would generally be invited to present the statement and answer questions from the membership.(See Annual General Meeting in Module 3 Accountability and Responsiveness to Membership.)

Appointment of an Independent AuditorIt is the duty of the Board to appoint, on an annual basis, an auditor from a reputable firm of chartered public accountants. This appointment must be done at the Annual General Meeting (AGM) and be ratified by the membership.

The auditor will give a professional opinion of the extent to which the MFRC’s financial activities follows generally accepted accounting principles (GAAP) as well as the Canadian Institute of Chartered Accountants (CICA) guidelines for not-for-profit organizations. As part of the auditor’s engagement, the auditor is required to determine whether the financial reporting framework, to be applied in the preparation of the financial statements, is acceptable.

The auditor will:

• perform an independent study of the MFRC’s records, systems and accounting policies,• determine if its financial statements are fair and reliable,• obtain evidence for the amounts and disclosures in the financial statements,• consider if internal controls are adequate,• point out any instances where there is non-adherence to GAAP and CICA principles, and • evaluate the reasonableness of accounting estimates made by management.

The auditor should meet privately with the Board to address any concerns or questions the Board may have. The Auditor will in turn report to the Board any observations arising from the audit, of which the Board should be aware.

As part of the audit process, the auditor provides a management letter. The auditor’s Letter to Management is a critical document that will indicate any changes management may need to make or if the Board needs to take corrective action in any area.

Regarding appointment of the auditor, it is best practice to do a Request for Quote every 5 years and distribute it to a list of auditing firms that includes the current auditor. This ensures that the MFRC’s cost for the audit is current and competitive.

In this way, the auditor will avoid complacency or bias in the audit.


Working with the AuditorThe Board of Directors should be fully engaged in the audit. Canadian Audit Standards (CAS) requires management and the Board of Directors to acknowledge that the audited financial statements are a governance responsibility. The CAS set out an overarching communications framework that emphasizes the importance of effective two-way communication between the auditor and the Board or audit committee during all phases of the audit. There are four key areas of communication. The auditor must:

• inform the Board of the auditor’s responsibilities on the audit; • discuss with the Board the timing and scope of the audit; • obtain from the Board information relevant to the audit; and • inform the Board on a timely basis of matters arising from the audit that are likely to be of

interest or concern to the Board.

More information is available in a document provided by the Canadian Institute of Chartered Accountants Director Alert found in Annex 7 or at:

https://www.cpacanada.ca/en/connecting-and-news/cpa-magazine/articles/2014/august/internal-audit-a-key-partner

Annual General Meeting

(See Annual General Meeting in Module 3 Accountability and Responsiveness to Members)

The AGM is the formal mechanism, required under legislation, for the Board to account for its financial oversight responsibility to its members. At this time the audited financial statements are presented. The AGM must follow provisions dictated by the legislation under which the MFRC is incorporated, its bylaws and governance policy.

The Board must provide sufficient notice of the time and place of its AGM to its membership. The number of days notice required will be

stipulated in its bylaws. The Board must also provide sufficient information to the membership to allow them to make informed decisions at the AGM. The membership will be asked to vote on the following:

• approval of the minutes of the previous AGM. Only those present at the previous AGM are eligible to vote for approval of the minutes of that AGM.

• acceptance of the Audited Financial Statement,• ratification of the Board of Director’s appointment of the Auditor,• any bylaw changes being proposed, and• appointment of Directors for the coming year.

HELPFUL HINTTheBoardmustprovidesufficientnotice of the time and place of its AGM to its membership.


Fund Development

As a body, the Board of Directors is responsible for approving and monitoring a revenue strategy that will sustain the work of the organization. The strategy must have three characteristics:

• it will result in funding needed for day-to-day operations,• it will provide funding for an emergency reserve, ensuring healthy cash flow and

organizational investments, and• it will be in line with the MFRC’s ethics and values.

Much of the MFRC’s revenue will come from MFS but it is advantageous to have other sources of funds since this will allow for more flexibility in implementing new programs and initiatives or in providing services not included in the mandated services funded by MFS. Other funds are also important for development of a reserve fund and to create the capacity for timely responses to emergency situations or emerging trends. The level of fundraising opportunities available and funds raised depends on the capacity of the MFRC and the community in which it is located. It also depends upon the level of competition from other organizations also fundraising within the community.

Other sources of revenue can include:

• other government funders such as provincial ministries • grants from private or public foundations such as the Trillium Foundation• grants from other charities such as True Patriot Love • corporate grants, sponsorships or donations• user fees such as day care fees and program fees• special fundraising events or activities such as galas or raffles• planned giving• private donors

The term “fund development” is commonly used to refer to a strategy and the activities undertaken to support the overall generation of funds for an organization. Fund development includes all of the activities listed above. The term “fundraising” generally refers to special events or activities that are more community oriented. Effective fundraising activities will raise the profile of the organization and can be combined with marketing and promotional activities to have a wider, far-reaching benefit. Spreading the word about the MFRC and raising awareness of your programs and services can also lead to an increase in partnerships and other programming opportunities.

Each Board member must be involved in implementing the fund development strategy. The Executive Director, other staff and volunteers will also be involved. Fund development is a team effort, with the Board taking a leadership role. The Board is a vital link between the MFRC and the community and plays a key role in developing relationships that contribute to successful fundraising. Board members are seen by the community as committed to the organization and dedicated to its overall well being and success. If the Board plays a lead role, others are more likely to offer their support.


Grants can generate significant funds that form an integral part of the budget of an MFRC, particularly for one-time projects (such as capital projects) or for implementation of new services. Grant proposal writing requires a focus on the specific granting priorities and goals of the organization to which the MFRC is applying for funds. It is important that the MFRC develops projects that meet the goals of the funder, as well as their own goals. But the proposal does not stand alone. It must be part of a process of planning, outreach to, and cultivation of potential foundation and corporate donors as well as CAF or community partners. Funders are increasingly interested in joint initiatives and projects that create partnerships between service providers.

Liability can arise when the MFRC undertakes to raise funds. In order to avoid liability the Board must be prudent in the governance of fundraising and in fiscal reporting. MFRCs are subject to a number of statutes such as the Income Tax Act, the Charities Act and a number of provincial regulations affecting fundraising.

The Board should also insure that the donors’ rights are protected. A best practice would be the adoption of Philanthropy: “A Donor Bill of Rights” found at:

http://www.afpnet.org/files/ContentDocuments/Donor_Bill_of_Rights.pdf

The Role of the Fundraising CommitteeTypically a Fundraising or Fund Development Committee will be a standing committee of the Board or a sub-committee of the Finance Committee. The role of the Fundraising Committee is to set fundraising targets for Board approval and to ensure that fundraising is planned, executed and evaluated.

Responsibilities of the Fundraising Committee include:

• Establishing a fundraising plan that incorporates a variety of fundraising activities, • Providing the fundraising plan for Board of Director’s approval,• Working with staff and volunteers in their efforts to raise funds,• Ensuring that the necessary human resources are in place to support fundraising

initiatives,• Monitoring fundraising efforts to ensure that they are in line with organization’s mission,

vision and values and that they are cost-effective and ethical,• Ensuring that donors are appropriately recognized and thanked, and• Evaluating fundraising efforts to determine their effectiveness.

The Role of Staff in Fund DevelopmentLarger charitable organizations may have staff specifically dedicated to the function of fund development. However, in most cases, the Executive Director is delegated with the responsibility to prepare written proposals for the purpose of fund development, for Board approval. The Executive Director also plays an important role in the planning and execution of special events and activities.


His/her support is integral to building partnerships in the community that lead to successful events. Among other responsibilities, he/she:

• Plays a lead role in the Fundraising Committee’s work to develop the activity plan and timelines,

• Allocates MFRC resources (time, space, staff and volunteers, administrative assistance etc) in support of the activity,

• Engages community partners, as required,• Engages in public relations activities, • Participates in the event, and • Ensures that donors receive donation receipts and are adequately recognized.

Other staff members also have specific roles in fund development and support the work of the Fundraising Committee under the direction of the Executive Director.

Their responsibilities include:

• Helping to plan and implement special events and activities,• Coordination of fundraising activities,• Providing administrative support to the Board and Fundraising Committee, and • assisting at the event or activity.


Annex 1 – Sample Banking Resolution

Annex 1 – Sample Banking Resolution

BOARD OF DIRECTORS RESOLUTION TO OPEN BANK ACCOUNTFOR XYZ MFRC

Upon a motion duly made, seconded, and unanimously carried, it was resolved, that name and position be authorized and directed to open a bank account for the XYZ MFRC with Name of Bank, in the City of City in the province of Province, which hereby is authorized to honor the deposits of the Corporation, and checks drawn against such deposits signed by two Name and position, as long as there are funds in the account.

The undersigned certify that they are the duly elected directors of this Corporation, and that the above is a true and correct copy of the resolution that was duly adopted at a meeting of the Board of Directors, which was held in accordance with the provincial laws and the Bylaws of XYZ MFRC.

Dated

Chair

Director

Director

Director

Director


Annex 2 – Sample Financial Committee Terms of Reference

Annex 2 – Sample Financial Committee Terms of Reference

FINANCIAL COMMITTEE TERMS OF REFERENCE

PURPOSETo advise the Board of Directors and consult with the Executive Director on matters pertaining to the financial state of the Military Family Resource Centre XYZ (MFRC).

To ensure the accountability requirements of the Director of Military Family Services and other funders are met so that funding to the MFRC is secure.

COMPOSITION AND OPERATIONSA. The Committee will consist of not fewer than three Members and not more than five

Members.

B. Membership will include:

1. Board Chair, Ex-Officio 2. Board Treasurer 3. Executive Director, Ex-Officio 4. Board Members 5. Non-board Members 6. Staff Support--Business Manager

C. The Treasurer of the Board of Directors will serve as the Chair for the Finance Committee

D. A quorum shall be a simple majority of voting membership.

E. The Committee shall operate in a manner that is consistent with the Committee guidelines of the Board of Directors Policy and Procedure Manual.

F. The Committee shall meet at the request of the Board of Directors or the Committee Chair.

ROLES AND RESPONSIBILITIES1. To report to, inform and make recommendations on new policy initiatives/changes to the

Board related to financial issues and concerns.

2. Review monthly revenues and expenses and ensure that organizational funds are spent appropriately.

3. Develop the annual budget and submit it to the full Board for approval

4. Regularly review the organization’s revenues and expenditures, balance sheet, investments and other matters related to its continued solvency.


5. To ensure financial planning, budgeting, review and reporting take place.

6. To ensure the Board’s financial decisions are appropriately implemented.

7. To ensure reports are prepared on a timely basis.

8. To review the results of all external audits and oversee the development of implementation plans to address recommendations.

9. To recommend an outside auditor to the Board.

10. To ensure the MFRC safeguards and maintains a current list of its assets, including prudent management of organizational investments.

ACCOUNTABILITYThe Committee shall report to the Board of Directors.

REVIEWThe Committee’s Terms of Reference and membership will be reviewed and approved by the Board of Directors at least every two years.

Approved by the Board of Directors

Signature:Board of Directors Chair Date


Annex 3 – Sample Finance/Audit Committee Board Report Template

Annex 3 – Sample Finance/Audit Committee Board Report Template

MFRC XYZ

REPORT TO THE BOARD

Finance/Audit Committee Date:Type of Report: q Information Presented By: q Discussion q Decision Attachments:

State the financial issues for example budget approval, financial statement approval the Board needs to:

• Be informed of• Discuss• Make a decision about

BACKGROUND INFORMATION/POSSIBLE IMPACT: (pros, cons, financial concerns):

RECOMMENDATION: State it in the form of a motion for the Board if applicable


Annex 4 – Sample Revenue and Expenditure Statement

Annex 4 – Sample Revenue and Expenditure Statement

XYZ Military Family Resource Centre Inc.Revenue and Expenditure StatementEnd of (month), (year)

2012Actual

$ 63,958.00 $ 71,302.00

$ 66,050.00 $ 70,545.00 $ 50,630.00 $ 86,055.00

$ 408,540.00

$ 41,800.00

$ 41,824.00

$ 18,442.00 $ 1,921.00 $ 11,439.00 $ 2,880.00 $ 11,439.00 $ 9,800.00 $ 416.00 $ 6,657.00

$ 62,994.00

$ 513,358.00

$ 360,492.00 $ 53,358.00 $ 11,852.00 $ 5,250.00 $ 1,889.00 $ 4,975.00 $ 59,664.00

$ 497,480.00

$ 497,480.00

$ 15,878.00

RevenueMFS Management and administration Child, youth and parenting Personal development & community integration Family separation and reunion Prevention, support and intervention Family liaison officer

Department of National Defence Site specific

Military Family Resource Centre Child and youth user fees PDCI user fees Fundraisers Rentals Donations Other government grants Interest Miscellaneous Revenue

Total Revenue

ExpenditureSalary & BenefitsProgram supplies and costsTransportationProfessional developmentVolunteer Recognition InsuranceAdministration

Total Expenditure

Excess of revenue over expenditures

2012Budget

$ 63,958.00 $ 71,302.00

$ 66,050.00 $ 70,545.00 $ 50,630.00 $ 86,055.00

$ 408,540.00

$ 41,800.00

$ 41,800.00

$ 18,400.00 $ 3,000.00 $ 15,000.00 $ 3,000.00 $ 9,000.00 $ 10,000.00 $ 450.00 $ -

$ 58,850.00

$ 509,190.00

$ 366,500.00 $ 55,490.00 $ 12,000.00 $ 5,700.00 $ 2,000.00 $ 5,000.00 $ 62,500.00

$ 509,190.00

$ 509,190.00

$ -

2011Actual

$ 59,990.00 $ 70,240.00

$ 65,590.00 $ 102,125.00 $ 50,515.00 $ 7,030.00

$ 498,327.00

$ 50,945.00

$ 50,945.00

$ 17,952.00 $ 3,108.00 $ 14,600.00 $ 2,560.00 $ 8,118.00 $ 9,800.00 $ 453.00 $ -

$ 68,860.00

$ 618,132.00

$ 372,896.00 $ 95,622.00 $ 18,788.00 $ 10,355.00 $ 3,804.00 $ 4,853.00 $ 62,457.00

$ 568,775.00

$ 568,775.00

$ 49,357.00

Variance to Budget

$ - $ -

$ - $ - $ - $ -

$ -

$ -

$ -

$ 42.00 $ (1,079.00)$ (3,561.00)$ (120.00)$ 2,439.00 $ (200.00)$ (34.00)$ 6,657.00

$ 4,144.00

$ 4,144.00

$ (6,008.00)$ (2,132.00)$ (148.00) $ (450.00)$ (111.00)$ (25.00)$ (2,836.00)

$ (11,710.00)

$ (11,710.00)

$ -


Annex 5 – Sample Variance Statement

Annex 5 – Sample Variance Statement

MFRC Financial Report as of Dec 31, 2011 3rd quarter

Actuals YTD

$ 779,207.64$ 150,000.00 $ 314,195.42 $ 152,899.63 $ 709,621.84 $ 10,155.00 $ -

$ 2,116,079.53

$ 31,979.24

$ 634,133.74

$ 2,719.24 $ 591.34

$ 18,662.16

$ 12,939.83

$ 4,658.59

$ 30,304.76

$ 26,891.09

$ 21,527.72

$ 664,532.11

$ 48,555.40

$ 8,665.80

$ 10,989.52

$ 2,683.47

Revenue

MFS AllocationBase Commander’s fundingDonations/GrantsProvincial Funding FeesSpecial Events RevenueDeferred Revenue

Total Revenue

Expenses Management, Administration, &

Communication Expenses Personnel Costs (Wages, Benefits,

PD, Advertising, Update Services) Volunteer Service Delivery Costs Welcome and Community

Integration Service Delivery Costs Second Language Training

Service Delivery Costs Activities and Initiatives for

Children and Youth Service Delivery Costs

Parent/Caregiver Education and Support Service Delivery Costs

Emergency Child Care Service Delivery Costs

Deployment Respite Care Service Delivery Costs

Casual Child Care Service Delivery Costs

Day Care/Out of School Service Delivery Costs

Playschool/Terrific Twos Service Delivery Costs

Drop-in Teen Centre Service Delivery Costs

Family Separation and Reunion Service Delivery Costs

PSI Service Delivery Costs

Budget YTD

$ 735,552.00$ 150,000.00 $ 209,896.50 $ 151,709.25 $ 720,675.00 $ - $ 195,132.00

$ 1,967,832.75

$ 48,116.25

$ 656,078.25

$ 8,160.00 $ 10,984.50

$ 13,924.50

$ 14,182.50

$ 3,919.50

$ 7,527.00

$ 10,312.50

$ 22,605.00

$ 720,598.50

$ 48,315.00

$ 10,631.25

$ 13,218.75

$ 10,672.50

Variance

$ 43,655.64 $ -

$ 104,298.92 $ 1,190.38

$ (11,053.16)$ 10,155.00 $ (195,132.00)

$ 148,246.78

$ (16,137.01)

$ (21,944.51)

$ (5,440.76)$ (10,393.16)

$ 4,737.66

$ (1,242.67)

$ 739.09

$ 22,777.76

$ 16,578.59

$ (1,077.28)

$ (56,066.39)

$ 240.40

$ (1,965.45)

$ (2,229.23)

$ (7,989.03)

Note

Unanticipated in-year funding

More donations than budgeted

Transferredas required atyear end

Unanticipated funding

Exceptional use of service, extra funding available if requiredExceptional use of service, extra funding available if required


$ 1,798.97

$ 6,376.35

$ 1,905.11 $ 195,670.55 $ 3,827.67

$ 208,825.04

$ 1,938,237.70

$ 177,841.83

PSI Short Term Intervention/Crisis Support (emergency fund)

IPSC Casualty Support Child Care Costs

IPSC Service Delivery Costs Base Comd Service Delivery Costs Base Comd Furniture/Effects/

Maintenance Fund Development Costs Total Expenses

Surplus/Deficit

$ 3,750.00

$ 9,000.00

$ 16,068.00 $ 194,071.50$ 9,000.00

$ 111,741.75

$ 1,942,877.25

$ 24,955.50

$ (1,951.03)

$ (2,623.65)

$ (14,162.89)$ 1,599.05$ (5,172.33)

$ 97,083.29

$ (4,639.55)

$ (46,672.07)

Special event


Annex 6 – CRA Charity and Giving – Checklists

Annex 6 – CRA Charity and Giving – Checklists

The following checklists are provided by:

Make sure you are using the most up-to-date checklist.

You can find all the checklists below at the following link:

http://www.cra-arc.gc.ca/chrts-gvng/chrts/chcklsts/menu-eng.html

Canada RevenueAgency

Agence du revenudu Canada


Basic guidelinesq ENGAGE ONLY IN ALLOWABLE ACTIVITIES - A registered charity is allowed to carry

out its charitable purposes both inside and outside Canada in only two ways: by carrying on its own charitable activities, and by gifting to qualified donees. A registered charity must maintain direction and control over its activities (whether carried out by the charity, or by an agent or contractor on its behalf) and must not engage in prohibited political activities or unrelated business activities.

q KEEP ADEQUATE BOOKS AND RECORDS - A registered charity must keep adequate books and records for the prescribed time period, in either English or French, at an address in Canada that is on file with the Canada Revenue Agency (CRA).

q ISSUE COMPLETE AND ACCURATE DONATION RECEIPTS - A registered charity may only issue official receipts for donations that legally qualify as gifts. An official receipt must contain all the information specified in Regulation 3501 of the Income Tax Act.

q MEET ANNUAL SPENDING REQUIREMENT (DISBURSEMENT QUOTA) - A registered charity must spend the minimum amount calculated for its disbursement quota each year on its own charitable activities, or on gifts to qualified donees (for example, other registered charities).

q FILE ANNUAL T3010 INFORMATION RETURN - A registered charity must file an annual T3010 information return (together with financial statements and required attachments) no later than six months after the end of the charity’s fiscal period.

q MAINTAIN THE CHARITY’S STATUS AS A LEGAL ENTITY - A registered charity that is constituted federally, provincially, or territorially must meet other specific requirements (in addition to the requirements of CRA) in order to maintain its status as a legal entity. This may include annual filing and/or annual fees. A registered charity should check with the relevant authorities to verify these additional requirements.

q INFORM THE CHARITIES DIRECTORATE OF ANY CHANGES TO THE CHARITY’S MODE OF OPERATION OR LEGAL STRUCTURE - A registered charity should get confirmation from the Charities Directorate (the Directorate) before changing its stated objects and/or activities to make sure they qualify as charitable. A registered charity should inform the Directorate if it changes its name, telephone number, address, contact person or governing documents (constitution, letters patent, etc.) and must obtain prior approval from the Directorate before changing its fiscal period end.


Engaging in allowable activities A registered charity must be created for charitable purposes and must devote its resources (funds, personnel, and property) to charitable activities. A registered charity is permitted to carry out its charitable purposes, both inside and outside Canada, in only two ways: by carrying on its own charitable activities and by gifting to qualified donees.

Is the charity aware of the following requirements:

q Contact the Charities Directorate if the charity plans to engage in new activities that were not identified in its application for registration, to ensure they qualify as charitable.

q Limit using the charity’s resources for social activities and fundraising activities as they generally are not considered charitable.

q If working through intermediaries such as an agent, a contractor, or any other non- qualified donee, the charity must be able to demonstrate that it retains direction and control over the use of it resources. (For example, the charity could enter into a formal written agreement with the intermediary body.)

q Do not engage in any activities that may directly or indirectly support or facilitate an act of terrorism.

q Do not engage in any prohibited political activities, such as supporting or opposing a political party or candidate for public office.

q Gift only to qualified donees (for example, other registered charities).

q Engage in only related business activities that accomplish or promote the charity’s purposes, if the charity is designated as a charitable organization or a public foundation.

q Do not engage in any business activities if the charity is designated as a private foundation.

Thischecklistisforthecharity’suseonly.DonotmailtotheCRA orfilewiththereturn.


Issuing complete and accurate donation receipts A registered charity may only issue official receipts for donations that legally qualify as gifts. An official receipt must contain all the information specified in Regulation 3501 of the Income Tax Act.

ChecklistDo the official donation receipts of the charity contain these mandatory elements:

q For gifts of cash: o a statement that it is an official receipt for income tax purposes; o the name and address of the charity as on file with the CRA; o the charity’s registration number; o the serial number of the receipt; o the place or locality where the receipt was issued; o the day or year the donation was received; o the day on which the receipt was issued if it differs from the day of donation; o the full name and address of the donor; o the amount of the gift; o (under proposed legislation) the value and description of any advantage received by

the donor; o (under proposed legislation) the eligible amount of the gift; o the signature of an individual authorized by the charity to acknowledge donations; and o the name and Web site address of the Canada Revenue Agency

(www.cra.gc.ca/charities).

q For non-cash gifts (gifts in kind), these additional elements:

o the day on which the donation was received (if not already indicated); o a brief description of the property transferred to the charity; o the name and address of the appraiser (if property was appraised); and o (under proposed legislation) in place of the amount of the gift mentioned above, the

deemed fair market value of the property.

NoteFor gifts in kind, the eligible amount of the gift cannot exceed the deemed fair market value of the item. An appraisal is recommended for items valued at $1,000 or more.

A registered charity cannot issue receipts for the following:

• for contributions of services provided to the charity (services do not qualify as gifts); • on behalf of another organization or charity; • in a name other than the name of the true donor.



Filing the annual T3010 information return A registered charity must file an annual information return (together with financial statements and required attachments) no later than six months after the end of the charity’s fiscal period.

ChecklistHas the charity included:

q a completed Form T3010, Registered Charity Information Return. q the Registered Charity Basic Information Sheet, with or without corrections (if the form

has been lost or was not received with the return package, contact the Client Service Section).

q a completed Form T1235, Directors/Trustees and Like Officials Worksheet, including all the dates of birth (not required if filing Form RC232-WS).

q a completed Form T1236, Qualified Donees Worksheet / Amounts Provided to Other Organizations, if applicable.

q a completed Form T2081, Excess Corporate Holdings Worksheet for Private Foundations, if applicable.

q Form RC232-WS, Director/Officer Worksheet and Ontario Corporations Information Act Annual Return, or Form RC232, Ontario Corporations Information Act Annual Return, if applicable.

q a copy of the registered charity’s own financial statements (assets and liabilities, revenue and expenditures, and any prepared notes).

q the signature of a director, trustee, or like official of the charity in the certification area of the return.

Notes• File within six months from the end of the charity’s fiscal period end. The CRA does not

grant extensions. Refer to Consequences of non-filing for additional information.• Mail to the correct address:

Charities Directorate Canada Revenue Agency Ottawa ON K1A 0L5

• Verify the information on the Registered Charity Information Return Summary when received, and check the charity’s T3010 information posted on the CRA Web site through the Charities Listings.



Keeping adequate books and records A registered charity must keep adequate books and records for the prescribed time period, at an address in Canada that is on file with the Canada Revenue Agency (CRA). The following checklist gives an overview of the general requirements.

ChecklistAre the books and records of the charity kept as follows:

q Copies of official donation receipts (other than for 10-year gifts) kept for a minimum of two years from the end of the calendar year in which the donations were made.

q All records concerning 10-year gifts kept for as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked.

q Minutes of meetings of the directors/trustees/executives kept for as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked or, in the case of a corporation, for two years after the day the corporation is dissolved.

q Minutes of meetings of the members kept for as long as the charity is registered and for a minimum of two years after the date the registration of the charity is revoked.

q All governing documents and bylaws kept for as long as the charity is registered and for two years after the date the registration of the charity is revoked.

q 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 kept for 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 a charity is revoked or, in the case of a corporation, for two years after the day the corporation is dissolved.

q Financial statements, source documents, and copies of T3010 returns kept for 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 items such as invoices, vouchers, formal contracts, work orders, delivery slips, purchase orders, or bank deposit slips.

Notes• The charity should keep all its key documents (constitution, bylaws, registration letter, etc.)

along with its books and records in one area for easy access. This will make it easier for the charity in the case of an audit or when there is a change to the governing board.

• Copies of key documents and records should also be kept in a separate location (preferably off-site) for back-up purposes.



Meeting the disbursement quota As a result of Budget 2010, the information below applies only for fiscal periods ending on or after March 4, 2010. If the charity’s fiscal period end was before March 4, 2010, see Meeting the disbursement quota - prior to Budget 2010

The disbursement quota is the minimum amount that a registered charity is required to spend each year on its own charitable activities, or on gifts to qualified donees (for example, other registered charities). The disbursement quota calculation is based on the value of a charity’s property not used for charitable activities or administration.

Checklistq Determine the charity’s spending requirement (disbursement quota) at the start of the

fiscal period. • If completed, the charity can use the amount on line 5910 of Schedule 6 - Detailed

Financial Information on the Registered Charity Information Return it will file for the fiscal period that just ended. See Disbursement quota calculation.

q If applicable, make note of any disbursement quota shortfalls from the previous year that need to be made up or any excesses that may be applied to meet the current year’s spending requirement. See Disbursement quota shortfalls and excesses.

q Separate charitable expenditures from other expenditures such as management and administration, political activity, and fundraising and keep track of these throughout the fiscal period as well as amounts gifted to qualified donees.

q Enter the proper amounts on line 5000 (expenditures on charitable programs) and on line 5050 (gifts to qualified donees) when completing the Form T3010 return.

Has the charity met its disbursement quota?The charity has met its disbursement quota if the total of the following expenditures equals or exceeds the calculated spending requirement:

• amounts spent on charitable programs (line 5000); • gifts made to qualified donees (line 5050) minus any designated gifts; and • amount of the special reduction approved in writing by the CRA for the fiscal period

(line 5750).

This checklist is for the charity’s use only. Do not mail to the CRA or file with the return.


Changingthecharity’smodeofoperationorlegalstructure

ChecklistHas the charity contacted or notified the Charities Directorate in the following circumstances:

q to ensure any proposed changes to the charity’s objects or activities qualify as charitable; q to obtain approval before making a change to the charity’s fiscal period end; q the charity wishes to request:

• permission to accumulate property (funds), • a re-designation, • associated status, or • a disbursement quota reduction;

q the charity has changed its name, address, telephone or fax numbers, email address, or contact information and has not already identified the change(s) on the Registered Charity Basic Information sheet;

q the charity has changed its governing documents (constitution, articles of incorporation, etc.);

q the charity has been part of an amalgamation, merger, or consolidation; q the charity is no longer in operation and wishes to have its registration voluntarily revoked.

NotesSend notifications or requests separately from the T3010 information return to ensure proper processing.

Mail or fax the information to:Charities DirectorateCanada Revenue AgencyOttawa ON K1A 0L5

Fax: 613-954-8037



Maintainingthecharity’sstatusasalegalentityA registered charity that is constituted federally, provincially, or territorially must meet other specific requirements (in addition to the requirements of the CRA) in order to maintain its status as a legal entity. Failure to maintain its status as a legal entity could result in the revocation of its registration as a charity.

ChecklistHas the charity checked with the relevant authorities such as Industry Canada or the provincial/territorial registrar to verify the following requirements:

q Annual returns and/or fees. These are usually required to keep the charity’s status as a legal entity current if the charity is constituted federally, provincially, or territorially. These annual returns are in addition to the CRA filing requirement for the T3010 registered charity information return.

q Governing documents (constitution, letters patent, etc.). Changes to the charity’s name, list of directors, bylaws, etc., must be recorded with the relevant authorities in addition to the Charities Directorate of the CRA.

Additional requirements/restrictionsAlthough these are not regulated by the CRA, nor are they requirements for maintaining charitable registration, the charity should check with the relevant authorities, such as Industry Canada or the provincial/territorial registrar, to see if they apply:

• fundraising activities - licenses and/or permits may be required. There may also be restrictions on the use of commercial fundraisers and/or third-party fundraisers;

• gaming and lottery activities - licenses and/or permits may be required; • charitable property - there may be restrictions on their use, as well as

reporting requirements; • duties of directors/trustees - there may be legal requirements to execute

fiduciary responsibilities; • changes to the charity’s address, telephone number, contact person, etc. - these should

be recorded with the relevant authorities in addition to the Charities Directorate of the CRA.



Annex 7 – CICA Director Alert: New Canadian Standards – questions for directors to ask

Annex 7 – CICA Director Alert: New Canadian Standards – questions for directors to ask

December 2010Author: Eric Turner, CA

Introduction Your upcoming audit will be different. Is your organization prepared?

In any organization whose financial statements are subject to audit, the board of directors is responsible for overseeing the audit process. In many organizations, this responsibility is delegated to the audit committee or other committee of the board.

The audit process in Canada is changing, and directors need to have an understanding of the changes and work with their auditors to ensure a smooth transition. New Canadian Auditing Standards (CASs), which are based on international standards, will be in effect for audits of financial statements for periods ending on or after December 14, 2010.

The new auditing standards apply to audits of all entities, whether public or private, for profit or not-for-profit, and in both the public and private sectors. They will be used to audit financial statements prepared in accordance with any acceptable financial reporting framework, including International Financial Reporting Standards, accounting standards for private enterprises, accounting standards for not-for-profit organizations and others.

In other words, if an organization’s calendar year financial statements for 2010 and beyond are being audited, whatever the organization’s size and nature, the auditor will be using the new CASs.

But there is no need to panic. The CASs are similar in many ways to the standards auditors have been using up to now. For instance, the main engine room of the audit – the way the auditor gains an understanding of the organization, assesses risks of misstatement of the financial statements and develops responses to those risks (including the risk of fraud) – is substantially unchanged.

However, there are some changes that may come as a surprise to boards of directors. A key area where boards will notice a change, for example, is the communications about the audit, whether with management, the audit committee or externally to the organization’s stakeholders. Further, the CASs have some significant benefits, not only for auditors but also for boards of directors and the organizations they oversee. In preparation for their next audit, directors and their auditors should discuss the move to the CASs and what it means in the specific circumstances of their audit.

This Director Alert highlights some of the key changes taking place and presents possible questions that directors or audit committee members might ask to get a better understanding of the CASs and how they affect the audit. Some questions are intended for directors to ask management, while others are questions for directors to discuss among themselves or with their auditors.

A. Understanding the Scope and Impact of the ChangesAs early in the process as possible, the audit committee or board of directors should discuss with the auditor the potential differences in the audit resulting from the new standards.


The nature and extent of differences that management and the board of directors may notice from prior year audits will depend on the circumstances of the organization. The CASs contain several new or significantly changed standards that may have implications for management and the board to the extent they are relevant to the audit of that particular organization. Further, the CASs often contain requirements that were previously best practice but not specifically required, and eliminate some choices that auditors may have had under the previous standards.

As a result, the degree of difference in the conduct of the audit of a particular organization will depend in part on the organization and in part on the practices previously followed by the auditor.

Increased emphasis on the responsibilities of management and the board.

One initial point that may attract the attention of both directors and management is the increased emphasis under the new standards on the responsibility of management and the board of directors for the financial statements.

The audited financial statements are the responsibility of the organization. Their preparation is the responsibility of management under the oversight of the board of directors. Although the auditor may provide assistance in the preparation of the financial statements, the statements remain the responsibility of management and the board. The audit of the financial statements cannot relieve management or the board of their responsibilities.

Responsibility for the financial statements has always been a fundamental responsibility of corporate governance. However, the new standards require this to be specifically acknowledged by management and the board. The premise is reflected in many of the communications between the auditor and the organization under the new standards, including the audit engagement letter, the management representation letter, and the auditor’s report.

In smaller organizations and those with limited accounting expertise, this may come as a surprise. In these organizations the financial statements may be thought of as “the auditor’s financial statements”. Directors will need to ensure that both the board and management understand the nature and extent of their responsibilities for the financial statements and are comfortable explicitly acknowledging that responsibility.

Changestotheauditor’sengagementletter

In addition to the increased emphasis on the responsibilities of management and the board of directors, the engagement letter is likely to look different in other respects. The auditor is required to include in the audit engagement letter reference to the expected form and content of the report to be issued by the auditor. As both the form and the content of the auditor’s report will be different under the new standards (see below), it is important that management and the board or audit committee carefully review the new engagement letter.

Questions for directors to ask:1. Have management, the audit committee and the auditor discussed the impact of the

CASs on this year’s audit? 2. What significant changes are expected to the audit process?


3. In what specific areas are communications with the board expected to change as a result of the new standards?

4. Do management and the board understand their respective responsibilities for the financial statements?

5. Has the audit committee reviewed the new audit engagement letter?

B. Enhancing Communication between the Auditor and the Board The new CASs set out an overarching communications framework that emphasizes the importance of effective two-way communication between the auditor and the board or audit committee during all phases of the audit. The communication requirements and guidance are more extensive and detailed than before.

There are four key areas of communication. The auditor must:

• inform the board of the auditor’s responsibilities on the audit; • discuss with the board the timing and scope of the audit; • obtain from the board information relevant to the audit; and • inform the board on a timely basis of matters arising from the audit that are likely to be of

interest or concern to the board.

CASs with enhanced communication requirements with the board

A number of the new standards include specific requirements for the auditor to communicate with the board or audit committee. Directors of some organizations may note an increase in communications from the auditor, as the auditor is now required to report to the board in some situations in which there was previously an option not to do so. Here are a few examples:

Related parties: The auditor is required to communicate with the board non-disclosure by management of related parties or significant related party transactions. In the past, where management did not disclose related party transactions, but corrected the oversight when requested by the auditor, the matter may not have been reported to the board. Under the new standards, the auditor is required to do so. The auditor is also required to obtain written representations at the end of the engagement with respect to related party relationships and transactions and their accounting and disclosure in the financial statements. Previously, representations were obtained only from management. The auditor may now consider it appropriate to obtain representations from the board as well, for example, when the board has approved specific related-party transactions involving management.

Correcting misstatements: The auditor is required to keep track of all non-trivial misstatements identified during the audit. The auditor must now request that management correct the misstatements. Previously, the auditor was not required to request correction of misstatements, provided that they were below the auditor’s materiality threshold. The auditor is required to advise the board of all misstatements which have not been corrected by management, regardless of materiality. Under the new auditing standards, the auditor will also advise the board or audit committee of the effect that the uncorrected misstatements may have on the auditor’s opinion, and will request that the board take action by requiring that management correct the misstatements.


Going concern: Financial statements are prepared under the going concern assumption (that the business will continue for the foreseeable future). The new standards require enhanced communication between the auditor and the board about the use of this assumption for the organization’s financial statements. Management is responsible for assessing the organization’s ability to continue as a going concern for at least the next twelve months. This determination affects the way the financial statements are prepared. The auditor will question management and make investigations during the course of the audit to test the basis for the determination. Under the new standards, the auditor is required to inform the board of any events or conditions identified during the audit that cast significant doubt on the entity’s ability to continue as a going concern, including whether the events or conditions constitute a material uncertainty, whether the going concern assumption is appropriate in the preparation of the financial statements, and the adequacy of related disclosures in the financial statements.

As a result of these and other enhanced communication requirements, boards and audit committees may receive more information from the auditor than they have in the past, particularly where there are areas of concern. Audit committees would be well-advised to take advantage of this additional information to enhance their understanding of the organization and their ability to oversee its financial condition, identify red flags and other warning signals and direct management in taking appropriate action.

Auditor evaluation of the two-way communication with the board

Another key change which boards should be aware of under the new standards is that when preparing the auditor’s report, the auditor is now specifically required to consider the quality of communication and interaction with the board. The auditor is directed to consider whether communications with the board have been adequate for the purpose of the audit: that is, whether the objectives of such communications have been achieved.

Inadequate communications may have significant consequences. For example, they may indicate an unsatisfactory control environment and influence the auditor’s assessment of the risks of material misstatements, such that the auditor may need to perform additional audit procedures in forming the audit opinion.

Thefollowingareitemstheauditormayobserveduringtheauditthataffecttheauditor’sevaluation of the two-way communication with the board:

• The appropriateness and timeliness of actions taken by the board in response to matters raised by the auditor. Where significant matters raised in previous communications have not been dealt with effectively, it may be appropriate for the auditor to inquire as to why appropriate action has not been taken, and to consider raising the point again.

• The apparent openness of the board in their communications with the auditor. • The willingness and capacity of the board to meet with the auditor without management

present.

HELPFUL HINTTheauditorisnowspecifically

required to consider the quality of communication and

interaction with the board.


• The apparent ability of the board to fully comprehend matters raised by the auditor, for example, the extent to which the board probes issues, and questions recommendations made to it.

• Difficulty in establishing with the board a mutual understanding of the form, timing and expected general content of communications.

• Where all or some of the board of directors are involved in managing the entity, their apparent awareness of how matters discussed with the auditor affect their broader governance responsibilities, as well as their management responsibilities.

• Whether the two-way communication between the auditor and the board is sufficient to meet any other applicable legal and regulatory requirements.

This has important implications for the board of directors. The board should ensure that it is organized in a way that allows for effective engagement with the auditor. This may affect whether or not the board chooses to have an audit committee, the directors who should sit on the committee, and the number and timing of meetings. It may also indicate a need for additional education for directors regarding the organization’s finances and their own governance responsibilities.

Boards should consider discussing with the auditor prior to the audit their specific expectations regarding communications, and taking the time after the audit to look back and evaluate the process and identify areas to work on in order to continually improve their communications.

Questions for directors to ask: 1. How effective has the communication process with the auditor been in the past? 2. Are there improvements that should be made to the communications process? 3. Is the board / audit committee organized so as to facilitate the required communications? 4. How can we ensure that we continually improve our communications with the auditor?

C. DatingoftheAuditor’sReportThe date of the auditor’s report is likely to change under the new standards. The auditor will now be unable to complete (and date) the report until those with the recognized authority for the financial statements (generally the board of directors) have asserted that they have taken responsibility for them.

The date of the auditor’s report is intended to signify to the reader the date as of which the auditor has considered the effect of events and transactions of which the auditor became aware and that occurred up to that date. The new standards require the report to be dated no earlier than the date on which the auditor has obtained sufficient appropriate audit evidence on which to base the auditor’s opinion on the financial statements, including evidence that:

• all the statements that comprise the financial statements, including related notes, have been prepared; and

• those with the recognized authority have asserted that they have taken responsibility for those financial statements.


Delaysinthecompletionoftheauditor’sreportmaybedueto:

Management factors relating to the preparation of the financial statements – when the financial statements are not complete because some adjustment or disclosure that could be material to the financial statements is still to be made. This may include, for example, the finalization of the organization’s income tax provision or the updating of the financial statements for subsequent events that require adjustment or disclosure. If the organization is still in the process of completing the financial statements (for example, the finalization of the entity’s income tax provision), the related audit procedures on the financial statement items or notes that remain to be completed will not yet have been performed by the auditor. The auditor’s report must not be dated before the auditor has performed sufficient audit procedures to support the content of his or her report based on the completed financial statements.

Board of directors approving the financial statements – In Canada, most incorporating or other governing legislation requires the board of directors to approve the financial statements.1 This is generally done at a meeting of the board. In many organizations, there may be a significant delay in the approval of the financial statements by the board.

Under the previous standards, the auditor had greater leeway to date the report as of an earlier date. This is no longer an option under the new standards. As a result, in many cases, the date of the auditor’s report will be a later date than under the previous standards.

Depending on the current policies and procedures in place, the boardmay need to consider:

• the impact on management’s procedures for reporting on subsequent events, • the coordination of the appropriate approval of the financial statements, • providing the auditor with sufficient appropriate audit evidence to support the approval of

the financial statements and the date thereof, and • any other effects this may have on the administrative flow for finalization and distribution of

financial statements.

Questions for directors to ask: 1. What is the expected date of the auditor’s report for the upcoming audit and what are the

implications for the auditor and for management? 2. Are there means by which management can improve the efficiency of preparing the final

financial statements? 3. Are there means of improving the efficiency of the board process for approving the

financial statements? 4. Are there any other factors which may delay the dating of the auditor’s report of which the

board should be aware?

1 See, for example, section 158 of the Canada Business Corporations Act (CBCA) which requires the directors of the corporation to approve the financial statements


D.FormandContentoftheAuditor’sReportThe auditor’s report is the key output from the audit. It communicates the auditor’s conclusion and the basis for that conclusion. The required format and wording of the auditor’s unqualified report under the CASs is different from the previous auditor’s standard report (see example auditor’s report on the facing page) in a number of ways, including:

• The report uses subheadings to emphasize the purpose of the respective paragraphs in the auditor’s report.

• The title of the auditor’s report clearly conveys that the report is that of an independent auditor.

• The description of management’s responsibility is expanded to indicate that it includes responsibility for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

• The report contains an expanded description of the auditor’s responsibility. • The auditor’s report states that the auditor believes that the audit evidence the auditor has

obtained is sufficient and appropriate to provide a basis for the auditor’s opinion.

The CASs also allow the auditor to make additional communications in the auditor’s report when the auditor believes it is necessary to draw attention to information in the financial statements, for example, a major risk that under the previous standards would have been buried in the notes to the financial statements. This is referred to as an “emphasis of matter” paragraph.

The new standards also allow the auditor to make additional communications in the report regarding the auditor’s responsibilities, or the report itself, such as the fact that the organization’s financial statements had not been audited in the prior year. This is referred to as an “other matter” paragraph.

Auditors who expect to include one of these paragraphs in the auditor’s report are required at the outset of the audit to communicate with the board regarding this expectation and the proposed wording of the paragraph. The board of directors should ensure that they understand the implications of the inclusion of such a paragraph and should be prepared to discuss with the auditor the use and wording of such paragraphs.

Audit reports for not-for-profit organizations which receive donations generally include a qualifying paragraph reflecting the fact that completeness of donations cannot be verified by the audit. This will be unchanged under the new standards.


Questions for directors to ask: 1. What is the expected form and content of the auditor’s report? 2. What new features in the expected form of audit report should the board be aware of? 3. Is the auditor expecting to include any additional communications in the auditor’s report?

Why? 4. What are the implications of these additional communications in the eyes of our

stakeholders?

IndependentAuditor’sReportTo the Shareholders of (Company Name)

We have audited the accompanying financial statements of (COMPANY NAME), which comprise the balance sheet as at (DATE), and the statements of income, retained earnings and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’sResponsibilityfortheFinancialStatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for private enterprises2, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’sResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluatingtheoverallpresentationofthefinancialstatements.


We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of (COMPANY NAME) as at (DATE), and the results of its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for private enterprises.2

Anytown, Anyprovince (Signed) Date CHARTERED ACCOUNTANT

E.ConclusionandwheretofindmoreinformationIn order to ensure that the upcoming audit proceeds smoothly, boards of directors and audit committees should ensure that they have a good understanding of the changes to the audit as a result of the CASs, and have regular and forthright communication with their auditors.

Visit the CICA website at www.cica.ca/CAS for general information about Canadian Auditing Standards.

2 The description of the financial reporting framework explains which specific accounting standards are being followed. Entities that follow accounting standards for not-for-profit organizations would describe the financial reporting framework as “Canadian accounting standards for not-for-profit organizations.”


Glossary

AGM - Annual General Meeting

Incorporated not for profit organizations are required by law to hold an Annual General Meeting. Ensuring that this mandatory business has been properly conducted demonstrates good governance. The meeting is part business, part celebration of the previous years’ accomplishments and part community outreach.

CICA - Canadian Institute of Chartered Accountants

CICA represents Canada’s Chartered Accountant profession both nationally and internationally. Chartered Accountants (CAs) are Canada’s most valued, internationally recognized profession of leaders in senior management, advisory, financial, tax and assurance roles.

CRA - Canada Revenue Agency

CRA administers tax laws for the Government of Canada and for most provinces and territories; and various social and economic benefit and incentive programs delivered through the tax system. Not-for-profits, such as MFRCs must complete the annual Registered Charity Information Return. The Canada Revenue Agency maintains an on-line searchable list of Canadian charities to ensure that members and potential donors are aware of the financial status of the organization.

DND - Department of National Defence

DND is a government department with responsibilities established by the National Defence Act. Under the law, the Canadian Armed Forces are an entity separate and distinct from the Department. As stated in the Act, the Department is headed by a Deputy Minister of National Defence, the Department’s senior civil servant, while the Canadian Forces are headed by the Chief of the Defence Staff, Canada’s senior serving officer. Both are responsible to the Minister of National Defence.

ED - Executive Director

The senior staff person in a not-for-profit organization, and the only person hired, managed and evaluated by the Board of Directors. The ED oversees daily operations and supervises the other staff in the organization.

GAAP - Generally Accepted Accounting Principles

GAAP refers to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing, and in the preparation of financial statements.


GST - Goods and Services Tax

The GST is a 5% tax on the supply of most goods and services in Canada.

HST - Harmonized Sales Tax

In Newfoundland and Labrador, New Brunswick and Nova Scotia, Ontario and British Columbia, the GST is combined with the Provincial Sales Tax to create the HST.

MFRC - Military Family Resource Centre

MFRCs are federally or provincially incorporated not-for-profit organizations established to deliver a range of programs and services to Canadian Forces families under the auspices of the Military Family Services Program.

MFS - Military Family Services

MFS provides national oversight, support and funding for the Military Family Services Program on behalf of the Department of National Defence.

MOU - Memorandum of Understanding

The MOU is a non-contractual agreement between each MFRC and DND as represented by MFS and the local Commanding Officer. The document outlines the rationale for the MFSP, the underlying principles of the MOU, the roles and responsibilities of all participants to the agreement and the financial arrangements for funding the Program.

RFQ - Request for Quote

An RFQ is a document that an organization submits to one or more potential suppliers eliciting quotations for a product or service that is standardized in nature, such as a financial audit.

SDA - Service Delivery Agreement

The SDA describes the financial plan for the upcoming year. MFRCs project how they will spend the funds allocated to them by MFS, what services and activities they will provide and how many families are expected to participate. This is the most important of the three funding documents because it details MFRCs’ commitment to MFS, and to the families they serve.

YTD - Year to Date

The period from the beginning of the calendar year (or fiscal year (FY) if so indicated) to the reporting date. For example, third-quarterly financials would be reported for the quarter alone and for the year-to-date, which would be nine months.

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