By Rozalyn Werner-Arcé, CAE
Just when you least expect it—it happens: the dreaded phone call from Revenue Canada! The person on the other end of the line informs you that the Canada Revenue Agency (CRA) is going to conduct an audit on your organization. Next, you receive a faxed letter confirming the audit along with three pages filled with single-spaced questions and a list of “things to do,” all of which must be thoroughly and accurately responded to within two weeks.
Your first call is to the board chair, the second to the treasurer (if they haven’t called you first), and then the sweating, sleepless nights begin.
You run a compliant organization—or at least you thought so. You’ve implemented new processes and procedures since you started, but still … uneasiness sets in.
Well, have no fear! After reading the helpful tips below, you will be so prepared that you will welcome that auditor with open arms, well … at with least a smile and a handshake.
1. Be prepared.
Read through the letter. Once, twice, even three times and then develop a plan. Organize all the requested documentation in a three-ring binder, separating each section with tabs. Make it look organized and easy to read, and you will wow your auditor right from the start.
2. Read through the letter the next day, too.
Now that you’ve had 24 hours to think things through rationally, read the letter again to make sure you didn’t miss or misinterpret anything. Take your time and read it thoroughly.
3. Confirm and clarify.
Communication with your auditor is critical. If you are unclear about what they are asking for, phone and ask, as many times as you need. It’s going to make their job easier (and yours) if you have all the right documentation ready when they arrive.
4. Be respectful and friendly.
Most people respond positively when they are treated in a genuine, courteous manner. Your auditor is paid to audit your organization, just like you are paid to do your job. The auditor did not target your charity, they are handed assignments. For whatever reason (and there may be some pretty good ones), your organization’s number came up. Upon their arrival, invite the auditor to have a cup of coffee, give a tour of the office, introduce them to relevant staff, show them their desk and the files, and then leave them to it. Oh yes, remember to breathe—deeply.
5. ‘Just the facts, ma’am, just the facts’
The auditor will be looking for specific things during the review and will ask lots of questions to make sure they have the whole picture. Genuinely and honestly answer the questions—no more, no less. Don’t play games, don’t try to hide things (they will be found out), and stop talking once the question has been answered. Remember, your auditor has been well trained in his or her job. They know what they are doing and usually have years of experience before they are sent out to do field audits.
6. Sit and wait.
Not literally, of course. You need to get on with your job, but make sure you are available. Likely the audit will start with an in-depth interview and then there will be lots of back and forth during the rest of the time. If you need to be out of the office, let the auditor know ahead of time so they can plan their work around your schedule. Just keep in mind that the longer it takes to get the information, the longer it takes to complete the audit.
7. Is it over already?
Finally, the day will come when your audit is finished. Although it may have felt like 100 days, it was likely only a few. Your auditor will meet with you at the end and give you the good (or not so good) news. There are four ways it can go. You can get a clean letter (you are good to go; very few organizations get this), an education letter (issues have been identified), a compliance letter (critical issues are identified), or a sanctions letter (serious compliance issues).
8. You’re almost done!
You will receive the official letter in the mail. Nothing in it should be a surprise. Be sure to review the documentation with the appropriate staff, develop necessary policies and procedures, and, where necessary, ensure that staff receive appropriate training. Furthermore, a responsible executive director who believes in accountability and transparency will share the letter with the entire board of directors. They, in turn, will discuss each issue and ensure that processes are in place to address the problems. Of course, this discussion should be recorded in the official minutes so that should you ever receive that dreaded phone call again, you will be prepared.
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Easy-to-follow checklists to help with the responsibilities of operating a registered charity can be found at: www.cra-arc.gc.ca/chrts-gvng/chrts/chcklsts/menu-eng.html.