The CRA recommends adopting the following types of measures to direct and control the use of a charity's resources:
• create a written agreement and implement its terms and provisions
• communicate a clear, complete, and detailed description of the activity to the intermediary;
• monitor and supervise the activity;
• provide clear, complete, and detailed instructions to the intermediary on an ongoing basis;
• arrange for the intermediary to keep the charity's funds separate from its own, and to keep separate books and records.
In order for such arrangements to be considered acceptable devotion of the charity's resources to its "own charitable activities” the following criteria should be met:
• the charity has obtained reasonable assurance before entering into agreements with individuals or other organizations that they are able to deliver the services required by the charity (by virtue of their reputation, expertise, years of experience, etc.);
• all expenditures will further the Canadian charity's formal purposes and constitutes charitable activities that the Canadian charity carries on itself;
• an adequate written agreement is in place;
• the charity provides periodic, specific instructions to individuals or organizations
as and when appropriate;
• the charity regularly monitors the progress of the project or program and can provide satisfactory evidence of this to the Charity;
• where appropriate, the charity makes periodic payments on the basis of this monitoring and maintains the right to discontinue payments at any time if it is not satisfied.
A charity must record all steps taken to exercise direction and control as part of its books and records, to allow the CRA to verify that the charity's funds have been spent on its activities. Therefore, it is important that the intermediary, in conducting the charitable activities on behalf of the Organization, shall do the following:
• keep copies of any letters, documentations related to activities, which include applicant's file #, application for assistance and documentation attached to it;
• report and letter that recommend an application for assistance;
• record the detail of each transaction including the date, name and amount provided to each recipient;
• keep copies invoices, receipts and proof of payment;
• provide the Organization complete records of all transactions.