Change to Charity Intelligence's Transparency Metric

Charity Intelligence's transparency metric will change to account for how "transparent" a charity's audited financial statements are. This change will take effect May 1, 2027. It will affect audited financial statements prepared and released after May 1, 2027.

A charity's transparency score will decrease by 1 if the audited financial statements lack full information but instead require a user to access different documents. Charity Intelligence feels that audited financial statements should be a full source of information. Donors shouldn't have to wait and access the T3010 annual filing to fill in the blanks.

This change reflects the purpose of financial statements; "financial statements purpose is to meet the common information needs of external users" (AcSB Accounting Standards for Canadian Non-Profits 1001:01). And further more, "the objective of financial statements is to communicate information that is useful to ... contributors .. in making their resource allocation decisions and/or assessing management stewardship." (Accounting Standard Objective 1001.12)

Examples could include:

Reporting revenues by major sources:

Not reporting government funding

Not disclosing international donations

Reporting spending by activities:

Not reporting administrative costs

Not reporting fundraising costs

Not reporting grants or distributions to other charities separately from total program spending 

The figures reported in the audited financial statements should reconcile with the T3010 filings.

Ideally, amortization and interest costs are reported as separate line items on the income statement. Electronic filing is also a best practice. Large charities with over $1 million in total revenues should file their annual returns electronically. Mailing in annual returns puts a huge cost on the CRA Charities Directorate, it causes delays in disclosing information, and greater chance of typos. In contrast, electronic filing is low-cost, faster and better data quality. Charity Intelligence will note those charities that file manually.  

We believe this change will improve disclosure and will give donors better information.

Charity Intelligence recognizes that change takes time. We have informed charities of this upcoming policy change in March 2025. We hope two years notice is sufficient.

And every auditor's letter says, "a charity's management is responsibile for the presentation of its financial statements." Canadian charities are empowered to improve transparency. 

For reference:

Charity Intelligence's policy change reflects Canadian Accounting Standards' Disclosure of Revenue Recognition, 

4411.22 "An organization shall disclose its contributions by major source.

4411.26 Information about the source of contributions will help financial statement users to assess the organization's economic relationship with other entities ... The sources would be grouped by major categories such as

• different levels of government
• foundations
• corporate contributions
• individuals 
• and other not-for-profit organizations...."

Charity Intelligence methods for scoring financial transparency

Charity Intelligence video 5 Best Practices for Charity's Audited Financial Statements, YouTube, November 2022