Release Date
December 3, 1997 (Revised April 28, 2009)

Reference Number
CPC - 012

Subject
Out of pocket expenses - Whether an official donation receipt can be issued in place of a cheque to reimburse volunteers for expenses incurred on behalf of the charity

Purpose
To clarify the Directorate's policy regarding expenses incurred by volunteers on behalf of a registered charity.

Commentary

1. A charity cannot simply issue an official donation receipt to a volunteer for the amount of the expenses, in lieu of reimbursing the expenses.

2. A charity can reimburse a volunteer for the expenses incurred on behalf of the charity and later accept the return of the payment as a gift, provided that the amount is returned voluntarily.

3. The parties are encouraged to proceed by way of an exchange of cheques, that is, the charity issues a cheque to the volunteer covering the costs incurred, and the volunteer then writes a cheque to the charity for an equivalent or lesser amount. By using the cheque-exchange method, a charity will have proper financial records justifying the receipt it issues to the volunteer and the volunteer can document that he or she has transferred property to the charity.

4. However, provided the volunteer has a right to reimbursement from the registered charity for the expenses incurred, the charity may treat the right to reimbursement as a gift in kind and issue a receipt for income tax purposes.

   When a registered charity wants to issue a receipt for income tax purposes to a volunteer in lieu of reimbursement, it should have a written direction from the volunteer. The written direction should confirm the right to reimbursement and direct the registered charity to issue a receipt rather than provide reimbursement. The following is an example of acceptable wording for such a direction:

   I _______________________ direct that the funds to which I am entitled by way of reimbursement for _______________, and would otherwise be forwarded to me by cash or cheque, be transferred to ______________ as my gift.

   If the charity issues a receipt for income tax purposes upon the transfer of a right to reimbursement, it should report the amount of the gift on the Registered Charity Information Return (Form T3010) both as revenue, and as an expenditure.

5. A charity should also have a policy in place on reimbursing volunteers. The policy should specify both the type of expenditures the charity is prepared to repay (e.g., for materials purchased for the use on a charitable activity or for reasonable accommodation if the volunteer is travelling on the charity's business), and appropriate procedures to document the volunteers' payments, such as submitting credit-card slips. Such a policy enables the charity to demonstrate it is controlling the use of its resources for charitable purposes.

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