ARCHIVED - About Us

Audits and Evaluations

Monetary Appraisal of Acquisitions

Findings and Recommendations

Procedures Aligned with the Legislation

The Canada Revenue Agency (CRA) requires that the FMV of a gift in kind be determined as of the date of the donation before an amount can be recorded on an official donation receipt. The CRA further recommends that donations with a value greater than $1,000 be appraised by a competent and qualified independent third party.

The Appraisals and Acquisition Branch had documented policies and procedures² for the appraisal of acquisitions as well as the issuance of tax receipts. These policies specified the requirements for the appraisals of the FMV of donations and required donations in kind to be appraised. The policy further specified that donations with a monetary value greater than $1,000 be appraised by an external party. The review of these policies and procedures demonstrated that they were effectively designed to be in compliance with the Canadian Income Tax Act and the Cultural Property Export and Import Act.

In addition, key controls in the acquisition process were effectively designed to ensure that appraisals were performed in accordance with relevant legislation. These key controls are discussed later in this audit report.

We also noted that LAC was in the process of establishing a common framework, the Whole of Society Model (WoSM), for the assessment and acquisition of documentary heritage. Management should ensure that the key controls identified through this audit are considered in the design of the WoSM and associated policy and operational instruments.

Key Controls and Supporting Documentation

Based on the results of the interviews, walkthroughs, and testing of a sample of acquisition files, the audit confirmed that LAC representatives have a solid understanding of the acquisition procedures in regards to monetary appraisals and issuance of tax receipts. In addition, acquisition procedures were available and easily accessible on LAC's intranet.

LAC also implemented a number of controls to ensure that monetary appraisals were performed in accordance with relevant legislation. Key controls identified through the audit included the following:

• Standard Contract (Deed of gift): The procedures required that LAC have legal title to the property, and actual custody of it, prior to resources being invested in the appraisal of the collection. A standard deed of gift needed to be signed by the donor and LAC prior to any work being conducted. The deed specified the terms and conditions of the donation and a description of the collection.
  
  
• Acquisition Proposal: In order to ensure that acquisitions were in compliance with LAC's mandate, the procedures required that archivists complete an Acquisition Proposal form. The acquisition proposal substantiated the relevancy of the acquisition and required the approval (signature) by the manager.
  
  
• Major Acquisitions Committee (MAC): The MAC had the mandate to review major acquisition proposals presented by archivists. Major acquisitions were defined as:
  • purchases with a value greater than $1,000; or
  • donations with a FMV greater than $50,000; or
  • acquisitions with a total acquisition value greater than $75,000.
    
    The MAC's membership consisted of directors general of all branches and was presided by the Director General of the Appraisal and Acquisitions Branch. In addition to approving major acquisitions, the MAC also had a monitoring role in regards to all acquisitions
• Appraisal: A monetary appraisal is required to substantiate the FMV of the donation. For donations with an estimated monetary value of less than $1,000, appraisals were performed internally. For donations with an estimated value greater than $1,000, the appraisal was completed by a third party. All donations with a FMV greater than $5,000 required certification by the CCPERB.
  
  
• Safeguarding of Donation Receipts: Donation receipts were maintained centrally and were only accessible to the Archival Appraisal and Acquisition Coordinator. All receipts required approval (signature) by the Deputy Head.

Based on the results of the review of the acquisition files, the audit team noted the following observations:

• All donation files reviewed contained a deed of gift.
• A strong description of the items acquired was available in the Acquisition Proposal form for all the files reviewed, however the Acquisition Proposal form was not consistently approved by the manager.
• For files where MAC approval was required, none of the files contained documented evidence of approval by the MAC.
• For the donation files appraised internally (donations under $1,000), all examined files, except for one, contained the required Preliminary Monetary Appraisal form (form ARC-501).
• For donation files appraised externally (donations over $1,000), all examined files contained an appropriate external evaluation report.
• For donations with a FMV over $5,000, all examined files, except for two, contained the required certification by CCPERB however for these two files, the CCPERB certification request had been sent but not received by LAC at the time of the audit, while the donation receipt had already been issued based on the NAAB evaluation.
• The retention of key supporting documentation was not consistent, as evidenced in the acquisition files. The current acquisition file structure made it very difficult to find documentation supporting key controls. Documents were filed in no specific order or logic and different donations relating to a specific collection were mixed within the same file.

Management should address the weaknesses noted above regarding the unsigned Acquisition Proposal forms and lack of evidence supporting MAC's decision to ensure that these key controls are consistently applied and documented. These controls ensure that acquisitions are aligned with LAC's mandate.

Furthermore, to maintain a qualified donee status under the Income Tax Act, public bodies must keep adequate books and records. On the basis of these observations, the CRA could determine that LAC does not comply with the Income Tax Act requirements in relation to its qualified donee status.

Reporting

LAC implemented a monitoring process for donations currently in the process of being appraised (active donations). Specifically, management implemented a report, known as the pipeline, which provided a summary of the status of the active donation files. However, in the course of the audit, we noted that the pipeline had not been updated on a consistent or timely basis, and that information on the overall status of donation receipts issued was not readily available. Furthermore, the information from the MIKAN system could not be reconciled to the pipeline, and therefore, we were not able to confirm the completeness of the donations.

Although LAC maintained a summary table of donation receipts issued, LAC was not able to provide the audit team with a detailed report to substantiate the donation receipts issued during the period under review. Representatives of the Appraisal and Acquisition Branch confirmed that these reports were not readily available and would require substantial manual intervention to prepare.

By not having the capacity to produce a detailed list of donations, LAC cannot efficiently monitor the issuance of donation receipts and ensure compliance with the Income Tax Act.

---

² Tax Appraisals and the Certification of Cultural Property - Policies and Procedures

Previous | Table of Contents | Next