Revenue Canada has recently revised its record retention requirements for electronically stored information. Employers using computerized systems to generate records are now required to keep payroll and other information in digital form (e.g. on diskette or tape). Employers must keep these records even if a third party generates them and even if a printed copy of the record is retained. Records must generally be held for a maximum of six years after the current taxation year (see Volume III, Issue 4, pg. 18).

This new record retention requirement creates a number of issues for not-for-profit organizations. Firstly, it is no longer acceptable for organizations with computerized accounting systems to just maintain a printed copy of the records for the year. The digital copy must be retained together with a copy of the application software (i.e. the actual program) that generated the records. This requirement ensures that in the future it will be possible to read the electronically stored data. Therefore, if you switch accounting programs at some point you must keep the program disks for your old accounting package.

Technically, organizations using an outside payroll service such as Ceridian (formerly Comcheq) and ADP must now request these third parties to give them a copy of the records in electronic format together with the electronic source code. We can't imagine that these large service bureaus will be eager to comply with this request. In fact, we suspect that an agreement to waive this requirement will be reached with Revenue Canada before long.