Can a registered charity pay its directors for services they provide to the organization?

As a general rule, directors of a registered charity should not be paid simply for serving as a director — this reflects a long-standing principle, reinforced by CRA guidance and Ontario's approach to charitable trustees under the Charities Accounting Act, that people governing a charity do so as a matter of stewardship rather than for compensation. Directors can still be reimbursed for reasonable out-of-pocket expenses incurred on the charity's behalf without it being treated as payment for serving on the board.

Paying a director for genuinely separate services — for example, a director who is also an accountant doing the charity's bookkeeping, or a contractor completing renovation work — is possible in narrower circumstances, but it carries real risk if not handled carefully. CRA expects the arrangement to be at arm's length in substance: a documented need for the service, a market rate, proper board approval with the interested director not participating in that vote, and clear records showing the charity received genuine value.

Charities considering paying a director for anything beyond expense reimbursement should get advice before proceeding, since a poorly structured arrangement can be treated by CRA as an improper benefit to a director, which puts the charity's registration at risk.