Avoiding 'Charity' Scams

Report on combatting abuse of non-profit organizations for terrorism-need transparency in NPO sector

Here is an interesting report from the Financial Action Task Force (FATF) on COMBATING THE ABUSE OF NON-PROFIT ORGANISATIONS International Best Practices from 2002.  It highlights the importance of transparency in non-profit sectors and financial management in thwarting abuse of charities.

Sample Fraud Avoidance Policy for a Canadian non-profit organization

Here is a sample fraud policy from the UK Charity Finance Directors’ Group.  While Canadian non-profits and charities do not need to have a fraud avoidance policy this example may be of use to some and certainly being aware of the content is advisable.  It is estimated that fraud costs Canadian non-profits at least 5% of revenue. 

Preventing fraud in Canadian Not for Profit Organizations

Here is an interesting booklet from the CSAE and RBC on Preventing_fraud_in_Not_for_Profit_Organizations.pdf

Recent presentations that I have delivered for the Charity Law Information Program (CLIP)

Here are copies of the handouts for a number of recent presentations that I have delivered for the Charity Law Information Program (CLIP)

Gifts of Canadian Cultural Property to Canadian charities

Cultural property is one type of gift that a donor can make to a charity.  Certain certified cultural property has certain additional benefits associated with its donation. 

CRA’s Fundraising Guidelines –Legal, Ethical and Practical Issues -AFP GTA Congress 2009

Here is a copy of my presentation CRA’s Fundraising Guidelines –Legal, Ethical and Practical Issues A presentation to the Association of Fundraising Professionals (AFP) GTA Congress 2009 in Toronto

The Offord Group - Perspectives on Canadian fundraising - article on CRA Guidance on Fundraising

An article I wrote entitled “CRA Guidance on Fundraising: AN OPPORTUNITY TO IMPROVE FUNDRAISING PRACTICES IN THE SECTOR” was published in PERSPECTIVES ON CANADIAN PHILANTHROPY by the Offord Group.  The publication can be downloaded from http://www.theoffordgroup.com/

When should a Canadian charity not issue a “official donation receipt” (tax receipt)?

I am often asked “When should a Canadian charity not issue a “official donation receipt” (tax receipt)?”  First of all Canadian charities do not have to issue tax receipts - however, if they are going to issue official donation receipts, commonly known as tax receipts, then the registered charity must ensure that it is only issuing the receipt for a “gift” and subtracting any “advantage” that the donor may receive. If in doubt call CRA or contact a charity lawyer.  Here is a list of transactions that generally do not result in a tax receipt being issued. 

Interaction Forum 2009 – the learnings of a Canadian charity lawyer in Washington, D.C.

I recently attended the Interaction Forum held in Washington, D.C. on July 6-9, 2009.  The Interaction Forum is the largest gathering of US ngos involved with development.  I met some very interesting people and learned quite a lot.  Here are some of my learnings from the Interaction Forum ...

How does a Canadian registered charity know the value of a pharmaceutical donation for development?

Valuation is complicated but don’t rely on the donor to tell you the value or use some optimistic number.  If a charity provides an official donation receipt for a donation of pharmaceuticals to a donor that charity is obliged to determine the fair market value.  If you can order similar pharmaceuticals internationally at 1% of the cost it is difficult legally (and perhaps unethical) to claim a far higher Canadian value or “wholesale” value in Canada.  This can result in a charity losing its charitable status. You might find The International Drug Price Indicator Guide helpful http://erc.msh.org/dmpguide/index.cfm?search_cat=yes&display=yes&module=dmp&language=English&year=2008  Here is the print version of the International Drug Price Indicator Guide. http://erc.msh.org/dmpguide/pdf/DrugPriceGuide_2008_en.pdf

Nantel, M. et al. v. The Queen (TCC) - Tax Court of Canada sides with CRA on valuation of art

You can find the Nantel v. The Queen (TCC) decision in French at http://decision.tcc-cci.gc.ca/fr/2009/2009cci599/2009cci599.html  According to the headnote it involved the valuation of a donation to a charity of a number of pieces of art that were bought by the donor about 10 years before the donation to a charity.  CRA disputed the donors valuation and ultimately brought in their own valuator.  Court had problems with two valuators brought in by the donor and court accepted the valuation by the CRA’s valuator which was approximately 1/6 of the donor’s valuators’ opinion. 

Interesting article on Jewish ethical perspectives on taxation and charity compliance

An article entitled Jewish Ethical Perspective to American Taxation by Kenneth H. Ryesky provides a Jewish law perspective on the US tax system.  Many of the points made here would be equally applicable to the Canadian tax and registered charity system.  It is a heavily footnoted and well written article. I like the conclusion “If practiced and applied properly, Jewish law has a very salutary effect upon taxation ethics and the welfare of the nation. But if Jewish children do not learn taxation ethics through the words and actions of their parents, teachers and rabbis, then they may well hear discourses on Jewish taxation ethics from Gentile judges in secular courtrooms.”

CRA’s Guidance Fundraising by Registered Charities - Amalgamated into One Document

CRA’s Guidance “Fundraising by Registered Charities” is in two separate documents namely the main guidance at http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-028-eng.html and http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-028-ddn-eng.html (entitled Additional information on Guidance CPS-028, Fundraising by Registered Charities). These documents are hyperlinked together and you can go back and forth between the documents to obtain all the information.  For those who find it more convenient CLIP has combined the two documents in this one document and inserted the content of the “Additional Information” directly next to the part of the the Guidance it is referring to. A reader can using this document read the guidance from beginning to end. As well it is in PDF format to make it easier for some to download to a laptop and review when they have time or to place comments or mark up. We have also increased the font size to make it easier for some to read.CRA’s_Guidance_Fundraising_by_Registered_Charities.pdf

Maréchaux, F.M.E. v. The Queen (TCC) - leveraged donation scheme nixed by Tax Court of Canada

In Maréchaux, F.M.E. v. The Queen the case revolved around whether F. Max E. Maréchaux, was entitled to a charitable donation tax credit.  Maréchaux is a lawyer at the law firm Miller Thomson LLP. http://www.millerthomson.com/index.cfm?cm=Employee&ce=details&primaryKey=16425  CRA had disallowed the donation claiming it was not a gift.  The appeal which relates to the 2001 taxation year and the tax court dismissed his appeal with costs and ruled for CRA. 

Are charitable donations in Canada down in 2008?  Depends how you define donation/legitimate charity

According to Statistics Canada total charitable donations in 2007 were $8,648,660,000 ($8.6Billion) and in 2008 $8,189,280,000 ($8.1B).  I am not great at math but that seems to indicate a drop of about $450 million dollars.  That is only part of the story.

Russel v. Queen - Tax Court of Canada crushes abusive tax gifting schemes

Russel is an art donation case.  However, it is more than that.  It might be the beginning of the end of the abusive charity gifting tax shelters in Canada.

New UK Charity Commission online toolkit to help trustees manage risks to their charity

The first chapter of the online toolkit covers charities and terrorism.  The next chapters will deal with Safeguarding charity funds; Safeguarding charities – people, property, reputation; and a case study archive (good practice examples from the sector for all chapters) and other sources of help.  http://www.charitycommission.gov.uk/investigations/toolkitintro.asp

Ontario PGT bulletin entitled Charitable Fundraising: Tips for Directors and Trustees.

The Ontario Public Guardian and Trustee has produced a charity bulletin entitled Charitable Fundraising: Tips for Directors and Trustees.  In that bulletin they discuss fundraising requirements for charities that operate in Ontario. 

Donation from shady donor can be costly to charity

Interesting article entitled Charities Face Greater Threat From Ponzi Schemes Than Lost Investments  The long and the short is that a charity that received a donation from a person who had obtained those funds either illicitly or the return on an investment scheme that was a ponzi scheme, can be required to return the funds, even if they have already been spent on a good program and have been receipted for tax purposes.

Read more at: http://www.huffingtonpost.com/david-donell/charities-face-greater-th_b_223088.html

What role do the provinces play in regulation of charities in Canada?

Here is a good page of links on the CRA website entitled “What role do provincial and territorial governments play in the regulation of charities?”  http://www.cra-arc.gc.ca/chrts-gvng/dnrs/rgltn/menu-eng.html
Also see “Constitutional Jurisdiction Over Charities” at http://www.carters.ca/pub/book/2008/halsbury08.pdf

Strengthening Governance, Ethical Standards and Financial Controls Presentation - CLIP

Here is the Charity Law Information Program (CLIP) presentation Strengthening Governance, Ethical Standards and Financial Controls

http://www.capacitybuilders.ca/files/resources/Strengthening_Governance__Ethical_Standards_and_Financial_Controls_1256914425.pdf

Warren Buffett on taxes and philanthropy

“Buffett says the rich should give back both in taxes and philanthropy.
“They may think they did it all by themselves, but the society has done an awful lot for them,” he says. “So you ought to have a taxation system, but also a personal value system where a lot of that goes back to the people who got the short straws in life.” “

The whole article is at: http://moneynews.newsmax.com/streettalk/warren_buffett/2009/10/30/279371.html

Charities Back on Track 2008-09 - UK report details problems with some UK charities

The UK Charity Commission has published an interesting report entitled Charities Back on Track 2008-09 which looks at various investigations involving UK charities and “financial mismanagement, trustee duties and responsibilities, vulnerable beneficiaries, and inappropriate political activities and campaigning.”  The number of serious incidents has increased - perhaps an indication of better reporting rather than increased misbehaviour.  As in Canada it is only a small number of chariites who are comitting serious misconduct - however, the damage that those few charities can cause to the sector can be substantial. 

New OECD handbook boosts anti-money laundering efforts and helpful for Canadian charities

The OECD Money Laundering Awareness Handbook for Tax Examiners and Tax Auditors can be found at:
http://www.oecd.org/document/46/0,3343,en_2649_33767_43841326_1_1_1_1,00.html

Banyan Tree Foundation affidavit by Vern Krishna makes interesting reading

Vern Krishna, a very respected Canadian tax lawyer, a few months ago provided an interesting affidavit on the lawsuit against Fraser Milner Casgrain and others with respect to the Banyan Tree Foundation at http://www.classactionlaw.ca/content/claims/Rochester/Supplementary%20Motion%20Record%20re%20Vern%20Krishna%20Affidavit.pdf  All allegations have yet to be proved in court

The Do No Harm Handbook - a useful tool to analyze the impact of humanitarian assistance on conflict

Any humanitarian relief organization that will operate in a conflict or post-conflict area should review “The Do No Harm Handbook (The Framework for Analyzing the Impact of Assistance on Conflict) which is located at: “http://www.cdainc.com/dnh/docs/DoNoHarmHandbook.pdf

Fundraising by Canadian registered charities

CRA in June 2009 released its Guidance on Fundraising by Canadian charities.  You can see the document in English at:  http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-028-eng.html and in French at:
http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-028-fra.html 

Holy Alpha and Omega Church of Toronto - PartII - CRA wins case on injunction, direction and control

In an earlier blog (http://www.globalphilanthropy.ca/index.php/blog/comments/holy_alpha_and_omega_church_of_toronto_case_-_fraudulent_tax_receipts/) I had noted the case of Holy Alpha and Omega Church of Toronto.  The Federal Court of Appeal heard the matter in September 2009 and here is the decision http://decisions.fca-caf.gc.ca/en/2009/2009fca265/2009fca265.html  The case involved a charity that CRA alleged was not complying with a number of requirements for a registered charity including but not limited to:  they did not maintain adequate books and records;  they did not have an agreement with a foreign intermediary over substantial amounts of funds sent to Ghana and therefore could not show that they had “direction and control” over their own resources; and they did not maintain proper control over tax receipts and a large number were missing.

Preparing your Canadian Registered Charity for a CRA Audit

If you anticipate that your charity is going to be audited by the Charities Directorate of CRA you may wish to review my article Canada Revenue Agency (CRA) Audits and Canadian Registered Charities at http://www.globalphilanthropy.ca/images/uploads/Canadian_Charities_and_Audits_by_the_Canada_Revenue_Agency.pdf  Here is a copy of an example of a Required Information and Documentation Letter from CRA which gives you an idea of some of the information that the CRA may initially request.

Canadian charities and fundraising contracts - factors to consider before signing

The Ontario Public Guardian and Trustee has produced a charity bulletin entitled Charitable Fundraising: Tips for Directors and Trustees.  In that bulletin they list in “Appendix A: Factors to Consider Before Signing a Fundraising Contract”.