Ethics and Canadian Charities
September 2011
Here is a case comment on Maréchaux v. The Queen that recently appeared in Valuation Law Review.
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Here is an article that appeared in Valuation Law Review entitled “Innovative Gifting Inc. and the House of the Good Shepherd, et al.” on the issue of enforcement of fundraising contracts. It is very important that charities obtain legal advice before entering into substantial fundraising contracts.
Here is a copy of The Valuation Law Review - Vol 17 Issue 2 September 2011 Taxation Decisions of The Canadian Institute of Chartered Business Valuators (CICBV). In this edition it discusses Marechaux, Lemberg, Lockie, Innovative Gifting and Russell and we have been able to reproduce the whole journal with the permission of the CICBV. The editor is Dennis Turnbull, CBV.
As noted on this blog in June of this year the Supreme Court of Canada denied leave to appeal in the case of F. Max E. Maréchaux v. Her Majesty the Queen
David Baines, a reporter for the Vancouver Sun, has written another article as part of a series entitled “CRA says charities operated for ‘no obvious charitable purpose’”.
I will be delivering with Guillermo Correa of RACI-Red Argentina para la Cooperación Internacional a workshop on capacity building at the CIVICUS World Assembly conference in Montreal looking at the Argentinean and Canadian examples.
Here are letters from the CRA on a private share donation transaction in which CRA revoked the status of the 4 registered charities involved.
August 2011
The Dept. of Finance has released some Legislative Proposals Relating to the ITA on August 16, 2011. These proposals deal with implementing the June 2011 budget proposals which include a number of proposals to prevent abuse of charities and RCAAAs.
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AFP will be putting on an Ethics & Accountability Workshop: “Weaving Ethics into Your Fundraising” on September 8 in Toronto. Here is more information
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Increasingly funders are interested in governance at charities. For a Canadian charity to receive funds from CIDA for the Partnerships with Canadians Branch such charity must show “must have sufficient experience, strong governance structures and demonstrate the support of Canadians”. If the organization cannot demonstrate good governance then CIDA will not even proceed to evaluate your application.
July 2011
Here is the Blumbergs Canadian Charity Law List - July 2011.
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Here is an short article in Macleans magazine entitled Buy, Sell, Donate.
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Here is Imagine Canada’s Statement on Compensation in the Charitable and Nonprofit Sector: http://www.imaginecanada.ca/files/www/en/positions/statement_compensation_07192011.pdf
June 2011
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Here is a great quote from Sam Younger, chief executive of the Charity Commission, that Canadian charities should think about.
Here are a couple of interesting blog postings notes entitled “Budget 2011 Cracks Down on Abusive Charities” and “Beware of tax shelter donation arrangements”.
F. Max E. Maréchaux, is a partner at the law firm of Miller Thomson LLP. According to Federal Court of Appeal decision “F. Max E. Maréchaux participated in a “leveraged donation” scheme. The essence of the scheme was that, for an expenditure of $30,000, he received a charitable donation tax receipt for $100,000, and claimed a tax credit of $44,218, a potential return on his outlay of nearly 50% in a matter of months. Very little of the money was retained by charities to advance their purposes.” Mr. Maréchaux had lost a decision at the Tax Court of Canada and his appeal to the Federal Court of Appeal was dismissed as “Mr Maréchaux had not made a “gift””. Now the Supreme Court of Canada has denied Mr. Maréchaux’s leave to appeal which results in the Federal Court of Appeal decision standing. According to the Trial Court “The Program was implemented on December 31, 2001, with 118 participants (“Participants”) and donations totalling approximately $18,305,000.”
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I will be giving a presentation to the CGA-Ontario on The Top Compliance Issues Facing Not For Profit Organizations and How to Deal with Them at the CGAO Not-for-Profit Symposium Flyer.
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In 2010 the UK government introduced measures dealing with “Payments to overseas bodies” by UK charities. The requirements seem common sense to me and I have reproduced them below. For Canadian charities interested in understanding their obligations when operating abroad may find CRA’s Guidance helpful at: http://www.globalphilanthropy.ca/index.php/blog/comments/cras_new_guidance_on_foreign_activities_by_canadian_charities/
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The UK has introduced in 2010 a “fit and proper persons test” for people involved with the management of charities that apply for Gift Aid. “Factors that may lead to HMRC deciding that a manager is not a fit and proper person include, but are not limited to, individuals: with a history of tax fraud; with a history of other fraudulent behaviour including misrepresentation and/or identity theft; for whom HMRC has knowledge of involvement in attacks against or abuse of tax repayment systems; barred from acting as a charity trustee by a charity regulator or Court, or being disqualified from acting as a company director”
According to CRA for 2010 there were claims on abusive charity gifting tax schemes of over $320 million. While a lot better than the 2006 numbers of 1.3 billion - it is still a significant problem.
May 2011
The Quebec Government has published a draft entitled “Charities - Governance and Best Management Practices”. They are requesting feedback by June 25, 2011.
Here are some of the upcoming FREE Charity Law Information Program (CLIP) webinars on appropriate receipting and fundraising with links to the registration pages that I will be delivering. The CLIP program of Capacity Builders is supported by a contribution from the Charities Partnership and Outreach Program of the Charities Directorate. There is no charge for these sessions at this time. You can register for any session by clicking the link. The short link for this page is: http://ow.ly/3jsBh
According to an article in the Ottawa Citizen on May 8, 2011 a Canadian charity that was recently revoked, was revoked because of involvement with terrorism. On globalphilanthropy.ca we noted on April 21, 2011 that the WORLD ISLAMIC CALL SOCIETY had been revoked although there was almost no details available as to why http://www.globalphilanthropy.ca/images/uploads/Canadian_Charities_Recently_Revoked_by_CRA_for_cause_-_April_2011.pdf The Ottawa Citizen article sheds quite a bit of light on the organization.
Reporter David Baines of the Vancouver Sun has written another article on Blake Bromley entitled “Vancouver ‘expert’ in charity law says CRA is targeting his clients”.
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While Canadians are debating whether there has been a drop in donations in Canada (I say not when you exclude reductions in abusive schemes) while others say perhaps a 5% drop in donations, there was a shocking article recently in the Chronicle of Philanthropy on US giving. First of all in Canada over 2/3 of all charity revenue is from government and only about 10% is from private donations and fundraising. In the US only about 1/3 of their revenue is from government leaving US charities far more vulnerable to fluctuations in giving. According to the article “In 2008, the IRS says, Americans wrote off $172.9-billion in charitable contributions, a 10.6-percent drop from 2007. Its estimates for 2009, released this month, project a 14-percent drop, to $148.6-billion.” A 10 percent drop followed by a 14 percent drop - that is huge and the fact that US charities are far more reliant on funding even more devastating. The US was hit with a triple storm of decreasing public confidence in charities, bad economic times, and increased need. In Canada we just jumped onto the chicken little bandwagon of the sky is falling when in fact it was not - government funding was increasing and donations were stable - yes need was greater and it would be better to get more funding for these important needs but when we try to exaggerate the fiscal situation in Canada for charities it undercuts the credibility of the charitable sector.
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It looks like the Vancouver Sun is doing another series on Blake Bromley and his use of charities. The article is entitled “Charitable donation expert says he heeds law, not CRA ‘technical rulings”. I think there are a few concerns with Blake Bromley’s arguments some of which I will refer to below.
April 2011
Here is the Blumbergs Canadian Charity Law List for April 2011 - lots of interesting legal and ethical issues in the Canada charity sector and elsewhere.
