Ethics and Canadian Charities
August 2012
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.(JavaScript must be enabled to view this email address) on 08/21/2012 |
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Ethics and Canadian Charities
In the US, unlike Canada, churches are not required to file the annual Form 990. The Economist just published an article ““The Catholic Church in America: Earthly concerns - The Catholic church is as big as any company in America. Bankruptcy cases have shed some light on its finances and their mismanagement” The article paints an unflattering picture of the Catholic church based on various bankruptcy filings. In Canada all churches file, along with other charities, the T3010 Registered Charity Information Return and you can read about the finances of individuals churches at the CRA website or charityfocus.ca While the T3010 is not nearly as detailed as the Form 990 filed by US charities, at least it provides some basic information on every Canadian charity. We have 4,144 Catholic parishes and chapels listed. 1,059 of them in Ontario. I have been arguing for years that we need to look to the US and UK for ideas to improve our transparency. Unfortunately, US transparency when it comes to churches is lacking.
In July 2011 the CRA imposed a penalty of $174,228.08 on the Reimer Express Foundation Inc, which is a Canadian private foundation based in Winnipeg. The penalties related to certain payments that CRA characterizes as gifts to non-qualified donees. Paul Waldie covered the Foundation in an article in the Globe and Mail entitled “Improper giving prompts tax trouble for trucking magnate’s Christian charity”. Here are the letters from the Charities Directorate of CRA to Reimer Express Foundation Inc. re: penalties for gifts to non-qualified donees.
The Charities Directorate of the CRA has posted a page on CIDA’s Sahel Crisis Matching Fund.
The Canadian government is launching a matching program for donations made by Canadians to organizations from August 7 - September 30, 2012. CIDA notes: “An estimated 18.7 million people in the Sahel region in West Africa are affected by a food and nutrition crisis due to drought, sporadic rains, poor harvests, soaring food prices and widespread displacement. As a result, more than 1 million children under the age of five are at risk of dying from severe acute malnutrition. Canada, through CIDA, is helping to meet vital humanitarian needs in the Sahel, and as part of its efforts, has created the Sahel Crisis Matching Fund. For every eligible dollar donated by individual Canadians to registered Canadian charities, Canada will set aside one dollar for the Sahel Crisis Matching Fund. CIDA will allocate these funds to established Canadian and international humanitarian organizations for humanitarian assistance efforts that benefit the people most affected by the crisis.” Organizations that receive a donation will not receive directly a matching amount but those organizations will advise CIDA of the funds collected and then CIDA will have a process to determine which organizations receive the funds. Organizations that are interested in potentially applying for those funds should review CIDA’s “Guidelines for Emergency Humanitarian Assistance Project Proposals and Reports”.
Posted by
.(JavaScript must be enabled to view this email address) on 08/03/2012 |
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Avoiding 'Charity' Scams
The Standing Committee on Finance Pre-Budget submission deadline for the 2013 Canadian Federal Budget has passed. I put in a brief submission with a number of recommendations including: Recommendations: 1) We need better governance in the charity sector through education and training to ensure that there is appropriate stewardship of the resources that charities have. 2) We need more transparency in the charitable sector through a. changes to the Income Act to allow CRA to disclose more about registered charities and also non-profits; b. an improved T3010 Registered Charity Information Return which provides greater details on charities, especially large charities, as we have seen in the UK and US improving their charity sector’s transparency over the last few years; and c. Canadians need to encouraged to be more knowledgeable and aware in their giving and to be able to carefully select worthy charities and avoid scams; 3) We need to reduce the amount of abuse of charities by a relatively small number of people a. by monitoring the implementation of the “ineligible individual” rules, and if these rules are not sufficiently effective in removing those who abuse charities, or their beneficiaries, then considering additional measures.; and b. making greater use of police forces to investigate abuse of charities and establishing a dedicated police unit that focuses on complicated schemes involving charity fraud. 4) We don’t need more tax incentives that will disproportionately benefit a few charities, including closely held private foundations, and some very wealthy individuals. Rather we should make small changes to the disbursement quota to increase the payout from 3.5% to 5%, so hundreds of millions of dollars can be used for charitable programming that would have been otherwise an unauthorized encroachment on capital.
July 2012
In Edwards v. The Queen, 2012 TCC 264 (July 23, 2012) the Tax Court dealt with whether it would allow a further delay in hearing a test case related to what CRA terms an abusive gifting tax scheme. This case deals with “ParkLane Charitable Donation Program.”
If you take a look at a Canadian registered charity on the CRA Charities Directorate database you will note the option to click “Quick View” and it provides a better user interface to review certain information on the T3010.
Posted by
.(JavaScript must be enabled to view this email address) on 07/19/2012 |
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Here is an article in the Globe and Mail entitled “Ontario universities promise funding guide amid Carleton donor backlash” which again discusses strings attached to major gifts. In the article it discusses how some universities will come together to discuss gift acceptance issues so that some of these more controversial arrangements can be avoided. Every university should have a gift acceptance policy. It should also have up to date gifting agreements that reflect that policy. The gift acceptance policy and gift agreements should be carefully considered to reflect the values and concerns of the university and its stakeholders. Most gift acceptance policies I see from major Canadian charities are largely cut and paste jobs that are long on stating the obvious (‘we accept cash gifts’) and short on dealing with some of the difficult issues that get charities into trouble.
Here is a copy of a letter from the Charities Directorate to the Hindu Temple Society of Canada. It is interesting for a number of reasons in that it discusses penalties for making gifts to non-qualified donees and the imposition of both a compliance agreement and a penalty. Furthermore, the letters discuss funding by the Hindu Temple Society of Canada of the Tamils Rehabilitation Organization (TRO) and the issue of the involvement of Canadian charities in political activities such as Tamil independence in Sri Lanka.
Posted by
.(JavaScript must be enabled to view this email address) on 07/19/2012 |
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Lord Hodgson has now published the report of his Review, and it has been laid before Parliament. It is entitled “Trusted and Independent: Giving charity back to charities - Review of the Charities Act 2006”. There is also a report on “Public perceptions of charity – A report for the Charities Act 2006 review”. These documents raise a number of interesting issues with respect to the regulation of charities in the UK.
Posted by
.(JavaScript must be enabled to view this email address) on 07/16/2012 |
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A UK law firm Farrer & Co recently published an article entitled “Tax reputation for high-profile individuals and corporations - being ‘legal’ is not enough”. Although it is a UK article it provides some important points for Canadians who are looking at schemes that are “too good to be true”. I have blogged about what CRA terms “abusive charity gifting tax schemes” and other inappropriate schemes involving Canadian charities. It is important that taxpayers not only consider the tremendous financial cost of investing in such schemes but also the reputational costs.
With the recent release of two Canadian aid workers who were working for the Norwegian Refugee Council there has been discussion about whether Canadian charities or aid workers should work in places that are in the midst of conflict. Humanitarian workers help save many lives every year - it would be unfortunate if they stopped doing this important work because of terrorists, bandits, pirates and criminals. That being said, charities need to be aware of the risks, provide training to their employees and volunteers, plan for various contingencies, have necessary equipment and personnel in the field and in some cases, unfortunately it may be necessary for a charity to temporarily or permanently cease operations in a certain area.
Posted by
.(JavaScript must be enabled to view this email address) on 07/02/2012 |
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Canada has sanctions against a number of countries. These countries include: Burma / Myanmar, Belarus, Cote d’Ivoire, Democratic Republic of the Congo, Eritrea, Iran, Iraq, Lebanon, Libya, Liberia, North Korea, Sierra Leone, Somalia, Sudan, Syria, Tunisia, Egypt and Zimbabwe. Canadian charities operating abroad or dealing with people in these countries should review the sanctions to ensure that their activities are not violating the sanctions.
Posted by
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Here is some great advice on some of the advantages and dangers of charities using social media as well as what you can do to mitigate such risk. First of all I should admit that I did not even know that there was a Charity Commission for Northern Ireland! Second as social media is used more often by Canadian charities they should ensure, just as with other communications, that it is legally compliant and enhances the reputation of the charity.
June 2012
The CRA recently released a press release that “Stéphane Saintonge, one of the promoters of an art-donation scheme to the municipality of Larouche in the Saguenay region, pleaded guilty to a tax evasion charge today before the Court of Quebec in Montréal. He was fined $840,000.”
Posted by
.(JavaScript must be enabled to view this email address) on 06/27/2012 |
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According to the Globe and Mail “An environmental charity at the centre of controversy surrounding political activism and foreign donations is taking the rare step of releasing a detailed account of grant recipients and international donors in an effort to stem attacks by Conservative politicians.” It will be interesting to see how much this disclosure adds to the disclosure that TIDES US has already made which I discussed in March.
Posted by
.(JavaScript must be enabled to view this email address) on 06/26/2012 |
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The CBC and various newspapers have articles on abuse of children by volunteers involved with Scouts Canada. CBC notes “A review of how Scouts Canada handled allegations of sexual abuse by its group leaders has found that dozens of cases reported to the organization were not passed on to the police. Despite past assurances by Scouts Canada that it had informed police about “every record of abuse” within its ranks, the audit has found at least 65 instances where that did not happen.”
Posted by
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The New York Times discusses the conviction of Msgr. William J. Lynn, a former cardinal’s aide, in Philadelphia and describes it as “becoming the first senior official of the Roman Catholic Church in the United States convicted of covering up sexual abuses by priests under his supervision.”
We have noted for a number of years that almost $500 million in “false” receipts have been issued. These are fraudulent receipts - no complicated scheme is involved and typically is no donation at all to a charity. (These are in addition to the approximate $6 billion in “abusive charity gifting tax schemes”) Typically, the taxpayer paid 10% of the donation to a tax preparer who issued them a receipt. CRA has found over 100,000 tax returns with such false receipts. Here is an example of one case involving Mr. James O. Grossett.
Here is the Blumbergs’ Canadian Charity Law List - June 2012
Posted by
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The Charity Finance Group is a group of charity finance managers based in the UK. They prepared recently a “Guide on Charity Fraud: A guide for the trustees and managers of charities”. Canadian charities may find the free guide helpful in preventing and detecting fraud. It is interesting to see the large number of organizations involved in producing the guide.
Andy Levy-Ajzenkopf of CharityVillage recently wrote an article “Don’t be a nonprofit party to terror” which discusses regulatory and risk management issues for charities in the area of preventing terrorism.
The CRA has posted another short video for donors on YouTube. In 3 1/2 minutes is covers quite a lot.
A few weeks ago CRA revoked the charitable status of an environmental group for involvement in an abusive gifting tax scheme. Sorry to disappoint some but no political activities here.
Here are the letters from CRA to HEDAC (Help Eliminate Disease and Addiction Canada) which explain why HEDAC was revoked for cause.
May 2012
The Standing Committee on Finance dealt with the charity provisions in the 2012 Federal Budget on May 28, 2012 from approximately 7 p.m. to 9 pm. The subject matter was “Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures”. Despite the title the meeting was interesting - no I don’t mean interesting for me from a charity geek perspective but actually could be interesting for any regular citizen. There was some heated discussion about the role of charities. You had Ethical Oil, the west coast blogger Vivian Krause, the CEO of Imagine Canada, Dennis Howlett from Canadians for Tax Fairness, the Canadian Federation of Independent Business and myself. (Also on non-charity matters, not admitting that such a thing exists, there were reps from PDAC which represents mining companies and the Grain Growers of Canada).
Posted by
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Today I will be presenting to the Ontario Hospital Association Conference on “Top legal compliance concerns for Canadian registered charities” and a second presentation on “Ethical Decision-Making in the Not-For-Profit Sector”. It was a busy day - also presented to the AFP Fundraising Day on the CRA’s Guidance on Fundraising.
The Globe and Mail had an article today entitled “Noose tightens around donation tax schemes”. It discusses litigation around some schemes that the CRA characterizes as “abusive gifting tax schemes”.
The Office of the Parliamentary Budget Officer has released a very interesting report entitled “Cost Estimates of Proposed Tax Measures to Encourage Charitable Donations of Assets”. It was written by Stephen Tapp. It looks at the effect of increasing certain tax incentives of donations of private shares, real estate and ecologically sensitive land. There are lots of interesting nuggets in the study that go far beyond just the issue of tax incentives for these measures.
Here is the transcript from the Standing Committee on Finance on May 8, 2012. 6 witnesses, lots of questions. I was one of the witnesses.
