Globe and Mail article “Are charities taking advantage of the urge to help Japan?” - my thoughts.

March 18, 2011 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, Global Giving, Ethics and Canadian Charities

There was an article in the Globe and Mail entitled “Are charities taking advantage of the urge to help Japan?”  I think that this article misses a number of very important points.  I am not sure why the Globe and Mail decided to interview former hedge fund people who are in New York as to whether there was need in Japan for donations and to give their views greater prominence than some of the best charities in this country who have affiliates in Japan that are directly involved with the disaster.

Here is my comment on the Globe and Mail article this morning that I posted on the Globe and Mail site.

“I am surprised to say this but I am more in agreement with Rex Murphy’s comments on The National last night and the I find the premise of this article wrong. Japan had the biggest ever recorded earthquake in its history, then a terrible Tsunami that wiped whole cities away and then a potential nuclear disaster requiring evacuations of big parts of the country. Any one of those disasters by itself could have paralyzed a country. When it was being reported that initially that 300 people had died the international aid groups said we don’t think we need to get involved and they are better at assisting in places that are poor, don’t have infrastructure etc. When a few days in it appeared that perhaps 25,000 people may have died, millions are displaced, the Japanese government is not capable (nor could any government be capable) of handling this disaster. The danger is that the people of Japan will think that they are alone – also g-d forbid Canada, a wealth country with well developed infrastructure, ever has a catastrophe like this the world will stand by and do nothing. The amounts raised in Canada are comparatively small. The amount cited by World Vision is far less than 1% of its annual budget. If you want to know how to make a difference with your charitable dollars you can read a number of articles at my website http://www.globalphilanthropy.ca

Here are some more specific comments on the article:

The Globe and Mail article quotes a US organization which is legally The Clear Fund but calls itself GiveWell “There are organizations that are using the Japan situation to raise funds, while kind of putting it in the fine print that [the money] might not go there,”.  The article then cites the World Vision Canada website ““In cases where donations exceed what is needed or where local conditions prevent program implementation, World Vision Canada will redirect funds to similar activities to help needy people,” the disclaimer says.” 

World Vision Canada as well as other organizations are just following a best practice suggested by various regulatory authorities such as CRA, the UK Charity Commission and the Ontario Public Guardian and Trustee which has jurisdiction over World Vision Canada because it is based in Ontario.

Here is what the OPGT has to say with my emphasis:
http://www.attorneygeneral.jus.gov.on.ca/english/family/pgt/charbullet/bulletin-8.asp

Special Purpose Fundraising
Charities sometimes raise funds for a particular purpose or project and sometimes donors give money to charity for a special purpose. Donations received for a specific purpose or project and donor directed funds must be used only for the stated purpose and must be kept separate from the charity’s operating funds.

If a charity is fundraising for a specific purpose it is a good idea to provide an alternative purpose for which funds can be used.  That way, if the original purpose cannot be carried out or if there are surplus funds, the money can be used for an alternate project. The alternative purpose should be communicated to potential donors when funds are solicited. If fundraising materials do not indicate an alternate use for special purpose funds, the charity will have to apply to the court to use the funds for a similar purpose or may be required to return unused funds to identifiable donors. Clear communication with donors during the fundraising campaign about all contingencies will help avoid problems.

Charities conducting special purpose campaigns should retain the records concerning the fundraising campaign and in particular the information about what the public was told about how the money would be spent. Copies of fundraising brochures should be kept. The Public Guardian and Trustee may inquire into whether funds raised for a special purpose are being used for the purposes for which they were collected. Keeping good records helps to ensure that misunderstandings can be resolved quickly.”

For Canadian registered charities that don’t operate in Ontario the CRA’s Registered Charities Newsletter No. 22 - Spring 2005 may be helpful:

“Legalese for charities
Cy-près – Where property is given in trust for a particular charitable purpose and it is or becomes impossible, impractical, or illegal to carry out the particular purpose, the trust will not necessarily fail if the intention of the trust is to devote the property to charitable purposes. The court can apply the cy-près doctrine and direct the property to some charitable purpose that falls within the general charitable intention of the trust.

Fiduciary – Relationship between a trustee/director and a charity.

Fiduciary duty – A duty to act for someone else’s benefit exclusively. It is the highest standard of duty implied by law (e.g., trustee, guardian). For charities, this means to accept and hold a public trust to maintain, preserve, and develop the organization’s resources to be used for charitable purposes, to ensure that the organization’s activities remain charitable, and to manage the organization for the benefit of the public.

Charitable trusts – A legal relationship created for the benefit of a class or the public generally, and established for charitable purposes (e.g., religious, educational).

Estoppel – The doctrine under which a person cannot change previously made statements, acknowledged facts or conduct if doing so would be detrimental to another person who has acted on those statements, facts or conduct.

Gifts for particular purposes
Q.4. Can we transfer gifts donated for a specific purpose to our general funds?

A.4. If a charity has raised funds or accepted a donation for one of its specific purposes, it cannot simply use these funds for another purpose. However, the charity may transfer funds raised if it clearly indicated while soliciting from donors that excess funds which cannot be used for a particular purpose may be used for another purpose.

Q.5. Can a gift instead be used for a similar but different purpose if the original purpose becomes impossible?

A.5. Under the doctrine of cy-près, it is possible to apply such funds to a similar but different purpose. Purposes that are unlawful are considered impossible (for example, if they require discrimination). Such was the case in Canada Trust Co. v. Ontario Human Rights Commission. In this case, the Ontario Court of Appeal held that an educational trust set up in 1923 violated public policy because it was based on notions of racism and religious superiority and because it improperly discriminated on the basis of race, religion, and sex. As a result, the trust was not charitable. Cy-près doctrine was applied and the trust was brought into accord with public policy by removing the discriminatory restrictions.3 Trustees cannot do this alone. Generally, applying the cy-près doctrine requires the Court’s approval.

Q.6. Can a gift instead be used for a similar but different purpose if the condition is clear but not efficient?

A.6. No. In cases where the condition is clear, the Court cannot intervene and go beyond the donor’s initial charitable intent through a cy-près scheme. Cy-près cannot be applied where there is no impossibility or impracticability. As a result, a charity should educate donors about the difficulties associated with gifts given for narrowly-defined purposes. As well, when soliciting gifts for a specific purpose, a charity should include a clause allowing for a gift to another charity or purpose.
Where conditions are attached to the use of a gift, a charity may need to consider whether to accept it at all.

Christ Church v. Can. Permanent Trust (1984) 18 E.T.R. 150 (NSSCTD) is an example of the court’s unwillingness to accept the trustees’ decision that a specified purpose was impracticable. A will had left money in trust and directed that the income it earned be used for repairs to a church building. The will also directed that the capital of the trust could be used to construct a new building. The trustees decided that they had no intention of constructing a new building and asked the court for an order allowing the trust capital to be applied to repairs of the old building. The court refused, saying that the trustees were bound to carry out the testator’s view, which was not necessarily that of the current governing body, and that the testator clearly foresaw the possibility the bequest might not be used at once. Therefore, there was nothing invalid about the direction given.

Q.7. Can we let donors choose which of our programs they support through their donations?

A.7. If a charity offers particular programs in accordance with its mandate, the donor may direct the donation to the program of the donor’s choice. For example, a charity may fund several community projects—schools, hospitals, youth organizations—and the donor may choose to which of these he or she wishes to donate.

A donor may not direct that funds be given to specific individuals that are not qualified donees for purposes of the Act, except when a charity’s mandate specifically contemplates the type of fundraising that would benefit those individuals (such as an organization with a mandate to raise funds for victims of a particular flood or fire).  A receipt should not be provided to a donor who directs that the donation be used to the donor’s own benefit, or to the benefit of persons with whom the donor does not deal at arm’s length.”


It appears to me pretty obvious that based on the fluid situation in Japan it is not possible to precisely determine what the needs will be and how much will be fundraised from Canada.  One cannot just jump to draw an inference that funds will be misspent or spent on another purpose because the charity reserves the right if it raises too much for a particular purpose or too little or it is no longer practicable that they can spend it on similar activities to help needy people.  The more specific the fundraising appeal - like help people in one area, or rebuild hospital in this city or building wing on such and such a hospital - the more likely it is that there will be a problem.  Certain countries, we forget so quickly, for one or another reason don’t allow groups in during a crisis (eg. Burma) or kick them out.(eg Sudan) or put restrictions on their operations that may make it impossible to do work in that country. 


The GiveWell representative is then quoted as saying “Our overall advice is that right now it doesn’t appear that there is a real need for more funding in Japan.”  The quote comes across as being detached and arrogant. 


I am going to reproduce verbatim a communique from the Japanese Red Cross issued on March 14, 2011, which is about 3 days before the Globe and Mail article:

We heartily appreciate your kind offer of donation.

If you want to donate money to the affected population of earthquake and tsunami, please contact your national Red Cross/Crescent society, which may have already launched fundraising campaign within your country.

If your national society doesn’t collect donation or you wish to send your donations directly to the Japanese Red Cross Society, please direct your fund to the following bank account. If you need the receipt of your fund, please state so clearly in the comment section of the bank transfer order. All the fund received under this account will be transferred to the Distribution Committee, which is formed around the local government of the disaster-affected prefecture and to be distributed directly among the affected population of earthquake and tsunami,

?Name of Bank: Sumitomo Mitsui Banking Corporation
?Name of Branch: Ginza
?Account No.: 8047670 (Ordinary Account)
?SWIFT Code: SMBC JP JT
?Payee Name: The Japanese Red Cross Society
?Payee Address: 1-1-3 Shiba-Daimon Minato-ku, Tokyo JAPAN

Thank you once again for your generous offer. It is surely the source of encouragement for the affected population in Japan.

For our operation updates, please have a look at the International Federation of Red Cross and Red Crescent Societies site. ?here.”

It appears to me that they are saying that it is best to donate to your national Red Cross but if they are not fundraising or you want to send it directly you can send the money to the Japanese Red Cross. 

The The Globe and Mail to say on March 17/18 (my emphasis added):

“The Japanese Red Cross has not issued an international appeal. The organization “has determined that external assistance is not required, and is therefore not seeking funding or other assistance from donors at this time,” said a bulletin issued this week by the International Federation of Red Cross and Red Crescent Societies.”  Yes that was 5 or 6 days earlier - I think one can say that a lot happened in 3 or 4 days in what has been described as highly fluid disaster.

If you look at the International Federation site they say:
“About the donations to Japan
The Red Cross Red Crescent has established a solidarity fund to provide people with an opportunity to show their support for individuals and communities affected by the devastating events in Japan.  Your gift will support the Japanese Red Cross Society (JRCS) disaster relief efforts to help those affected by the earthquake and tsunami. Funds will be utilised for the on-going provision of immediate relief and for eventual recovery support to the affected population.
The Japanese people have demonstrated their resolve for supporting vulnerable people around the globe, as the world’s attention now focuses on Japan we stand with them in solidarity.”


On March 14, 2011 the International Federation of the Red Cross put out a press release saying amongst a lot of other things:

““I have never seen anything as bad as this before. It defies belief,” said Tadateru Konoé, President of the Japanese Red Cross Society and the IFRC, who has just returned from a visit to Iwate prefecture in north-eastern Japan, one of the worst-hit areas.”

It is also interesting that Network for Good, which processes a lot of the Givewell donations, has on its Network for Good page, a page entitled “Help Survivors of Japan Quake & Tsunami”  and on the Network for Good site says quite appropriately states:

“An 8.9 magnitude earthquake hit Japan early Friday, March 11, approximately 250 miles northeast of Tokyo, sparking a tsunami that caused major destruction in northern Japan.  According to reports, more than 6,400 people have died, more than 10,200 people are still reported missing and more than 390,000 people are living in shelters.  Rescue efforts are complicated by aftershocks, tsunami alerts, radiation risks from damaged nuclear plants, electricity outages, snow and freezing temperatures.  Please consider supporting the emergency relief efforts of these organizations.”

I would just point out that the main organization handling the donations for this particular US hedge fund group has very contradictory advice!

A few other points in relation to GiveWell and them talking to a major Canadian newspaper about Canadians can give well:

* GiveWell is suggesting that Japan does not need the money but if you have to give to Japan rather donate to the Japanese Red Cross.  I would just point out to Canadian donors that if you donate to the Japanese Red Cross you will not get an official donation receipt at this time (may change later) - that means if you donate $10,000 it is $10,000 of after tax money and you get no deduction for it - if you donated to the Canadian Red Cross you could give them about $19,000, instead of $10,000 and the after tax cost would be the same. 

* For a website that suggests that donors not give to Japan it is very interesting their navigation bar on all the pages of their website say at the top of every page say “Issues / Charities / Japan / Mistakes / Buzz / Blog / About”.  - is that a bait and switch to find donors interested in donating to Japan? Is it being deceptive to fundraise for its own causes, however, good or not, they may be. 

* GiveWell notes on its website “How and why did GiveWell start? GiveWell started as a group of donors, employed full-time in the hedge fund industry, discussing how to accomplish as much good as possible. We found ourselves fascinated by the research we were conducting, but also found that it isn’t a part-time job, and few public resources exist that can help with it. We raised $300,000 from our former coworkers and left our jobs to start GiveWell. More ...” - although you may find it fascinating I would suggest that maligning good charities is not creating “as much good as possible”. 

* GiveWell a problem with restricted donations.  Personally I don’t like restricting funds and I suggest to donors to give to good organizations without restrictions.  That approach works well with some donors.  However, many donors are prepared to give for x, y and z.  Do you tell them no thanks especially if x, y and z are all in your mission.  “The best charities can be trusted. We are generally against the practice of “restricting” the way in which donations can be used. The main reasons have to do with micromanagement vs. giving people the ability to do their job”.  I would suggest that most charities can be trusted.  Trust is not the central issue - if there is not a lot of trust walk right away from the charity.  It is about confidence and verification that in fact the trust is well placed.  Many of the problems the world has today is because people sometimes trust to much. 

* the mistakes part of the GiveWell website is interesting - there is a trend that I think is very helpful for charities to readily admit mistakes so that they can learn from those mistakes, improve programs etc. - this is instead of putting out 100 page puff piece annual reports that make everything sound wonderful and absorb a huge amount of time to prepare - the problem when I read the mistakes part of GiveWell website is that some of these are not mistakes - they are more like negligence.  Further they don’t seem to have learned from their acknowledged mistakes.  One of the mistakes was “12/2007: overaggressive and inappropriate marketing” - I think your move to put Japan on every single page of your website right after the disaster may fit into that category.  “Ongoing: tone issues How we fell short: we continue to struggle with an appropriate tone on our blog, one that neither understates nor overstates our confidence in our views (particularly when it comes to charities that we do not recommend).”  Well 99.999% of charities in the world you don’t recommend so I guess the tone problem applies to them.  That GiveWell can suggest that people not donate to Japan but instead donate to one organization (admittedly a great organization that I have been giving to for long before GiveWell has existed ) is hubris par excellence.  By the way the organization they are suggesting be donated to is not even one of their “Top Charities”!  The following quote mistakes page is chilling “We wish to be explicit that we are forming best guesses based on limited information, and always open to changing our minds, but readers often misunderstand us and believe we have formed confident (and, in particular, negative) judgments. This leads to unnecessary hostility from, and unnecessary public relations problems for, the groups we discuss.”  Wow - I could not have said it better myself.  I have no problem with people making mistakes - but when you make a mistake consistently that causes hurt and damage to others that is not a mistake.

* I love metrics but these guys seemed to be obsessed with metrics that are questionable - for example they chide themselves on their mistakes page for not capturing traffic to their website for 6 months - honestly few people will care how many people go to the GiveWell site - but maligning thousands of charities in one breathe - seems to be less of a concern.  For an organization that is all about its website and so marketing driven it is hard to imagine how they could make such a mistake - I would be thinking that they are checking the stats every few hours!

* I am wondering why a site that is fixated on “impact” does not encourage people to send cheques to their charities (lowest cost) or to donate directly on the website of the charity using credit cards if it is urgent - usually 2-3% percent cost with the fees sometimes even being waived by the credit card companies in certain major disasters.  Instead they recommend that people donate to another website (admittedly I have no issues with that organization) that charges 4.75% fee on all donations. Why encourage people to pay an extra 2 to 4.75% percent - I think the answer is there and it relates to their metrics “•It’s important to us to track donations made due to our research. If you choose to give directly (rather than through our site), please let us know through our donation report form.”  Elsewhere on their website they suggest “We use Network for Good to process donations to recommended charities, rather than linking directly to the charities’ own donation forms, because: •Network for Good provides a single set of URLs; thus, we don’t have to change our links every time an individual charity updates its website.”  You are only suggesting people donate to one organization - even if they were to update their donation page - it hardly seems a big deal to change one link.  One could say it does not matter if it is no cost versus 4.75% but when the donations add up the amount adds up as well.  I guess I should not get to concerned with 4.75% - as discussed above they are encouraging people to give donations for which they get no tax advantage and will presumably donate half as much because of the real cost of giving.


The US site Givewell cited in the piece says “Update on how to help Japan: no room for more funding.”  Some of the comments on their site are interesting and reproduced below:

Dan McCarrel says:
March 17th, 2011 at 12:29 am
I am impressed by your analysis, but I question whether basing it upon the lack of a request is reliable in this circumstance. The government of Japan (for whatever reason - culture, or the impact of the crisis) has NOT been forthcoming about the reality of the situation. There obviously are far more people killed and injured than official estimates. The situation with the damaged nuclear power facilities is far more critical (and deteriorating by the minute) than the official position will admit. I have lived in Japan and I agree that the people are resilient and prepared; their planning and organization, in spite of the devastating circumstances, are admirable. This situation is extremely serious and requires monitoring. I strongly suspect that the country needs much more help than the Japanese are willing to admit today.

...
ben says:
March 17th, 2011 at 1:14 am
i’m of the opinion that it is not within the japanese cultural norm to outright ask for help. what you’re revealing is a cultural disconnect between japan and the West.Whereas the westerners more easily speak up for what they need or desire, the japanese tend to speak around such topics and issues. Just because they are not outright asking for help doesn’t mean they don’t need it.

...
Waheeb says:
March 17th, 2011 at 4:07 am
Japan is, yes, wealthy but is heavily indebted nation.  The destruction and damage is huge and although the Japanese seemed prepared, this does not mean contributions to relief is useless.  There are many people who are in shelters. Those people have a lot of needs and post disaster rehabilitation. The story is not over. There is a lot of work ahead in affected areas to get life back to normal. I do know there are many poor areas in the world and that it is always good to donate to other charities but I also believe it is an ethical issue to show help and support to the people of Japan.  This country has been in the forefront of foreign aid to help many impoverished countries and people around the world and they deserve a needed help. If you are worried that your funds will not reach Japan, then do some search and there will be a way to get them through. I am donating for Japan through the Japanese red cross.

....
andrew says:
March 18th, 2011 at 3:32 am
This is an interesting article and was informative, but I think it doesn’t address two very critical components before coming to the conclusion that there is no room for donations.
1) As previous commenters have noted, there’s a huge cultural variable (pride, humility, optimism?) as to whether a country asks for help and is up front on how severe a situation is. A country like Haiti has been accustomed to foreign support unfortunately, as a developing country. Japan is accustomed to being self sufficient. But if you’ve followed this from the beginning, you should be able to see a clear pattern in terms of what info is said or offered versus how things actually turn out. How can we trust that suddenly the government is accurate and precise in predicting their needs, when everything else has proved to be much worse than originally expected or communicated?
2) There’s little actual math displayed in this article. Most experts say this is the worst EVER in terms of monetary destruction. What’s that number? What’s been pledged? What’s the financial health of the government to absorb those costs and deliver aid in a timely fashion?

Neglecting these points to make a recommendation that many will read to mean “Japan doesn’t need help” seems awfully reckless when a half a million people are without homes, with little food and heat.  That’s just my $.02.
—————

I have no problem with organizations deciding that they do not wish to raise funds for Japan - after all the situation in Japan is terrible but it may not be within a mandate of an organization to operate in Japan or they may not have capacity to do so or they may be involved in other areas where there is also desperate need such as Libya, DRC etc.

But I don’t think it is fair to criticize organizations for raising funds for Japan on the assumption that the funds will be misappropriated.  If an organization misappropriates funds it should definitely be held to account but somehow equating raising money for Japan as opportunism is really unfortunate.  I don’t recall people in Canada saying - don’t help the people of New Orleans - the US is a very rich country with a military that can handle any disaster.  Some of the comments border on naivete or perhaps racism. 

No one is being forced to raise money for Japan.  It was a difficult decision for international development organizations to decide to raise money for Japan which is not an international development country - in fact I know that initially some on the first day said they would not until the sheer enormity of the disaster started to unfold.  If they did not raise money for Japan others may have criticized them for being indifferent.  No one should donate funds to Japan unless they want to.  Donating to Japan is not saying that you don’t care about other disasters around the world - donating to Japan is saying that in this time of tremendous anguish and destruction in Japan some people in Canada care about you and may only be able to help in token ways - but realize we do care.

Also obviously please do not ignore other worthy and important causes - or disasters that are not being covered by the media.  You can always donate unrestricted funds to charities - but that is not a one size fits all for every donor.

Do you require legal advice with respect to Canadian or Ontario non-profits or charities?

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Charity Lawyer Mark Blumberg

Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

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