Topics: News, What's New from the Charities Directorate of CRA, Canadian Charity Law, Global Giving, Ethics and Canadian Charities, Avoiding 'Charity' Scams
The International Relief Fund for the Afflicted and Needy Canada (IRFAN-Canada) has had its registered charity status revoked for failing to keep adequate books and records of its foreign activities. They had their receipting privileges suspended last year because according to CRA they “Failed to maintain books and records in Canada in accordance with subsection 230(2), to provide records for audit in accordance with subsection 231.1(1), and to comply with a Requirement to provide documents in accordance with subsection 231.2(1)”. Well it appears that there may have been more here than just sloppy record keeping. According to CRA’s lengthy letter “IRFAN-Canada also transferred gifts-in-kind to non-qualified donees valued at more than $17 million. ... We have been able to establish that $13 million transferred to other organizations in the form of gifts-in-kind was provided to organizations which we have been able to document from public records as having ties to Hamas.” Here are the CRA documents to IRFAN-Canada including various schedules:
“IRFAN-Canada records show that it has distributed approximately $19 million in Canadian funds and $17 million in gifts-in-kind from January 1, 2005 to December 31, 2009, for a variety of projects outside of Canada. However, IRFAN-Canada’s documentation relating to these projects was in many cases an after the fact paper exercise, as evidenced by its efforts to collect documentation for the express purpose of our audit.”
Appendix A to the Administrative Fairness Letter from CRA to IRFAN-CANADA [Correspondence relating to CRA’s audit of IRFAN-Canada’s 2002 fiscal year]
Appendix B to the Administrative Fairness Letter from CRA to IRFAN-CANADA [Correspondence relating to CRA’s suspension of IRFAN-Canada’s receipting privileges in 2010]
Appendix C to the Administrative Fairness Letter from CRA to IRFAN-CANADA [Additional Background Information]
Appendix D to the Administrative Fairness Letter from CRA to IRFAN-CANADA [Relating to JFHS’s Application for Charitable Registration]
Appendix F to the Administrative Fairness Letter from CRA to IRFAN-CANADA [Backgrounder on Hamas]
Appendix G to the Administrative Fairness Letter from CRA to IRFAN-CANADA [International Relief Fund for the Afflicted and Needy (Canada) Links to Hamas]
Appendix H to the Administrative Fairness Letter from CRA to IRFAN-CANADA [Due Diligence Findings]
Appendix I to the Administrative Fairness Letter from CRA to IRFAN-CANADA [Discrepancies and Inaccuracies observed on IRFAN-Canada’s Registered Charity Information Return (T3010)]
It is important that Canadian charities that conduct foreign activities comply with legal requirements as set out in the the CRA Guidance “Canadian Registered Charities Carrying out Activities Outside Canada” http://www.globalphilanthropy.ca/index.php/blog/comments/cras_new_guidance_on_foreign_activities_by_canadian_charities/
Here is the Toronto Star article “Status revoked for Mississauga charity with projects in West Bank: A Mississauga-based charity that runs projects in the Palestinian territories is no longer allowed to issue tax receipts.” by Allison Cross April 10, 2011
Here is the piece that appeared in the Canada Gazette:
“Vol. 145, No. 15 — April 9, 2011
CANADA REVENUE AGENCY
INCOME TAX ACT
Revocation of registration of a charity
The following notice of proposed revocation was sent to the charity listed below revoking it for failure to meet the parts of the Income Tax Act as listed in this notice:
“Notice is hereby given, pursuant to paragraphs 168(1)(b), 168(1)(c), 168(1)(d) and 168(1)(e) of the Income Tax Act, that I propose to revoke the registration of the organization listed below and that the revocation of the registration is effective on the date of publication of this notice.”
INTERNATIONAL RELIEF FUND FOR THE AFFLICTED AND NEEDY (CANADA), MISSISSAUGA, ONT.
There is also a section of the CRA AFL letter which discusses deceptive fundraising:
“2.5 Public Benefit Test/ Deceptive Fundraising
The issue of public benefit is at the heart of every inquiry into an organization’s claim to charitable status under the Act. Deceptive fundraising practices cause harm to the public and to the integrity of the registration system for charities by deceiving donors or potential donors and by impairing the fundraising efforts of other charities. Because of this harm, fundraising activities involving misrepresentations are damaging even when the misrepresentation is not illegal or fraudulent. There is significant harm associated with a deceptive or misleading statement, regardless of whether the charity’s conduct is intentional or negligent. A registered charity should ensure representations made by it, and those acting on its behalf, are fair, truthful, accurate, and complete.
Our audit review indicates that IRFAN-Canada misrepresented its fundraising efforts relating to victims of natural disasters from January 1, 2005 to December 31, 2008.66 IRFAN-Canada made appeals to the general public through disaster-specific pledge forms and on its website for donations to the following disaster relief projects: Tsunami 2004, South Asia Earthquake 2006, Indonesia Earthquake 2006, Bangladesh Cyclone 2007, Burma Cyclone 2008, Pakistan Earthquake 2008, and Indonesia Earthquake 2008. IRFAN-Canada collected $581,653.92 for these appeals. The audit found that these funds were instead co-mingled with IRFAN-Canada’s general operating revenues and distributed to regular funding recipients to sponsor their ongoing programs and activities predominately in the West Bank and Gaza.
IRFAN-Canada also appears to have falsely reported to the CRA in section C5 of the Registered Charity Information Returns (T301O)that it had made disbursements “for programs the charity managed directly, outside of Canada” in regions and countries for which we were unable to verify any transfers of resources. This also resulted in IRFAN-Canada misrepresenting to the public its actual program work.” For example, IRFAN-Canada’s 2006 T3010 states, at section C5, that it operated in Sri Lanka and Indonesia. However we were unable to verify any resources being allocated to these countries through our review of the general ledger accounts, which are set up according to the project title, and IRFAN-Canada’s own annual summaries of programs and projects. “
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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.