Recent Globe & Mail article on compliance problems with Canadian disaster relief charities

November 23, 2007 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, Global Giving

The Globe & Mail recently wrote about Canada Revenue Agency audits of Canadian charities involved in disaster relief including the tsunami. The large number of charities that were non-compliant amongst the CRA sample will not improve the public’s confidence in the international development sector.

I recently wrote a 29 page article on Canadian Charities and Foreign Activities that attempts to assist Canadian charities who are conducting or interested in conducting programs outside of Canada with some of the legal issues that they may face. It discusses the statutory and regulatory framework for Canadian charities operating abroad, describes the permissible structured relationship and agreements; reviews a number of cases dealing with Canadian charities operating abroad and highlights some challenges facing Canadian charities that have foreign activities.


The Globe & Mail article can be found at:

http://www.theglobeandmail.com/servlet/story/RTGAM.20071119.wcharities19/BNStory/National/

The text of the article is below:


Disaster-relief charities breaking the rules, probe finds
DEAN BEEBY

The Canadian Press

November 19, 2007 at 5:21 AM EST

OTTAWA — Most Canadian charities that provide disaster relief at home and abroad are breaking the rules, suggests a new probe by the Canada Revenue Agency.

More than half of the 27 disaster-relief charities randomly picked for close scrutiny by the agency’s charities directorate failed to meet standards - including some that handed over donations to “non-qualified” recipients abroad.

“The common theme amongst charities displaying foreign-activity concerns was gifting to non-qualified donees or transferring funds collected in Canada to an international governing body without control over the use of the funds,” says an internal report.

The document, completed this fall, was obtained by The Canadian Press under the Access to Information Act.

The agency launched the so-called disaster-relief project in 2005, following the torrent of donations from Canadians to help victims of the Dec. 26, 2004, tsunamis triggered by an earthquake off Indonesia.

About 225,000 people were killed in 11 coastal countries and the Christmas-season disaster drew billions in aid from around the world, including hundreds of millions of dollars from Canada. Concerns were raised at the time about how effectively the unprecedented pool of donations would be spent.

The Canada Revenue Agency’s probe looked at the 2,350 Canadian charities that reported any disaster-relief activity between 1993 and 2004, for anything from earthquakes to floods.

Of these, 178 reported that disaster relief was their main concern, and 27 were picked for auditing. Twenty-four of the audited charities focused on projects abroad.

Auditors found a raft of problems, including improper donation receipts, bad or non-existent bookkeeping, shoddy paperwork and failure to monitor how donations were spent once money was sent abroad.

The agency required seven of the charities to sign so-called compliance agreements to fix serious problems, and another nine received “education” letters requiring them to deal with more minor infractions.

The document does not identify individual organizations, nor does it provide details of the rule-breaking.

A spokeswoman for Canada Revenue Agency said none of the groups were stripped of their charitable status. “No charities were revoked for cause as a result of this review,” Beatrice Fenelon said.

She added that the agency is still reviewing the findings to determine what internal changes or processes might need to be changed to better monitor disaster-relief charities.

 

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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.

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