In a recent Toronto Star article entitled "Critics say Fraser Institute letter highlights ‘enormous lack of clarity’ in charity-audit rules" the Toronto Star discusses a letter from the Fraser Institute to supporters. The article raises some interesting points but I have some concerns with the article as well.
The Star identifies certain quotes from a Fraser Institute letter penned by Mike Harris, the former PC Premier of Ontario:
“Credit rating agencies have further downgraded the province’s credit rating, primarily because it’s very unlikely that this government will reverse course and enact a credible plan to balance the budget within the next two years.’’
“Ontario has experienced reckless overspending by government, ballooning public sector salaries, increased red tape and more union-friendly labour laws.”
“As my fellow Ontarian you must be outraged — this is why I am writing to you today to help us educate Ontarians about the severity of Ontario’s problems and the potential solutions.’’
“I would like to invite you to join me in the pursuit of policies that will establish Ontario as the envy of Canada by making a financial contribution in support of our Ontario Prosperity Initiative.’’
It would be nice if the letter was reproduced so people could see it, however, you can see the Fraser Institute's website information on the Fraser Institute.
The Fraser Institute has identified that it has not spent any money on political activities over the last 11 years. See this report on Charityfocus.ca
The article I think is incorrect on a number of levels.
1) There is reference to a "double standard" in terms of CRA audits. Unfortunately, because of the confidentiality requirements of the Income Tax Act we are not allowed to know, unless the Fraser Institute tells us, whether they are being audited by CRA. Therefore until we know exactly who has been audited and who has been revoked it will be hard to determine whether any group has had a double standard applied to them.
2) There is reference to ‘enormous lack of clarity’ on the political rules for charities. I disagree. Because a group can conduct political activities, or even partisan political activities, and claim that they are not political does not mean the rules are unclear. It may mean that the group does not understand the rules, or they may be deliberately violating the rules because they think they can get away with it, or even if caught the consequences may not be too great.
3) The article states "The government budgets $13 million a year for these political “super audits,” as some people refer to them." In fact, the 13 million is over 3-4 years and it is to cover 3 different areas namely more transparency on political activities (by changes to the T3010), more education on political and also more political audits. While most of the funds may be spent on political audits, it is definitely not all the money and definitely not $13 million per year.
The article quotes from the NDP, CRA, and 2 registered charities that are undergoing or have undergone political audits. The CRA just states the normal "it doesn’t comment on specific cases for confidentiality reasons, according to spokesperson Jelica Zdero, who added that when there are audits, charities are selected by the CRA alone “without any political direction whatsoever.” The two audited charities may have a bias in favour of arguing that the rules are unclear so that if they one day have to argue in court that they should not lose their registered charity status they will argue that "the rules are unclear". However, the two charities seem to have no problem seeing through the Fraser Institute's statements and deciding (correctly) that in fact the Fraser Institute is involved in political activities.
The NDP quote from MP Murray Rankin is interesting: “I just want a level playing field where other charities that may not be aligned with the Conservative government are subject to the same rules,” he said, adding the CRA’s rules are “all over the place.’’ Does Mr. Rankin know which organizations are being audited? More specifically does he know that organizations that are "not be aligned with the Conservative government" are NOT being audited. I agree with Mr. Rankin that there needs to be a level playing field and perhaps he will support my efforts to increase transparency in the charitable sector by allowing CRA in important cases to identify which organizations are being audited or have been involved in substantial non-compliance.
The head of a charity Environmental Defence states that "if they’re not being audited, then that raises the question — why not?". Well first of all CRA audits less than 1% of charities on all issues. CRA is auditing about 60 charities on political activities and seeing as there are about 500 who say they do political activities and probably another 5000-10,000 who conduct political activities but don't acknowledge that on their T3010 filings it is not likely that CRA can audit every charity who is involved with political activities. Also how do we know that the Fraser Institute is being audited or not being audited?
Personally I think that the emphasis placed on political audits is misplaced and resulting in less emphasis on other actual and significant abuse of charities such as receipting schemes, etc. That being said there are rules for Canadian charities and charities should be aware of those rules comply with them. We have helped many charities do significant political activities within the rules.
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
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.