Failure to keep up with paperwork can threaten crucial standing

A charitable registration number is an odd and valuable thing: it can slip through your fingers when you desperately need it and yet it can cost hundreds of dollars to get rid of it if you no longer want it.

Last year, 11 local charities were divested of their status by the government -- only five of them voluntarily.

So far this year, four charities have lost their status, all four of them at the charity's own request.

Those that lost their status involuntarily were usually cited for failing to file proper paperwork.

But, according to several local charities, the loss of the precious charitable status has come as a complete surprise.

"This is all news to me," John Howe, president of the Lions Club of Brantford, said this week when he was informed the club lost its charitable status just over a year ago.

Howe said the club -- which focuses on hosting barbecues to raise funds, helping with guide dogs and transportation for the blind and glasses for the needy -- hasn't had any correspondence about the loss of the status and has been continuing to file reports with the government.

"We'll have to get things in place and go through the process again," Howe said. "Fortunately, we've had no major fundraisers where issuing receipts were in order."

How does a group lose its critical status -- the number that allows it to issue the all-important charitable receipt -- without knowing it?

Beatrice Fenelon, a spokesperson for the Canada Revenue Agency, said the CRA works hard to ensure charities know what their obligations are and complete their paperwork accurately and on time.

The agency sends out reminder letters, makes phone calls and, if there's no response, sends a registered letter with a Notice of Intent to Revoke. The charity is given another 90 days to file After all that, if there's still no paperwork from the charity, another registered letter is sent out announcing the revocation and official word goes in the massive publication, Canada Gazette.

Some charities are penalized with a year-long suspension of their status and -- very rarely -- charities can actually be fined.

During suspensions, charities can't accept gifts without telling the donor they're under suspension and can't issue any charitable receipts for gifts received.

But there were only two such suspensions in the last year: the Adath Israel Congregation, for issuing receipts with false information on them, and the International Charity Association Network (ICAN), for failing to maintain or provide access to their books and records. Both organizations are in Toronto.

A glance at websites of the two groups show that, although their suspensions last until November and next March, they still display charitable numbers and solicit donations.

In addition to a suspension, the Adath Israel Congregation was hit with a half-a-million-dollar fine earlier this year.

You don't have to endure a fine to feel the punishment, though. Losing your status causes plenty of problems for charities.

No charitable status means you aren't allowed to issue charitable receipts for income tax exemption.

The charity can apply for re-registration, but it's like starting over with all new paperwork.

Plus there's a $500 penalty.

The Yes Church on West Street lost its status at the end of 2007 after paperwork was sent in late to the government.

"It was a clerical mix-up of some sort," says elder Victor Van Heck.

"Our documents got to the government's hands one or two days late and they automatically pulled the charitable status. They didn't even call anyone and I'm pretty astounded they would do that."

Now the church has to refile for charitable status all over again and pay the penalty.

"It's not so much the financial burden, but it's people's time and the meetings we've held that's been annoying. We've got everything done and filed now."

At first, the Yes Church was told regaining its charitable status would take up to a year, but Van Heck said they've been told the number should be reinstated soon.

As long as reinstatement is backdated by the CRA, the church will be able to issue annual receipts for members' donations after it gets its status back.

A similar situation occurred to the guy behind Paris's Memorial Gardens Foundations.

Funeral director Dwayne Budgell says he was mowing a rather useless plot of land near his business when he came up with an idea to beautify it with trees that would be planted in honour of loved ones who had died.

Budgell discovered that, since the land had been zoned unusable, it couldn't be sold to his funeral home but it could be leased to a charitable organization for 100 years.

"I had to apply for status and we created a garden with trees. It's a pleasing entrance to the town."

But last fall Budgell suddenly got a revocation letter from the Canada Revenue Agency.

"I was shocked. The government said our report was filed improperly and our status was revoked. I phoned our accountant and he didn't even know he filled it out wrong."

Now Budgell is faced with repeating the extensive process of getting the group's status back.

"It was a ton of work the first time, but the government is never fair."

Despite the seemingly harsh revocation of charitable status, the government doesn't exactly crack down on charitable fraud.

It takes years to find charities that are operating improperly and further months or years to shut them down. Even then, the charity can restart under a new name.

Previous investigations have turned up bogus charities created to only help the founders and bona fide charities where it was the fundraisers that benefited most from the donations.

Even when a charity's status is revoked, the public isn't going to know about it unless someone who is computer- savvy goes searching.

There are 260 registered charities in Brantford -- about 83,000 in Canada -- and six of them have had their status revoked since 2007.

Once status is revoked, the charity's former annual reports are removed from the CRA website, so you can't find details like the names of the directors, the work the charity was doing or the amount it was raising.

Some charities have just walked away from the process.

When the local Junior Achievement office closed in 2006, the government paperwork wasn't filed and the charity lost its status in March 2007.

Contrast that with the Friends of Myrtleville House.

When the foundation, created to support the local museum, realized its funds were dwindling, the board made plans to responsibly shut the operation down in a way that would ensure its good work would continue.

Board member Frank Van Heck said a lawyer and accountant were hired to complete paperwork, staff was let go, physical assets were donated to the Brant Historical Society and the leftover funds went to the Community Foundation which will manage an endowment to help the museum.

"It's a long and costly process and we've been working on it since January. It's probably going to cost $2,000 to $3,000," said Van Heck.

Plus, he has to keep the back records of the charity -- stored in four enormous plastic tubs -- in his house for years to come.

Van Heck was pleased to hear the charity's status had finally been revoked in May.

"The board can't be dissolved until everything is done."

Other area charities voluntarily had their status revoked because they merged with another group, were renamed or just needed to close down their operations.

About a thousand Canadian charities apply for that revocation each year.

Meanwhile, at the Lions Club, where members were shocked to learn their status was revoked a year ago, there's evidence that the Charities Directorate has been working with the club to get proper paperwork filed.

Charitable reports -- which for the last few years have been reaching the agency at least two months late -- were re-filed two years in a row by a past president in order to correct errors and members remember getting notices from the CRA and sending in requested documents.

One member even remembers donating to the club and getting a charitable receipt this year, which shouldn't have happened.

"We're going to have to get things in place," says president John Howe. "We'll go through the process again."