Donors may need research to ensure they give wisely

There are few safeguards to protect Canadians from a small number of misleading charities that take advantage of the public's trust, according to experts.

Although the Canada Revenue Agency points out that the "large majority of charities are well-intentioned," 175 charities in Canada have had their status revoked for cause since 2000, meaning they can no longer issue donation receipts for income tax purposes.

Among them was the Nanaimo-based Universal Aide Society, stripped of its status after a federal audit found employees spent thousands of dollars of the society's funds on their personal expenses. According to the group's website, the society ships containers full of goods, such as food, medicine and vegetable seeds, overseas to countries in need.

Last week, the CRA announced it revoked the charitable status of the Toronto-based Children's Emergency Foundation for taking part in tax shelter schemes. Some such tax shelters actually end up making the donor money.

Experts say that CRA is more aggressively investigating charities it suspects of breaking the rules, but the agency's Charities Directorate -- armed with about 40 auditors -- doesn't have the resources needed to properly keep tabs on more than 84,000 organizations registered as charities.

One problem is that charities technically fall under provincial jurisdiction, but they're also tax-exempt and can issue donation receipts, which falls under federal jurisdiction. There has been talk in the past of establishing a federal regulator for charities, but nothing has materialized. This results in charities operating in what is essentially an unregulated environment, with few clear rules established on what they can and can't do.

Some independent organizations have set out codes of conducts for charities, which the public could take as an indicator the charity is legit. But most of these groups simply take the charities' word that they are complying, and such codes could actually do more harm than good, says one lawyer.

The Charities Directorate is working on policies that will outline what constitutes acceptable fundraising practices, but enforcement remains an issue. In the end, even the charities say it's the individual donors who should do the research to ensure they're giving to a worthy cause.

"I think people need to be aware of who they're making donations to and how much is being used," said Anita Smith, executive director of Nanaimo Community Kitchens, one of 198 registered charities in the city.

Smith doesn't think the reputation of small, local charities like hers will be tarnished by the misdeeds of less-reputable organizations.

Donors interested in where their money goes need only stroll into the group's kitchen, where people build life skills and self-esteem while preparing low-cost meals in a group environment.

"We're a small organization, so almost everything goes to direct service," said Smith.

She thinks the strength of a local charity is that people can get involved and see for themselves how their money is helping. But if that's not possible, she encourages donors to do their homework before bringing out the chequebook.

"How much stays local, how much goes to administration, how much goes to direct services? If someone makes a contribution they have a right to ask that."

But Mark Blumberg, a Toronto lawyer and expert in charity law, said ensuring accountability among charities isn't always that simple.

"The average Canadian doesn't have time to do due diligence for every charity they give 10 bucks to," he said, adding donors should take responsibility for researching their charities.

He said the CRA are bound by privacy restrictions that make it impossible for the agency to warn donors that they are investigating a charity for a major infraction. Sometimes investigations can take two or three years. "And people are still giving them money thinking things are OK," he said.

Donors can also look up information about the charity by searching for their Registered Charity Information Return on CRA's website. This provides detailed financial information on the charity. But some charities fill out the returns improperly and could mislead the public by accident, according to Imagine Canada, a national organization that supports charities and non-profit groups.

"This can be really challenging for smaller charities." said Karen Alebon, program manager for standards and regulatory practice.

Of the handful of watchdogs that aim to keep charities honest, very few of them have any teeth.

Organizations like the Association of Professional Fundraisers and Imagine Canada have codes of conducts for their member charities to abide by, but often just take the charities' word that they are complying, said Blumberg.

"Probably, they're doing more damage than good because they are giving the appearance of being a watchdog and there is no watchdog," he said.

The Canadian Council of Christian Charities appears to be the only exception. This group requires members to open their books periodically and pay visits to the charity to ensure accountability. However, the organization has only 164 members -- all based in the Christian faith.

"There is no one else doing the on-site verification in Canada," said CEO John Pellowe.

Alebon said that although Imagine Canada does not perform audits or drop-ins on charities, it does require the organizations to submit certain documents when they join and that could lead to them catching a tax-shelter scheme.

Blumberg points out that for serious offences, none of these codes or memberships will make a difference. He thinks police or other authorities need to become more involved in investigations. The RCMP said it currently isn't involved in any investigation regarding the Universal Aide Society "at this point."

There has been discussions for years about establishing a standard law for charities, but Pellowe said the provinces have "no appetite" for it.

"The provinces have not dedicated resources to regulating charities," he said. "In affect, you have an unregulated environment."

Meanwhile, the CRA's Charities Directorate is working on a proposed policy that outlines rules charities must abide by, including keeping fundraising costs to 35 cents on the donor dollar.

But Pellowe stresses that the "vast majority" of charities are great organizations, and it's only the odd "lone ranger" people have to be skeptical about.

DWalker@nanaimodailynews.com

250-729-4244

TIPS ON GIVING:

Examine their Registered Charity Information Return on the Canada Revenue Agency's website at www.cra-arc.gc.ca/tx/chrts/menu-eng.html.

Ask questions. Find out exactly where your dollar goes, and how much of your donation will be used to cover fundraising and administrative costs.

Instead of giving small donations to many charities, give fewer, larger donations only to charities you are more familiar with.

Some questionable charities use a name which closely resembles the name of a respected, legitimate organization. Ask for information in writing.

Do not give cash. Be sure to obtain a receipt or printed copy of your donation so you will have a record for tax purposes.