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Government Vows Tough Stand On Bad Charities KEVIN DONOVAN - STAFF REPORTER The Toronto Star, Canada Mar. 2, 2003. 08:10 AM Bogus charities preying on the public will face tougher, quicker sanctions with new rules planned by the federal government. It's a move designed to restore public trust in charities. "We have identified predatory fundraisers as a top priority," National Revenue Minister Elinor Caplan said in an interview with the Star. An ongoing Toronto Star investigation has shown widespread abuse in the charity system. One charity, the Canadian Association of the Blind, took $1.5 million from the public and spent only $11,000 on charitable works. It took three years before it finally lost its federal charity licence. "Nobody believes it should take three years to take action against an organization doing bad things," Caplan said. One major problem in the charity system in Canada is that there is only one penalty - shutting a charity down. While the government can't stop anyone soliciting funds, taking away a group's ability to issue tax receipts severely limits their success. That penalty is used rarely, an average of a dozen times a year. Regulators would like new rules so that more charities could be more quickly disciplined. Options include temporary suspensions of the charity's ability to fundraise and issue tax receipts. If a charity then complies with an order from the government, it would be reinstated. Another option is financial penalties against the charity itself. Caplan plans to move on the issue this year. Meanwhile, she said the charities directorate at Canada Customs and Revenue has already begun beefing up its audit and enforcement capacity. Caplan said better scrutiny of charities will ensure that charitable dollars go where they are intended. The minister said the Star's charity series Give and Take last fall raised many key issues. "It was important because one of the messages was how important it is for donors to know who they are donating to." The series revealed that more than 12,000 Canadian charities - almost one in six - spend more money on fundraising and administration than they do on charitable work. Some are well-meaning but inefficient, while others run blatant scams preying on the public with aggressive, often abusive, fundraising tactics. Recently, the charities directorate Web site began posting financial information on many of the 79,000 charities so the public can find out where their money is going. (The Web site's address is http://www.ccra-adrc.gc.ca/tax/charities ). A story in the Saturday Star revealed that a charity purporting to raise money for infertile couples was registered in just 24 days. No background checks were carried out and the group ended up scamming desperate couples who thought the charity would pay for their IVF treatment. "Nobody believes it should take three years to take action' against a bad charity" National Revenue Minister Elinor Caplan The Star's recent charity series showed this was typical of the federal charities directorate, which rarely asks questions before handing out the charitable number, giving a group a bona fide status. One idea floated in charity circles is to give new charities probationary status. The charity would be elevated to full status if it proved it was doing true charitable work. What Caplan says is the next important step is a report due later this month by the Joint Regulatory Table, a task force of government and charity leaders which has been studying charity regulations for more than a year. Bob Wyatt, co-chair of the task force, said he believes the government is serious about fixing the system. His group is the latest in a series of government reports, but Canada Customs and Revenue has moved at a glacial pace. Wyatt said his task force's report will make some strong recommendations, including bringing in a range of penalties. "We are hoping for a regulator who is robust," said Wyatt, who comes from the charitable sector. He said a compliance system must be created whereby charities can be tracked and monitored. The Star's research revealed a pattern of bogus charities that, as soon as they are registered, run extremely expensive fundraising campaigns with no effort devoted to good works. By the time the federal charity's directorate gets around to investigating, two to three years have passed. Then the charity shuts down and starts up under the umbrella of a new name and a new cause. Wyatt's group will likely also recommend financial penalties for charities that fail to comply with the rules. The penalty would be payable by the charity and the money would go to a legitimate charity. Wyatt noted that legitimate charities hate rogue charities. It's a case of the minority giving the majority a bad name. He also said the donating public is confused about what makes a good charity and what constitutes a bad group. "The public needs to know what to look for when donating," said Wyatt. The trickiest issue dealt with by the task force is whether Canada will one day have an independent commission regulating charities. That system is up and running in Britain to rave reviews from the public and charitable sector there. In Canada, charities are regulated by the tax collector (because Canada Customs and Revenue issues the tax-free charitable number) and the charities directorate is badly understaffed trying to regulate 79,000 charities. Wyatt's commission has come up with four options for change, but its mandate does not allow them to favour one. That will be up to the minister and cabinet. The four options in the forthcoming report are: Setting up a charity commission similar to the English model. The commission would be independent of the taxman and would be responsible for registration, regulation and discipline of all charities. Beefing up the current charities directorate at Canada Customs and Revenue with a new focus on enforcing compliance. A hybrid of a charity commission and the existing charities directorate. Take the existing system run by the taxman and attach an independent voluntary sector agency, which would teach groups how to be good charities and comply with the law. The report will go to Caplan by the end of this month. Reference: Budget Commits $24 Million Over Two Years to Strengthen Charities Sector - Ottawa, March 29, 2004 http://www.cra-arc.gc.ca/newsroom/releases/2004/mar/0329ottawa-e.html Fact Sheet - April 2004 - Charities Regulatory Reform: Highlights http://www.cra-arc.gc.ca/newsroom/factsheets/2004/mar/04- 05RegulatoryReformHighlights-e.html Strengthening Canada's Charitable Sector: Regulatory Reform The final report of the Joint Regulatory Table, an advisory body created under the Voluntary Sector Initiative, has been released. The report, entitled "Strengthening the Charitable Sector: Regulatory Reform", examines how charities are regulated federally and looks at options for change. http://www.vsi-isbc.ca/eng/regulations/reports.cfm SOURCE: The Toronto Star, Canada - Mar. 2, 2003. 08:10 AM http://tinyurl.com/7yz55 * * * ---------------------------------------------------------------------- To sign-off Parkinsn send a message to: mailto:[log in to unmask] In the body of the message put: signoff parkinsn