A special political-activities audit of charities by the Canada Revenue Agency (CRA) has been under scrutiny recently. The special CRA probe, backed by $13 million and created in 2012, looks at whether charities are following laws which limit their political involvement. But critics claim not all charities are being treated equally, and the majority of the 60 charities under investigation have had a tumultuous relationship with the federal government.
The Canada Not-for-profit Corporations Act (NFP Act) came into effect on Oct. 17, 2011, however, corporations incorporated under Part II of the Canada Corporations Act (“CCA”) continue to be governed under the CCA until Oct. 17 of this year. Charities are allowed to engage in some secondary political activity, which consists of less than 10 per cent of its resources and is non-partisan.
In preparation for this year’s deadline, some charities are already reporting some difficulties with the CRA. For example, Oxfam Canada included in its filings that they purpose of their organization was, “to prevent and relieve poverty, vulnerability and suffering by improving the conditions of individuals whose lives, livelihood, security or well-being are at risk.” The CRA rejected “preventing poverty” as being a charitable goal, and replied, “Preventing poverty could mean providing for a class of beneficiaries that are not poor.”
This wasn’t Oxfam’s first confrontation with the current government in the past year. Multiculturalism Minister Jason Kenney clashed with the charity, which engages in extensive activities over water availability and usage, when Oxfam criticized a new Israeli soda factory built in a West Bank settlement. Last year, the charity sent an open letter to Prime Minister Harper in objection to a “friends and enemies stakeholder list” which used to brief cabinet.
Last month, the CRA launched an audit of PEN Canada, an organization dedicated to promoting freedom of expression. PEN has a history of criticizing the current government for censoring public scientists and for alleged involvement in spying on Canadian citizens. Ironically, one of their areas of interest over the past year, prior to their own audit, was how and why charities were being audited. They made a series of freedom of information requests to help determine this, and requested a list of all letters sent by the CRA between January 1, 2006 and December 31, 2012 to charitable organizations over political status. The stonewalling and lack of transparency it received as a result is documented on their website.
The CRA has rejected the notion that they use political orientation to scrutinize a charity, but they have acknowledged that they take into consideration complaints by MPs and cabinet members. A significant number of the charities under investigation are related to environmental causes, and have been a particular concern for the federal government. Joe Oliver, Minister of Finance, said that environmental groups had a “radical agenda” in 2012, when he was Minister of Natural Resources. The Minister of the Environment of the time claimed they were used to “launder offshore funds,” an accusation which is typically reserved for syndicate crime networks or terrorists.
Although some claim that there are right-leaning charities also under investigation, others point out there is simply no evidence that this is the case. Gareth Kirby, who recently completed his thesis at Royal Roads on An Uncharitable Chill: A Critical Exploration of How Changes in Federal Policy and Political Climate are Affecting Advocacy-Oriented Charities, says on his blog that the blame is not with the CRA but with the government itself,
The government has created a funnel that leads CRA staff to focus their attention on certain sectors. By allocating additional audit funds to CRAwhile other government departments saw cutbacks, by designating those funds for ‘political activities,’ by speaking publicly about the need for CRA to respond to public complaints, the government created a funnel that led CRA auditors to charities with relatively higher self-reported ‘political activities’ (which are perfectly allowable up to 10% of the organization’s resources when done properly) and charities with complaints in their files.
These will very strongly tend be organizations with different public policy perspectives than that of the government.
The funnel Kirby describes is outlined as follows:
Starting in 2012 and lasting all the way to the 2014 federal budget, federal cabinet ministers, with back-up comments from the Prime Minister, write and speak in public of charities in the same breath as money-launderers, criminal organizations, and terrorist organizations. Environmentalists are labeled “extremists” undermining Canadian families. Environmental organizations are added to the national terrorism strategy as potential threats to security. CRA staff see this as surely as the rest of us and know who the government is concerned about.
In 2011, a political employee leaves the employ of federal cabinet minister Jason Kenney to found Ethical Oil, an aggressive private non-profit that advocates on behalf of Canada’s petrochemical sector. The organization starts a website and files complaints to the CRA against energy-issue charities, accusing them of breaking regulations concerning “political” and partisan activities. The operative returns to Ottawa with a promotion to the Prime Minister’s Office. People with connections to the Conservative Party continue to run Ethical Oil.
The 2012 federal budget sets aside $8 million for stepped-up CRA audits of “political activities” and other matters, at the same time as other government departments get cuts in an austerity budget that laid off approximately 2000 government scientists and massively reduced environmental regulations and public consultation processes. In discussing the changes, Finance Minister Jim Flaherty refers to citizen complaints.
CRA now has the financial resources to increase audits for “political activities” and aims for 60 over three years. Staff check files to discover which organizations are declaring higher percentage of resources devoted to “political activities” (most charities are allowed up to 10 percent of resources, smaller charities up to 20 percent). These tend to be organizations with different ideas than the current government about the best public policies for Canada.
CRA finds multiple complaints from Ethical Oil in the files of organizations that address environmental and economic issues around climate change, expansion of the oil sands or gas extraction, pipeline and train transportation, export by ocean tankers, and protection of habitat and species in Alberta andBC related to the above.
Interestingly, a February 6, 2014 news report by CBC quoted Alberta Conservative MP James Rajotte noted that he assumes CRA “receive all sorts of information from all sorts of Canadians, in terms of who they should or should not audit.”
Perhaps there are complaints from individuals or groups in the CRA files of charities in other sectors my data identified as targeted—development/human rights groups and groups with significant funding from labour unions—or perhaps there are other yellow or red flags that drew CRA attention.
Charities with high self-declaration of “political activities” and/or complaints are given early and particular attention for auditing.
PEN Canada has already indicated that it is considering legal options, and has had offers of assistance from a large unnamed Bay Street law firm.