The Canada Revenue Agency (CRA) has revoked the charitable registration of the Friends and Skills Connection Centre, a charity based in Etobicoke, Ontario. The revocation was effective as of September 13, 2014. According to CRA, the charity was not maintaining adequate books and records, failed to file an accurate T3010 Return, failed to operate within its charitable mandate, and was conducting serious breaches with respect to its receipting practices. Also, one of the directors of the charity was determined by CRA to be an ineligible individual. Here is an excerpt from the notice of intention to revoke letter issued by CRA:
"The audit by the Canada Revenue Agency (CRA) revealed that the Organization has not complied with the requirements set out in the Income Tax Act (the Act). In particular, the Organization failed to maintain adequate books and records, failed to file an accurate T3010 Information Return, and failed to operate within the Organization's charitable mandate. In this regard, none of its reported expenditures were charitable in nature, nor was there any proof that these expenditures were actually made.
In addition, serious breaches were identified with respect to the Organization's receipting practices. The audit showed that the Organization significantly under-reported the value of the receipts it issued, relative to amounts claimed by taxpayers. The CRA was unable to verify the full amount of receipts issued, as the Organization failed to maintain any substantiating documentation. Of further concern, the Organization's records did not support that the gifts were, in fact, made, as bank deposits did not match the donations purportedly made. In addition, third-party verifications did not reveal evidence that the individuals had made these donations.
Finally, one of the Organization's directors during the audit period was previously a director of Faith Assemblies Mission International, at a time when it engaged in conduct which constituted a serious breach of the requirements for registration under the Act, for which its registration was revoked in 2009. As such, this director is an "ineligible individual" as defined in the Act. The Organization's banking and other records, in fact, continue to be in the name of that organization."
CRA also had a reminder of what an ineligible individual is. "In order to safeguard the assets of registered charities and protect the donations of Canadians, the Income Tax Act allows the CRA to revoke a charity's registration or suspend its tax receipting privileges if it is found to be controlled or managed by an "ineligible individual". In general terms, an "ineligible individual" includes a director, trustee or official of a charity previously revoked for serious non-compliance, a promoter of an abusive tax shelter gifting arrangement, or an individual convicted of a relevant criminal offence or relevant offence."
CRA has released detailed guidance recently on ineligible individuals.
You can read the full press release.
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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.