Today the Toronto Star posted an article entitled “Audit of charities encounters resistance”.  I think that it is very important that there be transparency about charities and I have written quite a bit on the subject.  Charities must be transparent with various stakeholders because such transparency is important in informing stakeholders of the work of the charity, and maintaining public trust and confidence in the charitable sector.  However, I have a number of concerns with some of the statements and quotes in the article and also the article fails to broach many important issues and complexities with transparency in the charitable sector.

Many Canadians criticize charities for not providing enough information – in fact charities do provide quite a bit of information and in many cases people are not even aware the information is easily accessible whether on the CRA website or the charity’s own website.  That being said, the CRA T3010 does not cover everything and some charities make mistakes in preparing or completing their financial statements or T3010 filings and a small number are deliberately deceptive in their filings.  I have made suggestions before for additional questions on the T3010 as noted below.  Here is a link to the CRA website database if you want to see what information is captured by the Charities Directorate.

I am currently working on putting together a website (it is a beta version right now) at which will provide some thoughts on the complexity of donating effectively to charities that you care about.

Last year I made a submission to the Finance Committee on transparency which discusses transparency in the charitable sector and encourages changes to the Income Tax Act to allow greater transparency.

Here is another short piece on changing the Income Tax Act to allow CRA to say more about serious non-compliance.


Here are some excerpts from the Toronto Star article [with some of my comments in brackets and bolded] and I welcome other thoughts:

Full article

“Nineteen of Canada’s 100 largest charities do not release their full audited financial statements to the public and refused to provide them to an independent agency that evaluates charities.” [These are not the largest charities in Canada in terms of revenue or assets.  These are the 100 charities that have been identified by Charity Intelligence (“CI”) as “Canada’s Major 100 Charities” and as having received the largest fundraising revenue.  Fundraising revenue only accounts for about $13 billion per year compared to $122 billion in government grants and funding out of a total of $182 billion in revenue,  I find these descriptions “largest” and “major” to be confusing.

“It took a special request to the Canada Revenue Agency to get detailed information for big-name charities such as the Aga Khan Foundation Canada, the Royal Ontario Museum Foundation and the War Amps of Canada.” [While I agree that larger charities which typically have audited financial statements should place them on their website, it is not a legal requirement.  For example it is a legal requirement for a charity that fundraises to disclose their fundraising ratio.  You can find out more about fundraising and such transparency requirements if you read CRA’s guidance on fundraising ]

“This lack of transparency was just one of many surprising findings of Charity Intelligence Canada, an independent agency that on Tuesday launched a first-of-its-kind search engine to help Canadians decide where to donate.”  [I think that it is incorrect to say that this is a “first-of-its-kind search engine”.  CRA has a database of up to 10 years information on every single Canadian registered charity.  As well CharityCan for almost 5 years has had a very good search engine with every Canadian registered charity and reports on each of them.  AJAH has a search engine that was launched a few months ago with information on thousands of charities and there are others that I have not mentioned.  The fact that there are problems with transparency in the charitable sector is not new and certainly not surprising.  Last year Charity Village wrote that the No. 1 story relating to the charitable sector in Canada was bill C-470 and the discussion around transparency. Hopefully this article with all its weaknesses will encourage some charities to further proactively disclose information about their organizations.]

The website,, breaks down revenue, program costs and fundraising expenses in reports on each of Canada’s 100 richest charities, measured by annual revenue. [the word “richest” is probably not correct.  CI is actually looking at the registered charities with the highest “fundraising revenue” – the really rich charities are in some cases private foundations that don’t fundraise from the public at all – although their donors and the private foundations do get all the same tax benefits as other charities.]

“Charities are not legally bound to disclose their audited financial statements to the public, but it is considered ethical to do so because they take in public dollars, Thomson said.”  [It is correct that there is no legal requirement for charities to disclose on their website the financial statements although many do in abbreviated format.  It is a legal requirement, however, for registered charities to file with the Charities Directorate of CRA every single year a financial statement with their T3010 filing.  Anyone can request copies of such financial statements by asking CRA. If you want an idea of what the T3010 contains see ]

“If a charity is not transparent, you may as well reconsider donating.”  [I agree that if a large charity is not transparent that you may wish to consider another charity.  However to telescope the issue of transparency into disclosure of audited financial statement on the website of a charity is a simplification of the complexity of the issues.  Financial statements only cover 20-30% of the important information that a charity should disclose because it does not usually reflect volunteer contributions, impact, programs, etc.  An audited financial statement only provides an general overview of the financial information of a charity but contains a lot less detail than the T3010 or many other reports that charities can and often do prepare relating to their programs.] 

“Fourteen of the richest charities spend more than 35 per cent of donations on fundraising, exceeding Canada Revenue Agency guidelines. Eight spent more than 40 per cent.”


14 of Canada’s 100 richest charities spend more on fundraising than the Canada Revenue Agency’s recommended limit: 35 per cent of revenue: ” [Again I would really suggest that people read CRA’s Fundraising Guidance – CRA does not have “guidelines” of 35 per cent or a recommended limit of 35%.  Charities should avoid prohibited activities and “indicators of concerns”.  Charities should spend no more than necessary on fundraising and appropriately disclose their fundraising costs, and here is actually what the CRA provides in their guidance on the ratio of costs to revenue in fundraising:
“Fundraising Ratios and the CRA’s Approach

The CRA recognizes that the charitable sector is very diverse and that fundraising effectiveness will vary between organizations. There can be good reasons for a charity to incur higher fundraising costs for a particular event or in a particular year. As a result, a range of factors will be considered in the course of a CRA review. One of the factors that the CRA will consider is the ratio of fundraising costs to fundraising revenue. The following table provides some general guidance in terms of where the CRA may seek additional information or justification for fundraising costs.

Fundraising ratios alone are not determinative in assessing whether a charity’s fundraising complies with the requirements of the guidelines in this guidance. However, these ratio ranges give charities a way to generally gauge their performance and understand the circumstances where the CRA is likely to raise questions or concerns.

Ratio of costs to revenue over fiscal period   ……….. CRA Approach
Under 35%  ………………………………………………. Unlikely to generate questions or concerns.

35% and above ………………………………………….. The CRA will examine the average ratio over recent years to determine if there is a trend of high fundraising costs. The higher the ratio, the more likely it is that there will be concerns and a need for a more detailed assessment of expenditures.

Above 70%  ……………………………………………….. This level will raise concerns with the CRA. The charity must be able to provide an explanation and rationale for this level of expenditure to show that it is in compliance; otherwise, it will not be acceptable.

In addition to considering where a charity falls within the ratio ranges, the CRA will look to the factors described in paragraphs 10 and 11 below, when it considers a charity’s fundraising activities. In addition, the CRA’s assessment of a charity’s fundraising will take into consideration the following factors:

a.The size of the charity (which might have an impact on fundraising efficiency).
b.Causes with limited appeal (which could create particular fundraising challenges).
c.Donor acquisition and planned giving campaigns (which could result in situations where the financial returns are only realized in later years).]


If one is interested in the issue of transparency you may find this quote from the Charity Commission of England and Wales interesting:

Transparency and Accountability – great quote from the Charity Commission of England and Wales

Also I am helping to organize a conference in Toronto in February with the Charity Law Information Program with speakers from charities, the IRS, Charity Commission of England and Wales, CRA and others on governance, transparency, accountability, financial management etc. and further details will be available at the CLIP site. Read more

Here is a note on the importance of transparency for Canadian charities

In the UK and US there are other transparency disclosure requirements and questions and I think that some of them we ought to consider here in Canada.

There are about 80,000 non-profits that are not registered charities.  They are tax exempt like charities but cannot issue official donation receipts.  They are exempt from almost all transparency requirements and in many cases receive government funding and support and some also receive public donations.  They are not required to disclose anything publicly about their finances including revenues, expenditure, salaries, programs etc.  Non-profits that are not charities file an annual return and there is no reason that I can think of that that form should not be publicly available similar to the T3010 filed by registered charities.  Under the new Canada Not-for-Profit Corporations Act (CNCA) a “soliciting” corporation will have to file its financial statements with Industry Canada and such information will be available to the public.

I would like charities to have to disclose as in the UK what public benefit their charity provided in the year.  Here is a model Trustees’ Annual Report which gives one some idea of what the UK expects charities to disclose.  All UK charities need to make a Public benefit statement i.e.  “A statement confirming whether the charity trustees have complied with their duty to have due regard to the guidance on public benefit published by the Commission in exercising their powers or duties.”

Charities that make use of volunteers should have a proper place to disclose that information including number of volunteer hours and value as the use of volunteers can be more important than the financial information provided in the T3010 in some cases.

Some other UK requirements are listed below and worth discussing.

“The Annual Report should provide the reader with an understanding of how the charity is constituted, its organisational structure and how its trustees are appointed and trained and assist the reader to understand how the charity’s decision-making processes work. The level of detail provided may well depend on the size and complexity of the charity and be proportionate to the needs of the report’s readers.”

“The methods adopted for the recruitment and appointment of new trustees, including details of any constitutional provisions relating to appointments, for example, election to post. Where any other person or body external to the charity is entitled to appoint one or more of the trustees this should be explained together with the name of that person or body (subject to section 1 above if permission not to disclose has been obtained).”

“Policy on reserves stating the level of reserves held and why they are held. Where material funds have been designated, the reserves policy statement should quantify and explain the purposes of these designations, and where set aside for future expenditure, the likely timing of the expenditure. Where no reserves policy is in place, a statement should be made to that effect.  Where any fund is materially in deficit, the circumstances giving rise to the deficit and details of the steps being taken to eliminate the deficit.”

With some bigger charities the following seems useful:

“The names and addresses of any other relevant organisations or persons. This should include the names and addresses of those acting as bankers, solicitors, auditor (or independent examiner) and investment or other principal advisers.”

“Where the charity is part of a wider network (eg charities affiliated within an umbrella group), then any impact this has on the charity’s operating policies should be explained.”
“The relationships between the charity and related parties, including its subsidiaries, and with any other charities and organisations with which it co-operates in pursuit of its charitable objectives.”

“A statement confirming that the major risks to which the charity is exposed, as identified by the trustees, have been reviewed, and systems or procedures have been established to manage those risks.”

“Where a charity uses volunteers to a significant extent in its charitable or income-generating activities, this should be noted. Unpaid voluntary contributions are not included in the SoFA, because of the difficulties in attributing a monetary value to them, but it is important that readers of the report are able to understand the role and contribution of volunteers. The information may therefore explain the activities with which volunteers help, quantify their contribution in terms of hours or paid staff equivalents, and may present an indicative value of their contribution.”

“Where significant fundraising activities are undertaken, details of the performance achieved against fundraising objectives set, commenting on any material expenditure which might enhance future income generation, and explaining the effect on the current period’s fundraising return.”

Some interesting US Form 990 requirements (you can see the form and the 79 page instruction booklet) are:

“Did any officer, director, trustee, or key employee have a family relationship or a business relationship with any other officer, director, trustee, or key employee?”

“Did the organization become aware during the year of a material diversion of the organization’s assets?”

“Did the process for determining compensation of the following persons include a review and approval by independent persons, comparability data, and contemporaneous substantiation of the deliberation and decision?”

“Did the organization maintain any donor advised funds or any similar funds or accounts where donors have the right to provide advice on the distribution or investment of amounts in such funds or accounts?”