The Government believes that there is a pattern of the same individuals being involved in multiple abusive charities. However, the Budget materials admit that under the current rules the CRA may be unable to refuse registration even if there is a high risk of abuse because of the past behaviour of the charity’s directors and others involved with the charity.
The Budget proposes to give CRA new powers over a charity’s governance. The proposals will give CRA discretion to refuse to register an applicant or to revoke an existing charity or to suspend its receipting ability if any individual director, officer, or person who otherwise controls or manages the charity has engaged in any of the following:
- been convicted of any crime (in Canada or elsewhere) involving financial dishonesty or that is otherwise relevant to the organization;
- been convicted in the last five years of any regulatory offence (in Canada or elsewhere) involving financial dishonesty (such as securities legislation, consumer protection legislation or fundraising legislation) or that is otherwise relevant to the organization;
- was a director, officer, or person who otherwise controlled or managed a charity or Canadian amateur athletic association that engaged in serious non-compliance for which its registration was revoked within the past five years; or
- was a promoter of a charitable donation tax shelter involving a charity that was revoked in the past five years for participation in the shelter.
The Budget papers confirm that the revocation/refusal is discretionary and that CRA will consider the circumstances. Although the Budget suggests that background checks will not be necessary, we suggest that cautious charities begin to obtain them for board members and management. The Budget also confirms that the above provisions are not to take effect until the later of January 1, 2012 and Royal Assent and suggests that CRA will consult with the charitable sector in developing its policy on these governance proposals.