Effective and accountable charities

  • June 27, 2022

The Charities and Not-for-Profit Law Section of the Canadian Bar Association supports Senate Bill S-216, the Effective and Accountable Charities Act. That’s the essence of a letter to Deputy Prime Minister and Minister of Finance Chrystia Freeland endorsing the amendments proposed to the Income Tax Act in the bill.

The Section believes there is a legitimate need for accountability and transparency on the use of charitable dollars. Currently charities are legally allowed to use their resources in two ways: on their own charitable activities and on making gifts to qualified donees.

The CBA Section advocates for the elimination of the “own activities” requirements, along with the corresponding “direction and control” regime that applies when a charity works with third parties to carry out their charitable program.

The Section favours replacing these requirements with an “expenditure responsibility” framework that is aligned with what countries like the United States and the United Kingdom require of their own charitable institutions.

Expenditure responsibility is explained by the US Internal Revenue Service, or IRS, as the obligation for a charitable organization to exert all reasonable effort and establish procedures to ensure grants are spent only on the purpose for which they were made, to obtain reports from third parties on how the funds are spent and to make reports available to the IRS.

The Section supports Bill S-216, which it calls “carefully drafted” for how it addresses the issue of transparency and accountability on the use of charitable dollars.