I was very pleased to see Gabe Oatley from the Future of Good interviewing Sharmila Khare, the Director General of the Charities Directorate. This took place on March 22, 2023, and you can find the full interview here. I sure hope that this becomes a regular feature.
Here are a few questions and answers that I thought were particularly interesting:
What steps is the CRA undertaking to support funders to use this new approach to grantmaking? One charity sector professional I’ve spoken with was supportive of the draft guidance product, but said he worried that without marketing the new guidance, funders might not change their behaviour to take advantage of the new rules.
I’ve heard similar comments. As the regulator of the sector, our responsibility is to put out administrative guidance so that the sector understands how we intend to administer the new legislative framework. We’re not necessarily the marketers of the new policy. I think the sector has an important role to play and also helping to ensure the sector understands the new framework and the new opportunities that will be available to charities who wish to work with non-qualified donees to further their charitable purposes.
Some have expressed concern that many foundations, particularly those whose charitable purposes are focused on “providing support to qualified donees,” might need to amend their charitable purposes to be allowed to leverage this new way of working with non-qualified donees. What is your perspective on that?
I think that is an important consideration that’s come up through the consultation process. We will be providing a little bit more guidance to the sector on how they can update their charitable purposes. Because at the end of the day, the charity needs to be able to demonstrate that resources were used to further their stated charitable purposes. It’s important for any charity to ensure that their purposes reflect the type of work they’re engaged in today.
So that will need to be updated for foundations for whom their stated charitable purposes are supporting qualified donees — they will have to make that change?
It will always depend on the particular fact and what the charitable purposes of any foundation currently look like, but it is likely that some adjustments will need to be made.
A more philosophical question: I worked on a story about CRA’s non-qualified donee draft guidance document. For that piece, I spoke with a foundation executive who was happy with a lot of what was in there but was disappointed to see the heavy focus on risk in the document. He said he believed the heavy focus on risk was indicative of the fact that this policy document was being created by what is, fundamentally, a tax enforcement agent. The charitable sector does not have a “home and government,” as has been long demanded by the sector. And for many charities, it seems, its front door into government is through CRA, which is a tax enforcement agent. As someone who’s been doing this work for a long time, what’s your perspective on what CRA is able to do; and any tensions that arise from the responsibility that CRA holds vis-a-vis its work with the sector.
First and foremost, the Charities Directorate, we’re a group of very passionate people who are there to serve the charitable sector. Our role may originate through the regulatory framework for charities and other qualified donees that is laid out in the Income Tax Act, but really what’s in our heart is a desire to see a strong and vibrant charitable sector — a sector that Canadians can trust — and Canadians will trust the sector if it is in compliance with the regulatory framework. So, I think the sector needs a regulatory body. It just so happens that the model we have in Canada has the Canada Revenue Agency playing an important role. But that doesn’t mean the agency is not supportive of the sector. We want to educate and support the sector so that they are in compliance with the regulatory framework and that’s what Canadians expect. That’s what parliamentarians expect.
Does the CRA’s role as a tax enforcement agent shape the relationship that charities are able to have with the federal government?
The Charities Directorate — it’s kind of like we’re our own little world within the tax agency. People in this directorate are here because they’re very passionate about this particular sector. They’re here in the directorate working by choice. Even though we are part of a big tax agency, and can benefit from many of the initiatives that the agency has put forward, we’re still very much a boutique group and a unique place to work with a very focused mandate.
There have been concerns, especially from Muslim charities across the country over a study that found that of the sixteen charities audited by the CRA’s counterterrorism financing group, the Review and Analysis Division, between 2008 and 2015, eight had their status revoked — six of which were Muslim-led. A study by a University of Toronto academic also found that Canada’s anti-terrorism financing and anti-radicalization frameworks can produce bias. Can you explain what the Review and Analysis Division is, why it exists, and what efforts have been made to limit possible anti-Muslim bias?
Our Review and Analysis Division is a niche area in the Charities Directorate that was really set up to protect the charitable sector from the abuse of terrorist financing. Charities are particularly vulnerable when it comes to the possibility of being used to flow monies for the wrong purposes. This is part of a global commitment that we have to protect this sector from abuse. Our Review and Analysis Division has three primary functions. The first is to review all applications for charitable registration to ensure that there are no risks of terrorist financing. Right at the entry point, we want to ensure that that risk is mitigated. That’s part of the workload that is, perhaps, a little bit less well understood. They also monitor the sector to see if there are trends or new developments in the charitable sector where these risks may emerge. And we have a small compliance function as well, where, if there is a risk — and we are working off the national inherent risk assessment that is published by the Department of Finance — if there is a risk of potential abuse, then that’s a flag for us and we will go in and do a full audit on the charity. There have been allegations of bias, but I think the policies and procedures and systems that we have in place in the Charities Directorate are designed to prevent bias presenting itself in the selection of a charity for audit or the denial of a registration. We work in team environments so it’s not one person making the decision. It’s done in collaboration with colleagues, and there’s lots of checks and balances in the system. Those are all designed to minimize or eliminate bias in our decision making process and our officers pursue a lot of training on the topic of unconscious bias.