The Canadian Jewish News (CJN) published an article today by reporters Ellin Besner and Jonathan Rothman, “Read about why JNF Canada lost charitable status after a decade of problems“.
We received last week from CRA a copy of the Notice of Confirmation (June 26, 2024) and Notification of Revocation (August 20, 2019) of Jewish National Fund of Canada Inc. from the Charities Directorate of CRA. Here is the PDF document Jewish National Fund of Canada Notification of Revocation -Redacted.
The letters and attachments from CRA to the charity and from the charity to CRA are 358 pages long. We recommend that anyone interested in compliance, the Jewish community, or being involved with JNF Canada in the future, review these letters in their entirety. As we realize some people may not have that time, we have attempted to provide a summary of these letters, but that is not a replacement for reading them. None of the allegations in these letters have been proven in court, and as we have blogged previously, JNF Canada is challenging the CRA in the Federal Court of Appeal. They have also made an application for judicial review to the Federal Court on August 20, 2024.
If you are in a rush, probably the most useful pieces of the PDF are:
CRA’s Notice of Confirmation – pages 1 -12
CRA’s ITR Appendix – pages 333 -345
Even though we have information from JNF and the PDF we still do not know a lot of other information. Some examples of what we don’t know much about:
-What is the role of JNF Israel in this revocation? Were they trying to push JNF Canada to be compliant, or were they obstructing JNF Canada’s efforts?
-What advice did JNF Canada get over the last 45 years from various professional advisors?
-Did JNF Canada implement the advice, ignore it, misunderstand it, etc?
-Why was JNF Canada having so many problems understanding the CRA concerns on direction and control and being so unable to satisfy the CRA concerns? There are 5 cases on foreign activities and direction and control; therefore, one would think it is quite settled law.
-What was dealt with in the earlier audits?
My guess is that in 20 or 30 years, someone will write a book that gives much more information than what we have today.
All numbers referred to in this post are the page numbers of the PDF document (i.e. from 1 – 358)
Here are some bullet points on what I think may be some of the most interesting things learned from these documents:
- 358 pages of letters and schedules
- CRA’s reluctance to register JNF Canada in 1967
- Extensive projects by JNF Canada on IDF bases
- CRA dropped concern about operating over the Green Line many years ago
- Big disconnect between CRA and JNF Canada
- JNF not maintaining direction and control and not even doing what CRA says it promised CRA it would do to maintain direction and control.
- JNF Canada doing lots of things that, in my view, are not necessary for direction and control and not doing many things that are necessary for direction and control.
- Patience of CRA. 5 audits over about 47 years.
- Letters were generally quite respectful. (but some really interesting distractions)
- Raising money for trees in Israel – described by JNF as a “gimmick” -JNF says activities are really about employment opportunities for hard-to-employ Israelis.
- UK litigation between JNF UK and JNF in Israel
- Even though 358 pages, many issues were not raised by CRA – some example of the other issues include:
- numerous issues raised by Charity Intelligence in the past or
- issues from reviewing recent T3010 JNF Canada filings or
- mission trips on the JNF Canada website and receipting which was visible until a couple of weeks ago or
- lack of JNF Canada required filings with Corporations Canada.
Basic Timeline
1961 incorporated
1967 – CRA had concerns about JNF Canada but after some representations, were ultimately satisfied and registered JNF Canada as a registered charity
Audits covering 1977, 1981, 1985 and 1995 (and later for 2011, 2012)
CRA letter dated August 21, 1989 raised concerns about the Organization’s direction and control, and maintenance of books and records; however, the audit was closed without any sanction. (34 years ago)
2014 CRA audits JNF Canada over fiscal year 2011 and 2012
May 12, 2016 CRA send letters (AFL – Administrative fairness letters) on areas of non-compliance
September 12, 2016 Charity response
2016 -JNF Canada said in 2019 that they stopped funding projects on military bases as of 2016
April 19, 2018 – second AFL sent by CRA to charity
May 17, 2018 and October 5, 2018 further charity responses
In 2019, the CBC wrote that they had heard from the Jewish National Fund of Canada that their charity was being audited by CRA over allegations of the charity funding a foreign military by building infrastructure on Israeli military bases.
August 20, 2019 CRA sends Notice of Intention to Revoke to JNF (responding to letters from JNF in 2016 and 2018) and attached ITR Appendix A and B
2023 appeal to Appeal Branch (internal appeal within CRA)
June 26, 2024 CRA sends Notice of Confirmation to JNF saying intending to continue with revocation
July 24, 2024 – JNF family and members were told about CRA’s intention to continue with revocation.
July 25, 2024 – JNF press release – appeal to the Federal Court of Appeal
According to data on CharityData.ca, JNF Canada had revenue between 2003 and 2022 of $241,691,171. Obviously, the amounts are much greater if you go back to 1967, but I don’t have access to that information.
High level
Page 2 “We remain of the opinion that the activities of the Organization are not charitable, that the information about the eligible beneficiaries are lacking and that the Organization does not have direction and control over its funds sent to Israel.”
SEEMINGLY BIGGER ISSUES
Objects/Purposes
JNF was prepared to change objects and they mentioned that a number of times (but never did in 57 years)
-CRA said on pages 1-2 that the proposed objects were charitable but
“While the proposed amendments may be valid charitable purposes, the question of whether an organization is constituted exclusively for charitable purposes cannot be determined solely by references to its stated purposes, but must take into account the activities in which the organization currently engages”
On page 131, the Charity proposes in a letter on September 12, 2016, new objects:
The Charity’s charitable purposes are broad and are not in accord with the current standards imposed by CRA as a condition of registration on new applicants. Although exclusively charitable, as required by law, they could be made more specific. To this end, subject to CRA’s views in this regard, the Charity proposes that its objects be amended and restated as follows:
In August 2019, CRA wrote to the charity that on page 335:
While the proposed purposes are in and of themselves charitable purposes, the question of whether an organization is constituted exclusively for charitable purposes, as explained in both AFLs, cannot be determined solely by reference to its stated purposes, but must take into account the activities in which the organization currently engages.
CRA notes on page 337:
We are not commenting on the merits of the Organization’s purposes, or purported activities. Our position stems solely from our responsibility to ensure that the benefits provided to registered charities under the Act are made available only to those entities that operate within the legislated and judicial boundaries of charity.
CRA notes on page 337 that fundraising materials are beyond the scope of what is charitable:
The Organization’s representations have not alleviated our concern with the Organization’s purposes, as presented in its promotional materials. Given the Organization’s past and present statements, including its “vision,” descriptions of its purported activities, and its magazine, it is our position that beyond the purposes for which it was constituted, the preponderance of available information demonstrates the Organization also operates in a manner which furthers the following unstated collateral purposes:
- To serve as the caretaker of the land of Israel;
- To build the social infrastructure of the land of Israel for the benefit of the People of Israel; and
- To build the foundations of Israel’s future.
While the second of these purposes is similar to the charitable purpose of providing public amenities, the first and third are not purposes the courts have found to be charitable. Therefore, even if it were to amend its constating purposes, as has been suggested, it is our view that the Organization does not operate in furtherance of exclusively charitable purposes, as a result of the unstated non-charitable collateral purposes identified above.
Lack of documentation/supporting records
CRA notes on page 4:
For example, the Organization was unable or unwilling to provide supporting documentation showing that the indigent workers selected were eligible beneficiaries. There is no documentation provided:
- demonstrating the beneficiaries exhausted all of their unemployment benefits and were being paid income support from the National Insurance Institute;
- demonstrating the beneficiaries were unable to find work by themselves;
- demonstrating the beneficiaries were non-professionals;
- demonstrating the beneficiaries were residing in areas with a limited number of positions applicable to their professional level;
- demonstrating that the selection criteria were created by the Organization instead of KKL
has expressed within our letter dated July 26, 2023; etc.
Lack of Direction and Control
In a June 26, 2024 letter, CRA notes:
Furthermore, the documentation reviewed for the audit period does not show that the Organization had direction and control over the funds sent to its agent and that the funds sent were used for the Organization’s activities. Prior to issuing our proposal letter on July 26, 2023, we requested the Organization provide all of its documentation for two completed projects. However, no such information was received from the representative.
On page 9, CRA states:
“Just providing a few invoices and some type of agreements is not sufficient to demonstrate that the Organization had direction and control over the funds provided or that the activity was theirs.”
“It is our opinion that the Organization is avoiding addressing the audit findings by creating various types of agreement with its agent in Israel. Furthermore, we found various issues with the different agreements created by the Organization. These issues were not addressed by the Organization aside from saying that they were no longer valid and replaced by another agreement. The non-compliance findings were significant, and proper documentation of the Organization activities in Israel was not provided.” (Page 9)
“Monthly payroll listings of indigent workers hired in 2011 and 2012 were provided to the auditor. The listing contained the name of the indigent worker, the employee number, weeks worked, gross pay and net pay deposited in the indigent workers bank account and the project number. No information was provided about the projects being worked on, such as addresses of the projects, the progress of the project, etc. mentioned to the auditor that the CRA’s request for information on October 31, 2014, was information the Organization never requested from KKL. (Page9)
Eitanim Psychiatric Hospital
-JNF suggested earlier certain protocols that JNF thought were improvements that would be used in future agreements and gave 2 projects as samples when asked by CRA but
“The agreement reviewed for this project does not contain the statement that the Charitable Activities Protocols mentioned would be contained within any future agreements.” (page 5)
-JNF had said it would get invoices translated into English and only then pay, but this was not done.
Gave one payment – for $300k – for a “small portion of the work”.
“It is also reasonable for us to infer that the Organization was contributing funds to an established project of which it had no direction and control and gifting to a non-qualified donee.” (page 6)
Some of the documents provided were not for the Eitanim Psychiatric Hosital but a different medical centre. CRA says on page 6, “Therefore, it is reasonable to conclude that these invoices were not related to the Eitanim Psychiatric Hospital project.”
Kiryat Malachi Accessible Playground Project
Finally, as per the Minutes of Caniscom held on July 3, 2011, it is reasonable to conclude that the Organization was not conducting its own activities, but acting as a conduit for KKL, by being its fundraising arm in Canada or by providing KKL with a private benefit, by supporting its work, by paying part of its labor cost. A similar conclusion can also made with Caniscom minutes that was held on June 14, 2012. (page 7)
CRA 2016 letter “that when the Organization has funds available, it transfers such funds to KKL in Israel. It appears from that conversation that the Organization does not inquire about the progress of the work done or provide any instructions with respect to how the funds should be used prior to making those transfers. (page 22)
On page 23:
No further details were provided to the CRA regarding the projects mentioned in those minutes. It appears that CANISCOM did not provide the Organization with details regarding the projects conducted such as: the place, the address: the discussions, the informal communications via telephone or email, the plans, decisions regarding the choice of projects, the visits, the photographs, the progress reports, the Work in progress, the achievements, the on-site inspections by the Organization’s staff members, the receipts for expenses and financial statements or any documents related to these projects that would help us determine that they were, in fact, authorized controlled and monitored by the Organization.
Despite the fact that the Organization received some documents from CANISCOM and KKL, it does not appear that the Organization has had an active role in carrying out the activities in Israel. Rather, the Organization appears to have given full authority to KKL to use its funds in the accomplishment of KKL’s own programs, more specifically to pay the salaries of workers. Therefore, we are of the view that the Organization failed to maintain effective direction and control over the use of its resources such that it can’t be determined that all of its resources were devoted to its own charitable activities. In fact, it appears the Organization was merely transferring funds directly to KKL, a nonqualified donee, without direction and control. Gifting resources to support the activities of an organization that is not a qualified donee is a contravention of subsection 149.1(1) of the Act.[my emphasis]
CANISCOM MINUTES
For the minutes of July 3, 2011:
A field trip then took place to view some of the new projects being developed in Israel. The visit included the following areas around Jerusalem. The Committee was informed of the background and rational of each site as well as the progress of each project – Restorers of Jerusalem, Rabin Park, Ramot Forest and Mount Scopus. Explanation was provided concerning the projects undertaken in Canada by donors. Projects are used in order to let the donors know where their dollars are being developed, however the money raised is allocated to pay indigent workers who work on these projects. (page 22)
For the minutes of June 14, 2012:
“REDACTED provided some background on the field trip that they were to partake in which included projects in the area of Sederot, a water reservoir, the new forest and of course. the new park being established. REDACTED pointed out that although JNF sells projects in Canada, the money raised goes to pay the salaries of indigent workers that work on these projects.
Page 37 of the PDF CRA writes:
For example, while the Organization stated it maintained direction and control over the payments of indigent workers, the documents it submitted to us did not adequately support this claim. We note that documents provided, such as the monthly expenditure reports for fiscal years 2011 and 2012 (Exhibits H-8 and 9), were requested from the JNF in response to our query, suggesting the Organization did not regularly oversee these expenditures. These included, for example, an email – Subject title: Monthly Payroll – CRA Query (Exhibit H-1), which read in part as follows:
“I have a detailed list of all the field workers with their gross and net pay for 2011 and 2012. I have also attached the documents relating to the CRA query re KKL (JNF) Payroll”.
“At month-end the Salary computer system generates a detailed list of workers and their net pay together with their bank details”.
Also, because the monthly expenditure reports were provided in Hebrew, we could not verify the Organization’s level of oversight concerning the following details, which were not otherwise provided to us:
- which projects the indigent workers were assigned to;
- whether projects themselves furthered the Organization’s charitable purposes;
- what type of work the workers provided;
- the geographic location of each project; and
- the status of each project.
No documentation was provided to show that the Organization had the authority to approve, amend, or reject the proposed staffing requirements and salaries of indigent workers. Further, no documentation was provided to show that the Organization had assessed potential indigent workers against a set of defined criteria it had itself established, and how it determined particular workers were eligible beneficiaries of its charitable relief.
Page 39:
As mentioned above, the Organization stated it carried out its activities in Israel through JNF. The Organization has submitted an unexecuted general agency agreement establishing the parameters of the agency relationship and providing for the conduct of charitable projects, which are not clearly specified. It is our understanding the specific charitable projects to be undertaken would be the subject of written schedules conforming with Schedule 1, attached to the agreement, however, no specific project schedules were annexed to the general agency agreement provided to us. While the Organization’s representations provided a brief description of the projects it is undertaking or will undertake (Schedules A & B), specific details are lacking.
On page 40;
The Organization stated its Board approved its annual budget and any expenses exceeding the annual budget, as per it by-laws. However, no annual budgets and no supporting documentation substantiating related Board approvals were provided to us.
On page 80 the Charity says:
Co-operation with the Agent and affiliated charities
As described above, the Charity and the Agent worked together closely through the entire process of project selection, project design, and project supervision. The Charity selected projects fundraised money, and then engaged the Agent to employ Indigent Workers to work on the Selected Projects. These projects were often funded by several organizations with other foreign charities or the Agent itself providing funds to buy supplies or capital property. In all cases, the Charity exclusively supplied funds to pay the salaries of the Indigent Workers.
Every year, the Agent holds a KKL Conference for the Charity and other affiliated charities. At these conferences. the leaders of the various charitable organizations discuss future projects and best practices.”
The above statement probably does not appear to CRA to be a distinct activity of a Canadian charity as required by CRA guidance.
On page 339 CRA states:
The representations offer commitments, and demonstrate a potential capacity to exercise direction and control. For example, they state that the Organization continues to employ a manager and has a committee to assist in overseeing its purported activities. However, they do not provide the necessary details or documentary evidence to enable us establish that the Organization would, in actual fact, adequately direct and control the use of its resource for its own activities, in furtherance of charitable purposes, as required by common law.
The structure was not acceptable to CRA
-JNF Canada is giving funds to KKL to hire hard-to-employ people
“CRA would advise that simply paying the salaries of workers is not a charitable purpose in itself, nor does it further any charitable purpose.” (page 24)
-JNF Canada has a large number of ‘projects’ – just paying for hard-to-employ people, not supervisors, not equipment, not supplies, etc.
CRA notes on page 24:
“Also, the courts have not recognized “providing employment” or “helping people find employment” as charitable purposes in and of themselves when the beneficiary group is the general public. However either providing employment, or helping individuals find employment, could be a charitable activity if it directly furthers one of the following charitable purposes:
- Relieving poverty by relieving unemployment of the poor;
- Advancing education by providing employment-related training; and
- Benefiting the community in a way the law regards as charitable by.
-Relieving unemployment of individuals who are unemployed or facing a real prospect of imminent unemployment and are shown to need assistance;
– Relieving conditions associated with disability;
– Improving socio-economic conditions in areas of social and economic deprivation; and
– Promoting commerce or industry.
On Page 24 CRA says:
Relating the above to the Organization’s purported activities in Israel, we have examined whether paying salaries to indigent workers could be considered to be relieving unemployment of individuals who are in need. In order to be recognized as charitable, in this respect, activities considered to relieve unemployment must be aimed toward enhancing an individual’s employability, which would generally include some or all of the following: ·
- Providing employment-related training;
- Providing career counseling;
- Providing assistance with resumes or preparing for job interviews; and
- Establishing lists of available jobs.
The focus must be placed on providing training as opposed to providing an individual with employment or supplying an employer with staff. However, the audit showed that the Organization is solely financing the employment of individuals that are poor and paying their salaries by providing funds to a non-qualified donee. As mentioned above, neither providing employment, nor financing the salaries of such individuals is a charitable endeavour. The only exception would be when operating social businesses for persons with a disability. which has not been established in this case. Furthermore, when the emphasis is on helping employers recruit employees, this does not further a charitable purpose due to the potential delivery of a more than incidental private benefit to the employers. Considering the above, the Organization did not demonstrate that these activities enhance employability of the workers. Therefore, it would not qualify as relieving unemployment. We would also advise that even if the programs were designed to comply with the requirement for registration, the Organization failed to show that it was carrying on its own charitable activities. As the documentation submitted during the audit in support of these programs did not allow the CRA to determine that the Organization had ongoing direction and control over the use of funds transferred to KKL and that KKL was clearly acting on its behalf, we are of the view that these programs were not the Organization’s own activities. Consequently, it appears that the Organization did not conduct any charitable activities in Israel. [my emphasis]
Page 34 CRA says:
Based on our review of the Organization’s promotional and marketing materials, and its website, it is our position that the projects are its main focus, and the employment of indigent workers serves as a means to an unstated end of broadly supporting the work of JNF.
Armed Forces of another country (MILITARY)
On page 47, CRA states:
Support for Armed Forces of another Country
The courts have stated that some activities may not be charitable when carried on in a different country. For example, increasing the effectiveness and efficiency of Canada’s armed forces is charitable, but supporting the armed forces of another country is not. The following projects, while not an exhaustive list, support our finding that the Organization’s resources were used to conduct activities in support of the Israel Defense Forces (IDF):
1) Sde Boker- Gadna Base – Outdoor Fitness Area (Project No.8323)
Based on JNF’s previous website, the Organization contributed funds in 2015. The implementation status is “in progress”. The Gadna is a special program that prepares young Israelis for their service in the IDF. Almost all Israeli high school students participate in one week of Gadna activity before joining the army. KKL-JNF and the Organization are creating an outdoor gathering and fitness area at the Gadna base at Sde Boker for the regular army staff. 37
2) Tse’elim IDF Base – Landscaping (Project No.11537)
Based on JNF’s previous website, the Organization contributed funds in 2015. The implementation status is “in progress”. KKL-JNF and the Organization are developing three areas of Negev’s extensive Tse’elim army base. JNF advised donors that “by contributing to the landscape development project at the Tse’elim IDF base in the Negev you will become part of the special relationship that KKL-JNF has with the Israel Defense Forces.”38
3) Tel Nof Air Force Base (Project No.13425)
Based on JNF’s previous website, the Organization contributed funds in 2015. The implementation status is “detailed planning”. The Tel Nof Air Force Base is a highly important military branch dedicated to defending the state of Israel. KKL-JNF and the Organization, in cooperation with the IDF, are planning recreation projects that focus on children and youth, located close to the homes of the air force staff. A donation to this project goes towards establishing and improving recreation areas for the children of families who live on an air force base.39
Further, according to the 2016 JNF Canada Staff Mission Tour document, the Organization made donations to three projects at the Tel Nof Air Force Base that included the Flight Squadron 133, Flight Squadron 210 and four play areas for the families’ children.40
4) Palmachim Air Force Base (Project No. 14111}
Based on JNF’s previous website, the Organization contributed funds in 2016 to the quality of life for the crew of the 124th Squadron, a helicopter squadron based at the Palmachim Airbase, located near Rishon LeZion. The project involved creating a suitable moadon (meeting place) that served as a place where crew can relax and refuel.41
5) Nevatim Air Force Base (Proiect No: 14112)
Based on JNF’s previous website, the Organization contributed funds in 2016 to repair the club (moadon) facilities and kitchenette of the 131 Squadron – The Yellow Bird – at the Nevatim Airbase. The refurbished club provided the crew with a seating area, TV, fully equipped kitchen and dining area.42
6) Hatserim Air Force Base (Project No. 14012)
Based on JNF’s previous website, the Organization contributed funds in 2016 for a relaxation area for the benefit of the pilots and staff at the Hatserim Air Force Base in the Negev. Improving quality of life for air force personnel who, because of their work, live on the base with their families, is crucial for their personal well-being and that of their families, in addition to contributing to the performance of the pilot team.43
7) Bat Galim Naval Base (Proiect No. 14066)
Based on JNF’s previous website, the Organization contributed funds in 2016 to help develop the training complex at the Bat Galim Naval Base. The project included installing pergolas, upgrading the paved plaza; removing unsightly, exposed pipes; installing planters and tables; dismantling and flooring; installing KKL-JNF benches and tables; and a donor recognition pillar.44
8) Haifa – Bat Gahm Naval (Project No. 14070)
Based on JNF’s previous website, the Organization contributed funds in 2016 to help facilitate the upgrade of the existing auditorium for soldier intake, training and conferences at the Bat Galim Naval Base. The facility, holds some 150 soldiers, including a stage and screening room.45
9) Sports Facility in Kiryat Shemona
According to JNF’s website, in 2013 the Balaban family, and friends of KKL-JNF from Canada, contributed towards building a multipurpose sports and fitness facility at the Kiryat Shemona Hesder Yeshiva and participated in the cornerstone ceremony. The members of the Balaban family told the audience the facility was intended to support service in the IDF as follows:” … It is an honor for us that students here in select units of the IDF, serving the community and studying Torah, will be able to play and exercise in this court. The installation of the sports facility would not just be for fun but for sports and physical fitness for their service in the IDF”.46
Summary
While the Organization stated it maintained direction and control over the resources used to support indigent workers, we were not provided with sufficient documentation to support this position. Further, the Organization’s representations did not demonstrate it maintained continued direction and control over its activities, and over the JNF’s use of its resources, and that its activities furthered its charitable purposes.
In summary, it is our position that the Organization did not devote its resources to charitable activities carried on by the Organization itself, based on its:
- a) Lack of direction and control over the use of resources/resourcing non-qualified donees; and
- b) Conduct of non-charitable activities
Accordingly, it is our position that the Organization has failed to meet the requirements of subsection 149.1 ( 1) of the Act that it devote substantially all its resources to charitable activities carried on by the Organization itself. For this reason, it appears there may be grounds for revocation of the charitable status of the Organization under paragraph 168(1 )(b) of the Act.
On page 190, the Charity notes:
-
IDF
The Charity stopped performing activities on IDF military bases in 2016. In its proposed compliance agreement, the Charity commits to not do so in the future.
On page 342 the CRA notes:
CRA’s position
…. With respect to our second concern, we acknowledge the Organization’s assertion that it ended activities on IDF military bases in 2016. However, the assertion is the only evidence we have of that change. In an attempt to determine if the Organization had ended its purported activities that support the IDF, we looked to the Organization’s website under Projects and, under the headings Education, 15 Tourism and Recreation, 16 and Forestry and Environment. 17 The “Support a Project” link in each led to descriptions of projects, purported to be those of the Organization.
Under the heading “Security,” we followed the “Support a Project” link, and found “Protected: Security” which required the reader type in a password to view the content. We did not have a password.
The descriptions of the projects considered above show the continued lack of a clear delineation between the purported activities of the Organization and the projects of JNF. The JNF webpage offers “a selected list of facilities in IDF camps provided in recent years by KKL-JNF and its Friends at home and abroad for the benefit of IDF soldiers.” As explained above, the Organization is identified as one of JNF’s partners. The information we have been able to review does not alleviate our concern that the Organization’s purported activities include supporting the armed forces of another country.
Accordingly, our position remains that the Organization has failed to meet the requirements of subsection 149.1 (1) of the Act that it devote substantially all its resources to charitable activities carried on by the Organization itself. For this reason, it is our position that there are grounds for revocation of the charitable status of the Organization under paragraph 168(1 )(b) of the Act.
Separation from JNF Israel
CRA notes:
Our review of the Organization’s “Projects” webpages, and its magazine show the Organization continues to not differentiate its activities from those of JNF.
Statements by JNF in Israel
Page 37:
We also note JNF characterizes the Organization as a ‘donating country’ rather than a body controlling specified activities JNF carries out on its behalf, which suggests the Organization may be resourcing JNF’s projects, rather than its own. For example, the 2016 KKL-JNF Joint Achievements Report – Adopted Projects21 reads in part as follows:
“The report is presented according to Israel’s three regions and forty-five donating countries and includes project type and specific location. In addition, each project’s stage of development and donation status is indicated’.
…
Moreover, based on JNF’s previous website, under KKL-JNF promotional newsletters “Hot Issues” projects were listed as “available for donation”.
CRA notes on page 340:
As well, JNF continues to present the Organization, not as the controller of programs carried out by JNF on behalf of the Organization, but as a supporter of JNF’s programs. On the JNF webpage “Projects and Partners Worldwide,” under the drop down menu “KKL-JNF Offices Listed in Alphabetical Order” we found JNF Canada with the following description:
JNF Canada supports KKL-JNF projects in Israel in numerous fields – people and the environment, forest and park development, and the advancement of Israel’s water economy.
Among the main projects supported by friends of JNF in Canada are the landscaping project for the Israeli Society for Autistic Children (ALUT) center in Kfar Halrusim, Beersheba; the construction of the Sderot Reservoir; the R&D stations in the Negev regions of Yotvata, Besor and Yair; the Adopt an Acacia project in the Arava; and the rehabilitation of the Carmel.
For the above reasons, the Organization’s representations have not alleviated our concerns regarding the Organization’s ability to maintain adequate ongoing direction and control over the use of its resources, and its purported activities.
Books and Records
Books and records
We are of the opinion that the latest representations received did not alleviate the concerns with the lack of supporting documentation showing that the Organization maintained adequate books and records for its activities undertaken in Israel.
On page 25, CRA says
The audit revealed that the Organization failed. to maintain adequate books and records for the activities it purported to carry out in Israel. The meeting minutes provided by CANISCOM, the Organization’s representative in Israel, were only a page long and did not include details regarding the funded programs.[my emphasis] Following our requests for additional information during the course of the audit to justify transfers of funds from the Organlzation to KKL, the Organization provided us with a monthly payroll of indigent workers employed, a summary of hours worked for each of the indigent workers, the numbers and project names that indigent workers worked, the selection criteria and three evaluation grids of indigent workers. However, the audit did not reveal any evidence to show that these payments constituted charitable expenditures by the Organization towards its own programs. The audit findings seem to suggest that these payments were simply unregulated payments to KKL. The Organization failed to request or maintain detailed reports of the use of funds by its agent including reports about the progress of the work conducted in Israel. It failed to provide evidence of its input into the programs, evidence as to how those programs were charitable in nature, segregate books and records, processes and approval to support the reported expenses by KKL As a result, we are of the view that the Organization did not maintain adequate books and records to substantiate that its resources were devoted to its own charitable programs.
Ebay Canada
Also, we are of the opinion that the books and records for activities undertaken in Israel were not being kept in Canada. As per the T2020 contained within the audit file, said that most of the documentation requested by the auditors for the activities undertaken in Israel were never requested by the Organization from KKL. These documents were only requested following the auditor’s request. Furthermore, as per a discussion between the Organization’s representative and the Appeal Branch on August 22, 2023, a request for an extension of time to respond to our letter was received since the records for reply were in Israel and were in the process of being translated by their agent KKL. Consequently, it is reasonable to conclude that records for activities undertaken in Israel were not kept in Canada during the audit period nor currently.
CRA says on page 8:
“….there was no documentation provided to demonstrate that the beneficiaries were eligible beneficiaries during the audit or at the objection stage. [my emphasis]
Travel expenses
“When it comes to expenses incurred in Canada, the audit revealed that the Organization had expense accounts for administrators and employees of $207,795 for 2011 and $196,449 for 2012. These expenses represent reimbursement of travel expenses including the cost of accommodation, meals, parking, and other similar expenses for business purposes. The administrators and employees used their personal vehicles to conduct the affairs of the Organization. As such, they provided expense reports for the kilometers traveled for business purposes and were reimbursed by the Organization for these expenses. However, the expense reports did not provide sufficient details to demonstrate the claimed travels were conducted in pursuit of the Organization’s charitable purposes. Specially, the reports did not indicate the date of the travel, its purpose in relation to the Organization’s objects, the departure address, the destination address, or the total distance traveled, in order to substantiate the claims or amounts paid.” [My emphasis]
On page 51, CRA says:
The policy of the CRA relating to the maintenance of books and records, and books of account, is based on several judicial determinations and the law, which have held that:
i. it is the responsibility of the registered charity to prove that its charitable status should not be revoked;
ii. a registered charity must maintain, and make available to the CRA at the time of an audit, meaningful books and records, regardless of its size or resources. It is not sufficient to supply the required documentation and records subsequent thereto; and
iii. the failure to maintain proper books, records, and records of account in accordance with the requirements of the Act is itself sufficient reason to revoke an organization’s charitable status in the case of material or repeated non-compliance.
On page 58, the Charity says in terms of books and records:
- The Charity maintained sufficient books and records in Israel to substantiate that its funds were devoted to its sole charitable program. which is ensuring the employment of the Indigent Workers on the Selected Projects by paying their salaries. The Charity also maintained sufficient records of its expenses in Canada.
On page 342, CRA states:
3) Failure to maintain adequate books and records
AFL 2 summary
We explained our position that the Organization did not maintain adequate books and records to prove that its charitable status should not be revoked, in accordance with 230(2) of the Act. Our concerns included:
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We were unable to verify the projects, and other details relating to whether the Organization’s resources were devoted to its own charitable activities because some relevant materials were in Hebrew and not “in such form as will enable the Minister to determine whether there are any grounds for the revocation of its registration under this Act. “
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The Organization failed to produce source documentation that would allow us to verify resources disbursed by the Organization through its intermediary.
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The agency agreement and supporting documentation did not establish that the Organization’s activities were effectively authorized, controlled and monitored by the Organization.
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Supporting documentation was not provided that would allow us to verify that expenses for travel, hotel, meals, gas, telephone, mileage, miscellaneous and entertainment related to the conduct of charitable activities.
CRA states on page 344:
CRA’s position
We acknowledge the efforts of the Organization to inform its volunteers, staff and intermediaries of their responsibilities as leaders of a Canadian registered charity, and its commitments to change its activities to comply with Canadian legislation and court decisions.
The representations offer commitments, but they do not offer documents that show the Organization maintains adequate books and records to prove that its charitable status should not be revoked. As well, our most recent review of the Organization’s webpages, as explained above, has not allowed us to verify that the Organization’s funded projects are its own activities, and not the activities of another entity, or that the activities are charitable under existing Canadian legislation and judicial precedents.
The Organization’s representations have not alleviated our concerns with the Organization’s books and records. Under paragraph 168(1)(e) of the Act, the registration of a charity may be revoked if it fails to comply with or contravenes subsection 230(2) of the Act dealing with books and records. It is our position that the present case consists of material non-compliance. For this reason, our position remains that there are grounds for revocation of the charitable status of the Organization under paragraph 168(1 )( e) of the Act.
OTHER ISSUES
Leads and Bias
On page 10, CRA discusses leads from the public:
The Organization believes that the CRA did not apply an appropriate standard and approach because it was influenced by the negative and misleading views encompassed in the campaigns and complaints against the Organization. It is the Organization’s position that those campaigns and complaints made their way into the records of the CRA and tainted the audit and resulted in a process that lacked fairness, rigour and impartially.
If an individual suspects that a business, a charity or a person is not complying with the requirements of the Act, this individual can report them to the CRA by submitting a lead to the Leads Program.
As per the Charities Directorate (CD) website, a taxpayer can submit a lead anonymously, but if it chooses to identify themselves, their identity is kept confidential. The CD reviews and considers all leads related to charities; however, the submission of a lead alone is not determinative as to whether an audit or other compliance actions are commenced. Audits and compliance actions undertaken are based on possible non-compliance with the Act and are risk based on whether the charity is meeting its legislative requirements based on a review of the charity’s books and records.
The CD’s actions are only made public if they result in a charity being: 1- revoked, 2- annulled, 3- suspended; and/or 4- penalized.
As for the screeners comments, this document helps the auditor determine the scope of the audit based on the reason of the audit selection. It is a tool used to communicate the items of concern that require specific review and comments by the auditor. The auditor uses this information to develop its Audit Plan. Once the audit is completed, the screener’s comments are addressed on Form T20, Audit Report. Furthermore, the audit results are based on information determined from the books and records of the Organization and not from the campaigns and complaints received by CRA.
Therefore the standards and approach used for this audit were appropriate and followed CRA procedures.
UK litigation
Pages 38 -39 discuss litigation between JNF UK and JNF in Israel and CRA notes:
We also reviewed a page from JNF UK’s website entitled “Relationship between JNF UK and KKL (JNF),”24 which described how the structure of its relationship with the JNF was unable to validate the JNF UK’s direction and control over JNF’s use of its funds.
The page reads in part as follows:
“JNF UK and KKL {JNF) have a similar history. However, JNF UK has always been independent of KKL.
Originally, the trustees of JNF UK decided that the appropriate way to fulfil its objects was to remit funds to KKL to support charitable projects of KKL. Historically, JNF UK’s relationship with KKL was governed by a series of trust deeds which set out how KKL was to use JNF UK’s money.
The relationship between JNF UK and KKL broke down in 1999. The main issue was that KKL wanted JNF UK to recognise that it was a branch of KKL and to recognise its supremacy over JNF UK; JNF UK refused to acquiesce. In order to attempt to move on from this argument, on 9 June 1999 the parties reached an agreement which acknowledged that JNF UK was an independent UK charity.
In March/April 2005, JNF UK stopped sending funds to KKL; it had lost confidence in KKL ‘s ability or willingness to apply JNF UK’s funds as directed by JNF UK. On 17 October 2005, KKL purported to terminate the Memorandum of Understanding. Lengthy litigation followed, which was settled with a re-affirmation of JNF UK’s independence.” (emphasis added)
Today, KKL is one organisation among many in Israel invited by JNF UK to submit project proposals which are assessed in the same way as all other project proposals.”
In particular, we note the statement that JNF/KKL wanted JNF UK to recognize it as a branch of JNF/KKL and to recognize its supremacy over J NF UK, and we note JNF UK’s statement that it had lost confidence in JNF/KKL’s ability or willingness to apply JNF UK’s funds as directed by JNF UK. In this regard, we are concerned that the Organization may not have the ability to maintain direction and control over its resources and over the conduct of its activities, as JNF UK claims was the case in its own relationship with JNF/KKL.
While the Organization has stated that it is independent of JNF, and involved in water, environmental, and development projects in the Middle East, we were unable to distinguish between the activities of the Organization and those of JNF. In its literature, the Organization referred to itself and to its projects as being carried out by “JNF,” and on the Organization’s website and twitter account, it described itself in an identical manner to JNF:
“The Jewish National Fund is the caretaker of the land of Israel, on behalf of its owners – Jewish people everywhere. “
Occupied Territories / Judea and Samaria
Occupied Territories
In an April 19, 2019 letter, CRA says, “Our review identified that the Organization’s resources appear to have been applied to JNF’s non-charitable projects in the Occupied Territories, and to supporting the Israeli armed forces, and not to activities furthering its charitable purposes. It is our position that the Organization has operated as a conduit for JNF, a non-qualified donee, in contravention of the Act. Our concerns are described in detail below.” (page 33)
On page 333:
August 20, 2019 CRA sends Notice of Intention to Revoke to JNF
Notwithstanding your written responses dated September 12, 2016, May 17, 2018, and October 5, 2018, we maintain our position that the issues identified during the audit, with the exception of our position on activities undertaken during the audit period in Israeli settlements, represent a serious breach of the requirements of the Act. As a result of this non-compliance, the Organization’s registration as a charity should be revoked.
On Page 342 CRA states
CRA’s position
The nature of the Organization’s activities undertaken during the audit period in Israeli settlements was not a factor in our decision to propose revocation of the Organization’s charitable status.
In earlier letters, CRA discusses the involvement of JNF in the Occupied Territories, but CRA, for the last 5 years, apparently has not continued with that as a reason for revocation.
CFO not qualified to respond
The Organization expressed concerns that the auditor contacted REDACTED who at the time of the audit, was the Director of Finance of the Organization. The Organization expressed concerns that REDACTED was not qualified to answer many of the questions asked of by the auditor.
However, this concern only appeared to be raised after receipt of the proposal letter dated July 26, 2023. We have not located any such allegation prior to this time. It is the Organization’s
stance that the auditor took REDACTED to be the voice of the Organization, and conflated REDACTED understanding of the Organization’s purpose, activities, and operation with the official position of the Organization. We are of the view that if REDACTED could not answer the questions of the auditor, it was REDACTED responsibility to consult with the other senior people of the Organization and/or its representatives. Also, before the start of the audit, the Organization was aware of the initial audit questionnaire it had to provide to the auditor. If the Organization felt that was not the proper individual to liaise with the auditor, it was their responsibility to delegate another senior individual in order to be the liaison. REDACTED was the Director of Finance of the Organization at the time of audit and therefore should have been well versed about the financial operations of the Organization. Furthermore, if REDACTED was unsure on how to answer a question (asked by the auditor or part of the initial audit questionnaire), it was REDACTEED responsibility to consult with other members of the Organization before providing an answer or have them present when the audit team visited the Organization’s operations over the extended audit period.
Finally, the Organization indicated to the CD that they were in regular contact with their agent’s Finance department through their CFO, which was at the time of audit REDACTED. These concerns now being raised by the Organization do not sway the CD’s and or findings with respect the repeated and serious non-compliance with the Act.
1967 issues
CRA had a new registry system in 1967 which began the registration of “registered charities”. The system was very basic and asked very little about charities.
The Charity notes on page 62:
The Charity was incorporated on November 1, 1961. At the time of its incorporation, the objectives of the Charity were as follows:
To create. provide, enlarge and administer a fund to be made up of voluntary contributions from the Jewish Community and others to be used for charitable purposes.
In 1967, the Charity engaged in extensive discussions with the predecessor of the CRA. The Department of National Revenue. regarding its objectives and the manner in which it would pursue these objectives. During these this exchange of letters (the “1967 Letters”), the CRA accepted the Charity’s position that its activities would be charitable as long as its funds were used exclusively to relieve poverty by paying the salaries of Indigent Workers: the Charity informed the CRA that ·'[the] entire balance is sent to our Israel Committee who use it for the employment of indigent labourers – recent immigrants in the main – on various work projects for which they receive daily stipends”. The CRA accepted this, replying in a letter dated August 25, 1967 that “[on] the basis of the information now supplied, we consider that the Jewish National Fund of Canada (Keren Kayemeth Le’ Israel) Inc. qualifies as a charitable Organization.
On Page 19 CRA states:
The Organization was registered as a charitable organization effective January 1, 1967. According to its Letters Patent, the objects of the Organization are:
– To create, provide, enlarge and administer a fund to be made up of voluntary contributions from the Jewish community and others to be used for charitable
purposes.
– The operations of the Corporation may be carried on throughout Canada and elsewhere.Notwithstanding that they were broad and vague, the Organization’s purposes were accepted when it was originally granted registration under the understanding that it would restrict itself to charitable activities. [Our emphasis] The Organization was cautioned at the time in regards to what constitutes charitable activities and the requirements of the Act to maintain its registration.
The audit revealed that the only activity the Organization is currently engaged in is paying the salaries of workers in Israel. It is our view that this activity does not further the Organization’s formal purposes (or a charitable purpose per se as contemplated by the first object) and it appears the Organization is not undertaking any other activities that would further charitable purposes. Rather, the Organization appears to be furthering unstated non-charitable purposes. In fact, according to the information obtained in the interview questionnaire received on September 11, 2014, the mission statement of the Organization is:
– To provide funds to Keren Kayemeth Le’lsrael (KKL) to redeem the land of lsrael.
– To connect Canadian Jewry to their national homeland and to their partnership in its development.
– To emphasize the centrality of Israel to Jewish life.It is therefore our understanding that the Organization is no longer devoting its resources to activities in support of charitable purposes, but is rather furthering unstated
non-charitable purposes.As such, it is our view that the Organization is currently not established for exclusively charitable purposes as required by subsection 149.1 (1) of the Act. As a result, it
appears there may be grounds for revocation of the Organization’s status under paragraph 168(1)(b) of the Act.
Mission Statement
“One of the three items contained within the mission statement of the Organization, at the time of audit, was to provide funds to Keren Kayemeth Le’Israel (KKL) to redeem the land of Israel. To provide funds to a non-qualified donee is not a charitable purpose.” [page 3]
In 2014, the mission statement of the Organization is:
– To provide funds to Keren Kayemeth Le’lsrael (KKL) to redeem the land of lsrael.
– To connect Canadian Jewry to their national homeland and to their partnership in its development.
– To emphasize the centrality of Israel to Jewish life.
The charity said on page 62:
This Mission Statement has no official status in the Charity, and was never passed by resolution of the Board. It serves as an informal statement of the Charity’s mission to guide reflection and the actions of the Charity’ s supporters.
On May 26. 2014, the Charity was continued under the Canada Not for-profit Corporations· Act. SC 2009, c 23. The purpose of the Charity stated in its articles of continuance is:
To create, provide, enlarge and administer a fund to be made up of voluntary contributions from the Jewish Community and others to be used for charitable purposes.
On page 130, the Charity notes:
“The suggestion in the first statement of the Mission Statement – that the mission is to provide funds to the Agent – is unfortunate.”
Trips to Israel
On page 67, the Charity says:
As a part of the Charity’s drive to connect Canadian Jews with Israel, fundraise for projects, and then supervise those projects, the Charity also organizes regular trips to Israel for donors, staff and management. Trips organized for current and potential donors (“Mission Trips”) are paid for by the donors themselves, not the Charity.[my emphasis] These trips are primarily designed to encourage donors to contribute to the Charity. and no tax receipts are issued for these trips. The Charity organizes a trip to Israel for its employees every year where the employees of the Charity visit the Charity’s completed and on-going projects (“Staff Trips”).”° Staff are strongly encouraged to go on a Staff Trip once every three years.
On Page 80, the Charity says:
- Fundraising
A major part of the Charity’s activities in Canada is to fundraise. Fundraising is done by promoting specific projects. The Charity and the Agent use the same branding. as do the other JNF affiliated charitable organizations worldwide. The Charity also has an agreement with the Agent to give credit to the Charity or to particular Canadian donors for specific projects in Israel despite the fact that the Charity does not own the project site or anything constructed on the project site.
The Charity holds Mission Trips where current or potential donors visit completed projects in Israel to see the impact of the Charity’s work. The Charity does not raise money directly from these trips but uses them to encourage donors to donate more in the future. No receipts are issued for these visits. [my emphasis]
Past Audits
The CRA notes
To conclude, the Organization made reference to its past audits where it said that none of its historical non-compliance was flagrant or intentional. The Organization’s practices in the audit years for the 1977, 1981, 1985 and 1995 fiscal years were reviewed. It is the Organization’s position that any issues of non-compliance the CRA raised in previous audits were not of sufficient concern to the CRA to pursue revocation, or even require the Organization to enter into a compliance agreement. The CRA letter dated August 21, 1989 raised concerns about the Organization’s direction and control, and maintenance of books and records; however, the audit was closed without any sanction. We do not agree with the Organization’s position and conclusion of the past audits as the major concerns about the Organization’s activities overseas have been present since the first audit. Final decision letters were not issued by the CD at the time for various reasons. [my emphasis] [FN 32 For example, in early 1984 the Minister declared a moratorium on all compliance actions concerning charities. Following this moratorium, the 1981 audit was closed.]
On page 32 in an April 19, 2018 letter:
To summarize, the CRA must be satisfied that the Organization’s purposes are exclusively charitable in law, and that its activities directly further charitable purposes in a manner permitted under the Act. In making a determination, we are obliged to take into account all relevant information. Accordingly, the audit inquired into all aspects of the Organization’s operations. The fact that some of the areas of non-compliance identified in this letter may, or may not, have been evaluated in preceding audits does not preclude the need for compliance with existing legal requirements. Furthermore, the CRA may take a position that differs from that reached previously based on reconsideration of the pertinent facts and law.