The Charities and Nonprofits Law Section of the Canadian Bar Association supports Senate Bill S-216, Effective and Accountable Charities Act. That’s the gist of a letter to Deputy Prime Minister and Minister of Finance Chrystia Freeland approving proposed changes to the income tax law in the invoice.
The Section believes there is a legitimate need for accountability and transparency in the use of charitable funds. Currently, charities are legally permitted to use their resources in two ways: for their own charitable activities and to make gifts to qualified donees.
The CBA Section advocates the elimination of “own activities” requirements, along with the corresponding “direction and control” regime that applies when a charity works with third parties to carry out its program charitable.
The Section supports replacing these requirements with a “spending accountability” framework aligned with what countries like the US and UK require of their own charities.
Accountability for expenditures is explained by the United States Internal Revenue Service, or IRS, as a charity’s obligation to use all reasonable efforts and establish procedures to ensure that grants are only spent for the purpose for which they were granted, 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 crafted” for the way it addresses the issue of transparency and accountability in the use of charitable funds.
Brigitte Pellerin is the editor-in-chief of publications for the Canadian Bar Association.