Small foreign-aid charity struggles with onerous CRA demands after audit
Wednesday, Jul 30, 2014 07:45 am
OTTAWA - A small Vancouver charity that helps the poor in Latin America has survived an audit of its political activities but is now struggling with fresh demands from the Canada Revenue Agency.
CoDevelopment Canada Association — known as CoDev — faces the crippling prospect of translating every scrap of paper it receives from 17 partners in El Salvador, Nicaragua, Honduras and elsewhere from Spanish into either English or French.
The demand, set out in a January compliance letter from the CRA, will start to bite this fall as the tiny four-person shop begins to receive banker's boxes full of Spanish-language documents from its Latin American projects, including taxi chits and bus-fare receipts.
The group's executive director, Barbara Wood, says the newly imposed requirement will drain away scarce resources, yet must be carried out or CoDev risks losing its charitable status.
The case is an example of how the CRA's 52 political-activity audits currently underway can end badly for a non-profit organization, even if it manages to pass the new class of audits instituted by the Harper government in 2012.
Many of the charities under audit have been critics of government policy, including CoDev, a trade union-funded group that has raised questions about Canada's free-trade deal with Colombia, among other issues.
"It makes me feel uncertain and a little bit stressed," Wood said in an interview. "I'm feeling fairly vulnerable."
CoDev reported $1.3 million in expenses in 2012-2013, with some four per cent going to political activities. The rules say charities can devote up to 10 per cent of their resources to political activities, though partisan work such as endorsing a candidate or party are forbidden.
The group underwent a CRA financial audit in 2009, their first in 25 years. The lone agency accountant who visited the office made some helpful comments along with a few minor demands, said Wood.
Wood said she was surprised when the agency said another audit was coming, and three auditors — two of them political-activity specialists — showed up last year to go through the files again.
"It was extremely taxing," she said.
Among CRA's new demands: the official CoDev mission statement had to be rewritten to cite each human-rights law in all 11 Latin American countries that CoDev's partners try to uphold. That meant a lengthy four-page annex to the statement, in English translation.
CoDev also avoided any mention of "preventing poverty" in the mission statement, having been tipped by Oxfam Canada that CRA would not allow such a charitable goal. Oxfam had to agree only to the alleviation of poverty to maintain its charitable status.
But the most onerous condition, Wood said, is the major translation project ahead, which involves thousands of receipts.
"The amount of work is unbelievable," she said. "The rules seem to have been applied differently in 2009 than they were now ... We're a really small team and this is a huge amount of work."
A spokesman for the CRA said the agency cannot comment on specific cases because of the confidentiality provisions of the Income Tax Act.
But Philippe Brideau said the translation requirement has long been in place for all charities.
"It has always been a requirement that charities keep books and records in one of the official languages of Canada: French or English," he said. "Books and records can also be translated from their original language if they were created in a language other than English or French."
He added that "there is no set time frame within which the CRA conducts subsequent audits ... In some instances, the CRA conducts audits to ensure that a charity has implemented corrective measures identified at the time of a previous audit."
Wood said there is "a great sense of disquiet or unease that the CRA could come back at any time and say this is not actually what we were looking for."
"There's a sense of not wanting to speak out about anything, not wanting to have your head up above the crowd."
The Harper government ordered the political-activity audits in March 2012, handing CRA some $8 million in funding that has since grown to $13 million.
The measure closely followed statements from senior cabinet ministers that labelled environmental charities "terrorists" and "money launderers" for their opposition to government pipeline and energy policies.
Critics and the charities themselves have said the new wave of audits, also hitting labour- and church-sponsored groups, foreign-aid groups and human-rights organizations, has led to an "advocacy chill" as they fear speaking out.
But Revenue Minister Kerry-Lynne Findlay has said the government is simply holding charities to account, enforcing the rules and safeguarding public money. And CRA officials say they alone decide which charities to audit for political activities, and do so fairly.
An umbrella organization representing more than 70 international-aid groups in Canada says a survey of members has found government funding drying up significantly since 2011, and many subject to relatively recent audits from the CRA and Foreign Affairs.
The Ottawa-based Canadian Council for International Co-operation also held workshops in October and April led by two lawyers to help members cope with the new political-activity audits, said spokeswoman Michelle Bested.