Charities caught short as foundation founders
TORONTO—Canada Revenue Agency's (CRA) investigation of Banyan Tree Foundation has left homeless shelters and drop-in centres confused, empty-handed and wondering if they should start looking gift horses in the mouth.
In June a CBC investigative report revealed that the Banyan Tree Foundation is being investigated by CRA, who called the foundation a "sham" and is demanding donors pay back millions in tax credits.
Dozens of charities who had been pledged millions of dollars in annuities by Banyan Tree are now wondering where money will come from to run programs that depended on the pledged cash.
Charities contacted by ChristianWeek told similar stories: they were approached by Banyan Tree and offered cash gifts to be paid in annual installments over 25 years. Most of the charities received two or three payments, but about a year ago the money stopped coming. Now they're wondering if they'll ever see another cent.
"We did our due diligence," says Bruce Smith, a chaplain with King-Bay Chaplaincy in Toronto. "Everything seemed to be above board." The chaplaincy that serves Toronto businesses was
promised a total of $6 million. When the money stopped coming King-Bay had to cut five chaplains, says Smith.
The Mary Centre of the archdiocese of Toronto provides support services for people with developmental disabilities. Executive director Dominic Conforti says Robert Thiessen, president of the Banyan Tree, has been very supportive of the Mary Centre in the past. When Thiessen offered the centre a total of $4 million, says Conforti, "we were confident with Thiessen and Banyan Tree that they were genuine in what they wanted to do."
At the same time, Conforti says the centre was careful not to make the donation their lifeblood.
"We said, it sounds like a good thing—maybe too good to be true. We'll be careful."
Winnipeg's Siloam Mission was also careful with the $1.9 million promised them by Banyan Tree.
John Mohan, executive director of Siloam shelter, says they were careful to use the money for operations instead of building a program or capital campaign on it.
When Mohan contacted Banyan Tree to find out why this year's donation hadn't come through, he was told because stock markets weren't performing well the investment wasn't paying off as expected and the next installment would be delayed.
Mohan says he trusted Banyan Tree, although he didn't fully understand how the whole investment process worked. Hampton Insurance, the agency supposedly managing the investments which were generating the annuities, never communicated with Mohan, he says. All his information came through Banyan Tree.
Thanks to the diversity of their donor support and Siloam's growth as an organization, they weren't hurt very badly by the loss. "A few years ago that would have been 10 per cent of our operating budget," says Mohan. Now it's closer to two per cent.
Although Banyan Tree is listed as a registered charity, the foundation has been operating like a tax shelter by
supposedly investing the money of donors and writing them larger tax receipts. In the end donors would get more money back in tax refunds than they gave in the first place. Now CRA is asking donors to pay back those tax credits.
Although he'll be more cautious in the future, Mohan says he doesn't want to spend all his time second-guessing the motives of everyone who gives to Siloam.
"Are they motivated by greed? Are they motivated by trust? I don't know if their motives are always philanthropic," he says. "I prefer see the best of people. I see this as something that was well-intended and went off the rails… but God is our supporter, not Banyan Tree."
John Pellowe, CEO of the Canadian Council of Christian Charities cautions against donor schemes that are based on profit rather than goodwill.
"This hopefully will have a chilling effect on that kind of giving," he says. "It's abusive of the spirit of the income tax act."
Charities also need to be a little more shrewd, he says. "The CRA is looking to charities to be more responsible in who they deal with."
The biggest risk for a charity in getting involved in profit-motivated giving arrangements is that if the CRA concludes they're involved in something illegal, they could lose their charitable status.
Last year an official at a small Greek Orthodox church in Toronto was handed criminal charges after All Saints Greek Orthodox Church partnered with a tax-shelter company. The church, which had been issuing about $7,000 in tax receipts annually suddenly wrote receipts for $273 million over a four-period.
"CRA has said that 100 per cent of these donations will be audited," says Pellowe. "Charities should know who they're receiving money from."
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