Cautionary tale warns churches, charities
OTTAWA, ON—If you give money to your church or charities, be prepared to prove it at tax time. That's the message the Canadian Revenue Agency (CRA) is sending after several Ontario Christian charities lost their charitable status over receipting discrepancies.
This fall, Markham-based tax preparer Faiz Khan pled guilty to issuing false receipts for almost $2 million worth of donations for churches and charities between 2004 and 2008.
Four of the organizations for which Khan prepared taxes have had their charitable status revoked—City Chapel Ministries International, Destiny Ministries International, Ave Development Foundation and Pan Africa Canadian Multi-cultural Centre. Another mentioned in the proceedings—Full Faith Gospel Tabernacle—retained their charitable status. None of the charities involved were available for comment.
"We see cases like these all the time," says Wayne Kroeker, manager of member support at the Canadian Council of Christian Charities. "Sometimes it's due to an internal issue with an employee or volunteer making up receipts. Other times the charity is being taken advantage of. But a lot of the audits we're seeing right now are targeting receipting. Because if you claim to have made a donation, and you haven't, it's fraud."
The CRA also recently issued intent to revoke the charitable status of Christ Apostolic Church International in Toronto after the charity failed to provide proof of donations for which they had issued receipts. According to the CRA the church had issued receipts for over $250,000 in donations in 2007, but had only deposited $80,000 into its bank account.
The CRA reported, "Of the receipts provided by the organization, serious discrepancies were noted including taxpayer names and donation amounts that did not match the receipts as filed by the taxpayers."
Their defense, according to the CRA, is that they issued receipts for the donation of practical items, many of which the CRA claims "did not qualify as gifts." ChristianWeek was unable to reach the church for comment.
Legal nightmare
Issuing receipts for gifts-in-kind can be a legal nightmare, according to Kroeker.
"Sometimes people donate things like artwork and jewelry to charity," he says, "things that charities don't actually need, and then ask them to sign a piece of paper saying it's worth a certain amount. Then you would have to show that you received that much on your books, even if you could not sell it for that amount. Plus, a church shouldn't be in the business of buying and selling jewelry anyway."
One of the charities named in the Khan case, Ave Development Foundation, is soliciting on their website for "cash donations, used equipment, computers, used books and any other related items" for their work in providing education, healthcare and microfinance work in Ghana.
"The vast majority of Canadians and registered charities comply with the law," says CRA spokesperson Philippe Brideau. "However, there are also those individuals and organizations who seek to exploit the various tax incentives put in place to support charitable giving."
Brideau says it is especially important for individuals who file online to remember to hold on to their receipts. The CRA can request to see receipts up to six years after the original donation was made.
"The CRA takes all forms of fraud seriously," he adds. "Any registered charity found to have knowingly or negligently abused its tax receipting privileges by issuing receipts for inflated amounts or for transactions that do not qualify as gifts, may be subject to monetary penalties and/or have its registration revoked."
Auditing donors
Kroeker says that one way in which the CRA seems to be tackling the problem of false receipting is through auditing donors.
"They are going after individuals," he says. "People like you and me. If you say you've given something to a church or charity they want detailed proof. Like a letter on the charity's letterhead detailing when and how you gave."
His son, Daryl Kroeker, was recently audited by the CRA when he filed back charity receipts after graduating university.
"It was frustrating," Daryl says. "It felt like I was being second guessed, and that people weren't trusting me.
The donations in question included money he'd given to Camp Crossroads near Gravenhurst, and his home church, Waterloo Mennonite Brethren. He says the groups worked with him to get the proof he needed.
Daryl now works as a satellite director for Niagara youth for YFC Youth Unlimited, where he is involved in fundraising initiatives. He adds the experience of being audited has helped him appreciate the strong system of accountability Youth Unlimited has in place for their receipting.
"Anything under $100 I am able to do myself," he says. "Anything over that has to be done by head office, and they're always double checking everything I do. It's never just me looking over the details.
"There's no reason not to donate," he adds, "There's just a system in place and we need to adhere to it."
Wayne Kroeker adds, "You need to make sure there are good checks and balances in place. Lock up your receipt books and don't give unauthorized access to them. It's also really critical that we educate charities not to lend out their charitable number. I know it's hard for us to understand, especially those of us who can't imagine wanting to cheat, but if you get a call from someone saying they need your charity number, you should not give it out."
Dear Readers:
ChristianWeek relies on your generous support. please take a minute and donate to help give voice to stories that inform, encourage and inspire.
Donations of $20 or more will receive a charitable receipt.Thank you, from Christianweek.
