Charity and Not-For-Profit

Kulish: CRA charity suspension, fine ‘a warning shot’

By Staff

The Canada Revenue Agency’s (CRA) $550,000 fine against a Mississauga charity and a year-long suspension over concerns of terrorist funding is a “warning shot” to supporters and board members of registered charities, Toronto charity and not-for-profit lawyer Taras Kulish tells

Kulish, a senior associate with Steinberg Title Hope & Israel LLP, says the CRA suspended a long-standing Islamic charity which it says failed to comply with the rules for donations as required by law.

On the basis of a 2011 audit and analysis, the CRA says the charity sent money to an unqualified Kashmir group militantly acting in opposition to the Indian government, and the charity’s resources may have been used to “support the political efforts of Jamaat-e-Islami and/or its armed wing, Hizbul Mujahideen.”

Kulish says the CRA action stems from an audit initiated under the former Conservative government, which resulted in the suspension starting in September 2018 plus the fine.

“With the new Liberal government, the CRA has since shifted from an emphasis on audits to a more educational approach, with the Charities Education Program,” he says. “We haven’t seen concrete results yet from the new direction, but this action is a clear warning shot that both board members and supporters of a charity must be vigilant in ensuring compliance and ask questions to ensure due diligence.”

The $550,000 fine suggests there were substantial funds involved in the charity, Kulish says.

“It’s not enough to pay lip service and fill out paperwork, especially when you are partnering with organizations overseas,” he says. “You have to ensure you know who you are dealing with, audit the activities, look for milestones and visit at least once a year to confirm progress in agreed upon charitable work.”

It’s a topic Kulish discusses regularly at seminars for charities and is a salient example of what can go wrong, he says.

The suspension and fine have brought the charity into the glare of the media, he says, and that’s unfortunate.

“This highlights that board members have to be actively involved in governance and not just rubber-stamping projects,” Kulish says. “They must probe and ask questions. There’s a fiduciary responsibility, and even just one person operating outside of the rules can bring it all crashing down.”

He said board members and supporters should ask questions and demand transparency.

“If they are not getting answers or have particular concerns, they can lodge a complaint with the Office of the Public Guardian and Trustee or the Charities Directorate,” Kulish notes.

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