A few bad apples…

14 03 2011

March is Fraud Prevention Month, prompting a quiz sponsored by CanadaHelps and Capital One concerning charitable giving. To take the online quiz and see how much you know about charitable fraud, click here: http://www.canadahelps.org/.

Charity fraud is rare in Canada despite media coverage that might suggest otherwise. In more than 20 years working in the charitable sector, with dozens and dozens of organizations, I have never once come across actual fraud. We have a reasonably strict system of monitoring and enforcement here in Canada, making it tough to scam donors or operate fraudulent charities. The Canada Revenue Agency (CRA) pulls the plug on those who try, resulting in loss of charitable status or revoked registration.

Mark Blumberg’s Canadian Charity Law List for this month includes examples of this enforcement in action. “CRA has revoked the registration of The Organ Donation & Transplant Association of Canada for excessive fundraising and administrative fees and for involvement in an ‘international donation arrangement'”. Apparently this organization ran into trouble for gifts in kind whose real value didn’t match their reported value. Then there’s Pediatric AIDS Canada/USA, whose registration was also revoked by CRA for high fundraising costs and involvement in an “international donation arrangement that artificially inflated expenditures on charitable activities”.

Both these organizations were included in a recent Toronto Star article about charity fraud (“Plug pulled on charity after audit reveals money misspent”, March 7, 2011). The article essentially deals with six organizations where cases of charitable spending or reporting breaches led to CRA intervention. I point this out because six organizations out of thousands who conduct themselves legitimately is a very small number. Even if there are other, as yet undiscovered, fraudsters out there they remain a very small percentage of Canada’s overall charitable sector. The damage they inflict, however, can be devastating to all.

Donor diligence is the best defense against making contributions to fraudulent causes. But donors should not become alarmed and think that fraud is rampant in Canadian charities. It is not. A very few bad apples make it extremely challenging for legitimate charities to maintain goodwill and donor trust (and often add to the costs of operating a bona fide charity). Volunteers, too, can be skeptical about supporting the sector if they don’t feel their efforts are aligned with legitimate and legal purposes. So there’s much at stake (donors, volunteers, public opinion) for the good apples.

Updated charity laws, aggressive prosecution of lawbreakers, and accessible information for donors and volunteers are all helping to keep fraud to an absolute minimum in Canada. One bad apple is one too many, but it’s important that the entire sector not be branded criminals by a very few examples of cheating, fraudulent fundraising, or illegal scams.

For more information, check these resources:

http://www.canadiancharitylaw.ca

http://www.cra-arc.gc.ca/charities

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