FOR IMMEDIATE RELEASE
Charity opposes revocation of its registration
TORONTO, May 11, 2009 – The Children’s Emergency Foundation said today that
it has consistently complied with Canada’s laws and regulations while
pursuing its mandate to help needy children in Canada and overseas and
therefore opposes the revocation of its charity registration.
CEF spokesperson Ed Shiller said that “the revocation lacks proper
foundation and unfairly besmirches the reputation of a leading Canadian
charity.”
In a news release issued today, the Canada Revenue Agency announced that it
has revoked the CEF’s registration following an audit of the charity’s
operations which covered the years 2002 to 2005. The CRA alleges violations
of the Income Tax Act relating to the CEF’s participation in a tax shelter,
the distribution of gifts-in-kind by the charity and its record-keeping.
Mr. Shiller said that “since its founding in 1996, the CEF has become the
largest single source of continuing financial support for more than 400
community programs in Canada that feed over 100,000 impoverished and
undernourished children every week.”
In addition, he said that “over the years the charity has acquired and
distributed tens of millions of dollars worth of medical supplies to
reputable organizations in under-developed countries to ease the sickness
and suffering and prevent the premature death of impoverished children and
their families.”
He said that “the CEF’s conduct with respect to its fundraising, charitable
works and record-keeping conformed to existing laws and regulations. Indeed,
every practice that the CRA took issue with in its current audit, with the
exception of participation in a tax shelter in 2003, was approved in an
audit that the CRA conducted of the CEF in 2000.”
In 2003 the CEF participated in a tax shelter organized by the Canadian Gift
Initiatives that shipped $18.8 million worth of new certified pharmaceutical
products to developing countries.
“At the time, Canadian law permitted this and the CEF took part only after
receiving favourable independent legal and accounting opinions,” Mr. Shiller
said. “But the CEF ended its participation in the program on December 5,
2003, the day the Government of Canada introduced legislation to curtail
certain tax shelters.”
Contact: Ed Shiller at 416-496-2243 or 416-409-5468
Background information
On May 11, 2009, the Canada Revenue Agency (CRA) issued a news release
announcing the revocation of the Children’s Emergency Foundation’s charity
registration on the grounds that it participated in tax shelters and
international donations arrangements that were not part of its mandate and
that the charity’s records fail to substantiate the values represented. The
CRA based its conclusions on the results of an audit it conducted of the CEF
for the years 2002 to 2005.
The CEF disputes the findings of the CRA and maintains that it has
consistently acted in accordance with the legislative and regulatory
framework that governs the operations of charities in Canada and with its
own mandate.
Every practice that the CRA took issue with in its 2002-2005 audit, with the
exception of participation in a tax shelter in 2003 (which is discussed
below), was permitted in an earlier audit that the CRA conducted of the CEF
for the year 2000.
The structure of the Children’s Emergency Foundation’s programs and
practices was substantially the same during the period covered by the 2000
audit as it was during the years 2002 through 2005. However, practices that
were accepted by the CRA at the time of the earlier audit are now condemned
in the latest audit.
In addition, since its inception in 1996, the Children’s Emergency
Foundation has relied on and followed the directions of Chartered
Accountants in all its practices with regards to the keeping of accounts,
employment and contracting practices, preparation of annual statements and
the preparation and submission of the T3010 report.
Tax shelter
During the latter part of 2003, the CEF participated in a single tax shelter
– not two as claimed by the CRA – which was organized by Canadian Gift
Initiatives. A total of 541 individuals donated an aggregate $18.8 million
worth of new certified pharmaceutical products. The CEF took legal
possession of these donated pharmaceuticals, shipped them to underdeveloped
countries and issued a tax receipt to each of the 541 donors for the fair
market value of the goods they donated. The fair market value was determined
by the price listed by the Ontario Ministry of Health and Long-Term Care.
These shipments benefitted thousands of children and their families – an
outcome that was attained at no financial cost to the CEF.
According to independent accounting and legal advice obtained by the CEF
prior to its participation in the program, such tax shelters were permitted
by the Income Tax Act and were accepted as valid by the CRA. On December 5,
2003 the federal government announced legislative initiatives designed to
curtail certain tax shelter programs. The Children’s Emergency Foundation
immediately withdrew from participation in the Canadian Gift Initiatives tax
shelter on December 5, 2003 and has not participated in any other tax
shelter since.
Gifts-in-kind
Every year the CEF receives donations of gifts-in-kind from other charities.
These gifts consist of medical equipment and supplies that the CEF ships to
reputable organizations in underdeveloped countries to ease the sickness and
suffering and prevent the premature death of impoverished children and their
families.
In its 2000 audit, the CRA accepted that this activity was consistent with
the ITA and the CEF’s mandate, which is:
1. To provide relief to children and their families in Canada and in other
countries who are suffering as a result of extreme poverty, natural or
man-made disaster, war or insurrection, or homelessness;
2. To receive grants or donations of cash or in-kind from individuals,
corporations, government bodies or other associations for disbursement to
children and families who are so afflicted;
3. To educate the Canadian public concerning the needs of such
children and families and concerning appropriate responses to those needs.
In its most recent audit, the CRA maintains that shipping medical equipment
and supplies is outside the CEF’s mandate, and that the CEF therefore should
not include the value of the goods or the cost of shipment as expenses for
charitable activity. It is clear from the CEF’s mandate, which the CRA
approved when it registered the CEF as a charity, that receiving and
shipping gifts-in-kind was a legitimate charitable activity.
Record-keeping
All of the CEF’s financial records, tax forms and reporting documents were
prepared by or with the advice of Chartered Accountants, and all of the
CEF’s financial statements were audited by licensed auditors.