By Mark Blumberg and Henri Pasha
(December 21, 2022)
We recently reviewed the private foundations contained on the T3010 Registered Charity Information Return for 2020. The database was prepared by the Charities Directorate of CRA in August 2021 and covers about 84,000 charities.
In this case we looked at the 500 private foundations with the largest assets to see how much they spent on charitable activities or gifts to qualified donees according to their T3010 filings. We also noted the percentage amount expended on charitable activities and gifts to qualified donees as a percentage of the assets.
In terms of the percentage column keep in mind that some foundations are restricted in terms of the ability to pay out the greater of income and their disbursement quota requirement of 3.5% of certain assets. Other foundations may have given more in previous or subsequent years. Some foundations have little ongoing assets and are largely flowing money through so the percentage number would be quite high.
Some foundations were just recently created and may have received funds late in the fiscal year.
Some foundations may be playing games by transferring funds to other charities, but the funds are restricted gifts, and the recipient charity may not have the ability to spend those funds in the near future. This makes these foundations look more generous than they really are, and funds are not actually going to be used to help real beneficiaries in the near term.
Unfortunately, CRA collects very little information on the T3010.
CRA does not ask for example, if assets of the foundation are restricted or not. (i.e., Are all the assets of the foundation available potentially for granting purposes). CRA does not ask if the gift from the foundation to the recipient charity was restricted or not (for example whether the recipient is only allowed to spend a small part of the gift each year or it is unrestricted and can be spent at the discretion of the grantee).
The Sean Blumberg Transparency Project is in memory of my youngest brother Sean Blumberg. Sean was a sweet, kind person, a great brother who helped me on a number of occasions with many tasks including the time consuming and arduous task of reviewing T3010 databases and making them into something useful.
As part of the Sean Blumberg Transparency Project, Blumbergs has been releasing information on the Canadian charity sector to provide a better understanding of the size, scope, complexity and challenges of the sector.
Please review my caveats about the reliability and usage of T3010 information.
Limitations and Caveats
There are a number of cautions in dealing with the information from the T3010. You can access the CRA Charities Listing database directly on the CRA website at:
https://www.canada.ca/en/revenue-agency/services/charities-giving/list-charities/list-charities-otherqualified-donees.html.
As well, Blumbergs also maintains Canada’s largest charity information portal at www.CharityData.ca with up to 19 years information on every Canadian registered charity. The portal is free and the aim is to increase transparency in the Canadian charity sector. With CRA removing recently over 10 years’ worth of information from the Charities Listing, and only providing 5 years information online in the Charities Listing,
www.CharityData.ca has far more years available
1) The data in this note is based on the 2020 T3010 Registered Charity Information Return filings. Although all charities are supposed to file their T3010 within 6 months of their fiscal year end, some charities file late or do not file at all and then will lose their charitable status. Depending on the data set from CRA, not every charity may have filed their T3010 or been inputted yet.
www.CanadianCharityLaw.ca
2) Registered charities complete the T3010 and one person signs the form. The T3010 information is not independently verified by CRA when it is posted on the CRA site or placed in the CRA database.
3) Although an important legal document, the T3010 is often completed by volunteers or others who may have little understanding of the nuances of the Income Tax Act (Canada), limited language skills, may not have easy access to the correct information or are in a hurry to file the form to avoid deregistration. In the case of larger institutions, it is typically accountants or finance staff who prepare the T3010. One would expect greater accuracy with the larger institutions. However, as they also tend to be more complicated and involve bigger numbers, the likelihood of a significant inaccuracy in their T3010 filings is great.
4) The T3010s are filed with CRA and in many cases needs to be coded by hand at CRA which can also introduce mistakes. Only a small number of T3010s have 2D bar code technology which can eliminate most processing errors on CRA’s part. Canadian charities can, as of June 2019, electronically file the T3010 which will hopefully reduce errors and speed up the process for T3010 data becoming available.
5) In some cases, those completing the T3010 for a charity are deliberately deceptive when completing the T3010. For example, an organization knows that it has substantial fundraising or political expenses but chooses to put them under charitable activities. Or an organization claims pharmaceuticals that it can purchase for $50,000 are really worth $50 million.
6) Don’t rely on any of this information without checking with the charity and appropriate due diligence as required.
7) The T3010 is a tax form which is supposed to be completed according to guidance provided by the CRA in Guide Completing the Registered Charity Information Return (T-4033) and also various other CRA guidances and policies. The information inputted may not conform to Generally Accepted Accounting Principles (GAAP) and often the numbers will not match what is in a financial statement. You can obtain copies of financial statements, whether audited or not, on any registered charity by requesting the financial statements from CRA. These financial statements are filed with CRA but not placed on the CRA website and they can sometimes add further information.
8) Some questions on the T3010 are more prone to error than others. Some questions are complicated, while others are quite straightforward. Some matters are easily quantifiable, like value of official donation receipts, while others require allocation and other subjective measurements. Some questions, like revenue, are answered by almost every charity and if a charity makes a mistake, the likelihood is that such a mistake will not have much impact on the bigger picture. On the other hand, some numbers like political expenditures (which are now no longer being asked about) were often incorrectly completed and even one or two charities by mistakenly inserting large numbers in this category can distort the picture. With the 2012 numbers, the top 6 organizations listing political expenditures appear to be all mistakes. This seems to have inflated the numbers by about 1000%. You can see my article “Did the University of Windsor spend $285 million on political activities in 2012”. For the 2013 political numbers were $171 million on the T3010. If one reviews the actual organizations, the number is probably about $26 million. For 2017 the number is 28 million. For 2018 the number is 30 million.
9) The T3010 asks certain questions. Many important questions are not asked on the T3010. Relying on the T3010 to make decisions on whether a charity is efficient or worthwhile to support is prone to failure. We have established a website at www.SmartGiving.ca which discusses in detail questions donors may want to ask before donating to charity.
This analysis was prepared as part of the Sean Blumberg Transparency Project.
Mark Blumberg is a lawyer at Blumberg Segal LLP in Toronto, Ontario. He works almost exclusively in the area of non-profit and charity law. Henri Pasha is a summer student working at Blumbergs. To find out more about legal services that Blumbergs provides to charities and non-profits please visit www.CanadianCharityLaw.ca
This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional.
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