revoked charity status greenpeace_canada_charitable_foundation 16 august 1994
TRANSCRIPT
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ATTACHMENT TO NOTICE OF INTENTION TO REVOKE
OF
DECEMBER 6, 1995.
y REGISTERED MAlL
Greenpeace
Canada
Charitable
Foundation
185 Spadina Avenue
Toronto,
Ontario
MST 2C6
Attention: MS Vicki Slemin
Operations Director
August
16,
1994
Dear Ms S1emin:
Re:
Charity
Audit
81924
Tel: (613) 954-1362
This l e t te r i s f u ~ t h e r to
an
audit of the
books
and records and
act ivi t ies of Greenpeace
Canada
Charitable Foundation (the Charity )
which
was
conducted
by a representative of the Department
for the period
January
1,
1990 to December 31 1993.
The audit has raised serious concerns about the Charity's compliance
with
certain
provisions of
the Income Tax Act (the Act ).
For
a
registered charity
to
re ta in
i t s registration,
i t
must comply with
the
provisions of the Act. I f a particular registered
c h r i ~
does not
comply
with these provisions, the Minister may
revoke
that chari ty 's
registration
in
the manner described
in subsection 168(2) of
the Act.
The balance
of
this l e t te r describes
the
Department's concerns.
CHARITABLE
ACTIVITIES
The
Charity
is
registered as
a charitable
organization. To
sat isfy
the
definit ion of
a
charitable
organization
pursuant
to
subsection
149.1(1)
of the Act, a charity must devote i t s resources exclusively to
charitable act ivi t ies carried on by
the organization i t se l f
or
to
other
ancil lary and
incidental
activities such as pol i t ical act ivi t ies which
meet
the
requirements
of subsection 149.1(6.2)
of
the
Act. The term
charitable
is not defined in the Act and
we
must therefore refer to
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the
principles of
common
law to determine whether a
particular
purpose
or
act ivi ty is
charitable.
The Charity was
regis tered
with the
following
object:
The
object
o f
the
Corporation i s
to further the
advancement
o f education
and for the purpose o f
furthering
such
object and to the extent that such
ct iv i t ies are not inconsistent with such object:
a
to
educate the
public
on environmental i ssues,
b
to
support environmental
preservation
through
education means
c to conduct research
on
environmental
i ssues,
and
/
d
to
make available
to the
public the results
o f
such
research.
I
To
be chari table , an
educational
activity
must either
t ra in
the
mind,
prepare a person for a career or broaden the sphere of human knowledge
(as in scient i f ic research). Research, as a particular area of
education, must be directed to gaining more knowledge about a particular
question,
and
the research
procedures
and
i t s results must be explained
to the public ful ly and fair ly . The courts consider that simply
providing
selected information and opinions on a
subject
is not
educational, in
that
i t does not present a ful l and fa i r examination
of
the
subject
and t
lacks
the necessary degree of tra ining or
ins truct ion.
In summary for an organization's over-all act iv i t ies
to
meet the
requirements of
the
Act
the
following cr i t e r i a
must be
met:
the act iv i t ies must meet the
legal
definit ion of charitable
act iv i t ies as
defined by
the Courts;
a registered charity must carry out i t s own
charitable
act iv i t ies
directly or
give funds to
qualified donees;
and,
pol i t ical act iv i t ies must
be
ancil lary
and
incidental to
the
charitable act iv i t ies
The expenditures
you
identified as
charitable on
your T3010
Charity
Information Return for
the
years 1990 to 1993 inclusive consisted of
the
publication
of the newsletter
Greenlink
and
pledges
to Stichting
Greenpeace Council
( International
.
Based
on
the
audit
results,
we
do
not
perceive any
of these expenditures to be charitable
expenditures.
The basis for th is conclusion is as
follows:
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reenl ink
Our review
of
th is
publication has
concluded
that i t s
content
is not
advancing education
in
the charitable sense.
The
publication
principal ly consists
of environmental news stor ies and supports the
advocacy act ivi t ies
of
Greenpeace Canada.
In addition, t is not
your
activi ty.
The audit
results
show
that the
publication is an act iv i ty of Greenpeace
Canada
and
that
the Charity is
charged for
the related expenditures a t
year
end through
the
intercompany account.
Pledges to Stichting Greenpeace Council
Basically the
Act permits
a
registered charity to
carry
out i t s
charitable purposes, both
inside and outside Canada
in
two
ways:
Firs t t can make-grants to other organizations
which
are
qualif ied
donees
as described
in
the
Act.
Second,
t can carry on i t s ow charitable act iv i t ies . In
contrast
to
the relat ively
passive
t ransfer
of money or other
resources
involved in
making
grants to qualif ied
donees,
carrying
on
one s ow activi t ies implies
active
part icipat ion on the part
of
the Canadian charity in a program or project that d i rect ly
achieves
a charitable purpose. The Act
clearly
does
not
allow a
Canadian charity to
carry
out i t s mandate
by
handing over i t s
resources toanother organization (unless
that
organization
is
a
qualif ied d o ~ e e .
The Department
has
no objection
to
a Canadian
charity arranging to
accomplish i t s
ow educational
or
other charitable act iv i t ies
through
contractual
agreements with
organizations outside
Canada.
However the
requirement to
be
sat is f ied
here is
that
the
charity is
devoting i t s
resources
to act iv i t ies for
which i t
is
responsible
as
a
co-participant
or
principal .
What
is
important in such
cases is
that the arrangement
provide for
suff ic ient
direction
and control by
the Charity over the
use
of i t s
resources to sat is fy
the requirement of the
Act
that
these
resources
be
devoted to charitable
act iv i t ies
carr ied
on
by
the
Charity
i t s e l f .
The Department
accepts that charit ies
can, in
fact , fu l f i l the
requirements
of
the Act as
outlined above,
through agency relationships
with other organizations or individuals operating
abroad
wherein
the
charity retains
a presence
in the
field. The
Department s acceptance of
such an agency
relationship
between a charity and
another
organization
or individual
as a means
of ensuring
the
char i ty s compliance with the
Act would be subject to certain minimum
standards for departmental
purposes.
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However
once
an agency
agreement
has been executed,
the
Canadian
charity
must in fact show a
reasonable degree of on-going
in teres t and .
control
in the
project
carried out by the
agent.
The agent should report
back
to the
Canadian charity
on a reasonable and regular basis
on
the
progress of the project(s) . Documentation relat ing to the carrying out
of
the
project
by
the
agent
should
be
part
of
the
chari ty 's
records,
available
in Canada.
The chari ty 's
continuing el ig ib i l i ty
for
charitable regis t ra t ion will depend
on
whether or
not
i t is
in
fact
maintaining
a suff ic ient degree of ongoing control as required
by the
Act and provided for in the agreement.
e
note
that an agency agreement was signed between the Charity and
International on
October
1st,
1990. The agency agreement
provided
that
the
Charity
unds shall
be
applied
by
SG only
in such manner
as
the
Charity
directs
in writing
and solely
in satis faction of the Charity 's
charitable objects .
The Charity
reported the
following expenditures on
i t s T3010 Charity Information Return as
charitable expenditures
made
under the agency agreement which
were intended
to
establish
a
World
Park
in
Antarctica:
1990 - 700,000
1991 - 350,000
1992 - 350,000
The 1990 expenditure was paid to International by the Charity
on
June
14, 1991. In response to your
April
12, 1991
l e t te r
the Department did
not
object
to
the
payment
of
the funds to
your
agent, which
were
to have
been disbursed on
your
behalf pursuant to your direction,
for the
year
1990
even though
a
separate
bank
account
was not
maintained
by the
agent.
I t was our understanding that the
agent
did maintain a separate
accounting
for
these
funds and
i t
would
be
able to
provide
you
with
vouchers and
cancelled
cheques. The agent was
to
have maintained a
separate bank account for
future
years.
The 1991
and
1992 expenditures
consisted
of pledges
which
were made
by
the
Charity to International . The audit
results indicate tha t
the
pledge amounts were added
to
the amount owing from Greenpeace Canada
to
International. International
subsequently
forgave the
pledge
amount
owing to t
by
Greenpeace Canada.
Based on the facts which were provided during the audit , we believe that
these resources were actually used by Greenpeace Canada in i t s
operations:
The
Charity did
not advise
International that i t
approved the 1990
act iv i t ies or draft budget unti l
af ter
the expenditures
had
been
incurred; namely by facsimile dated February 11, 1991. I t would
therefore
appear that
the 1990
expenditures
were
not
incurred by
International pursuant to
the
Charity's direction.
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The
1991
payment
of 700,000
from
the Charity to International
was
made on the understanding that International
would provide
a
loan.
to Greenpeace Canada. International did provide
a
loan of
700,000 to Greenpeace Canada. Greenpeace Canada
subsequently
reduced i t s loan payable
to
the Charity
by
500,000.
The
Chari ty 's
pledges to
International
for 1991
and
1992
in the
amount of
350,000
each were
not paid.
ue to the fact that
Internat ional
t reated
Greenpeace Canada and the Charity
as one
ent i ty Greenpeace Canada was able to
add the pledge
amounts to
i t s balance
owing
to International. Greenpeace
Canada was
subsequently forgiven the 700,000
in
pledges, except
for a
balance of 70,202 which was allocated to the Charity.
You
have
indicated
that although the pledge amounts were not
actual ly
paid to
International,
Greenpeace
Canada
paid
for
Internat ional campaigns
carried
out
in
Canada
in order
to
offse t
the payment
of
tha
pledges.
However the
audit
results indicate
tha t Internat ional
advanced funds
to
Greenpeace
Canada
in
the form
of grant
revenue in
order
to pay
for
these
International
campaigns.
The
Charity
has not
exercised
sufficient control over
i t s
resources. We note that you were able to provide the
Greenpeace
Annual
Report
1990-1991
which
does make reference to the
Antarctica campaign. However the report does not detai l how the
Chari ty 's resources were actually
spent. You
did
subsequently
obtain
a general
breakdown of the al locat ion of
the
expenditures
for 1990;
these
expenditures
detai l the amount of 350,000 rather
than the 700,000 that was actually sent to International for
expenditures incurred during the
1990 year.
We
were also
advised during the audit that International is
jus t
now completing i t s 1992 audited statements and for
this
reason you
have not received subsequent annual reports
respecting
the
funds
allocated.
I t
therefore
appears
that the act iv i t ies and related expenditures
respecting the Antarctica World
Park are
not
those
act iv i t ies of the
Charity.
As a resul t t appears that the
Charity has
fa i led to devote a l l i t s
resources
to chari table act iv i t ies
and
therefore
does not meet
the
defini t ion
of
a
chari table
organization pursuant
to
subsection
149.1(1)
of the Act.
Paragraph 168(l)(b) of the Act provides that for a regis tered chari ty to
be ent i t led to
re ta in
i t s registered status,
i t
is required
to
comply
with the
requirements
of the Act relat ing
to
i t s registrat ion
as
such.
I f
a registered
chari ty
ceases to comply with these
requirements,
the
Minister
may
give
notice
to the charity that he proposes
to
revoke
i t s
regis t ra t ion.
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USE OF
RESOURCES Y
NON QUALIFIED DONEES
We refer
you to your undertaking
given
on regist rat ion (copy
attached)
which
s tates
tha t
the
Charity will
not make
i t s
resources (including
human
resources)
available to
any
organization
which is not a qualified
donee .
Should
a
chari ty
wish to
loan funds to
an organization
which is
not a
qualif ied donee,
in
order to be acceptable
to
Revenue Canada, the
transaction would have to be
properly
characterized as an investment.
We would expect the
loan to
be for a
reasonable
term, be
adequately
secured and be made on
terms similar to an
arm's
length
transaction (the
interes t
charged and received by the chari ty would
be
similar
to
that
charged
in the
open market between two ent i t ies acting independently of
each other).
The audit
resul ts indicate that the Charity's loan
receivable from
Greenpeace
Canada
is
n o ~ i n t e r e s t
bearing, has no specif ic terms of
repayment,
and
is
unsecured.
In addition, the following
factors
cumulatively
indicate that
the
Charity
does not
operate
as a separate ent i ty
which is
dis t inct from
the
operations
of Greenpeace Canada:
Greenpeace Canada
has
a
Sublicensing
Agreement with the
Charity
respecting
the use
of
the name Greenpeace . The pledge amounts
for
both
organizations are
reported
to International jo in t ly
The forgiveness of the 1991 and
1992
pledge amounts,
except
for
the $70,202 balance from 1990 in the Charity 's records, was
recorded
in
the
books
of
Greenpeace
Canada
and
was not
reflected
in the records of the
Charity.
The
fundraising act ivi t ies
which fa l l under
the
name Partners in
ction
do not distinguish
the act iv i t ies
of the Charity
from
those
of
Greenpeace Canada.
The payment in 1991 by Greenpeace Canada against
the
Loan
Receivable in
the
amount of $500,000 was
actually
a
circulat ion
of
the Charity 's funds that
were
sent to
International.
The Charity
and Greenpeace
Canada had a
jo in t general
ledger
and
jo in t board
meetings
up
unt i l
December 31, 1992.
We
do note
that
you
have
provided
separate
Board Minutes
for the 1993 year
and
that
the
Charity now has i t s own general
ledger.
However the
Charity
continues
to transfer funds from
i t s
account
to
Greenpeace
Canada on a
regular basis.
Greenpeace Canada executed a Loan
Agreement with
International on
February
18,
1994.
This
Agreement provided that Greenpeace Canada
~ o u d make no material
changes
to
the
budget
(defined
as amounts
greater than $25,000) without the approval of International . The
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budget includes the revenues
of
the Charity, which strongly
suggests that the Charity is seen as
being part
of Greenpeace
Canada.
Pre-authorized
payments
from donors
to
the Charity
continue to be
made direct ly
to
the
bank
account
of
Greenpeace
Canada.
As
a
resul t
t appears
that the Charity has fai led
to devote a l l i t s
resources to charitable
activi t ies
and
therefore
does not
meet
the
definit ion
of
a
charitable
organization
pursuant to
subsection
149.1(1)
of
the Act.
Paragraph
168(l)(b)
of the Act provides that for
a
registered charity to
be ent i t led
to retain i t s registered
status, i t
is
required
to comply
with the
requirements
of the Act
relat ing
to i t s registrat ion as such.
I f
a
registered charity ceases
to comply
with these requirements, the
Minister may give notice to
the charity
that he proposes to revoke i t s
regis t rat ion .
POLITICAL ACTIVITIES IN EXCESS OF THOSE LLOWED
IN
THE ACT
Subsection 149.1(6.2)
of
the
Act
permits
a
charitable
organization
to
devote some
of
i t s resources to non-partisan
pol i t ical a ct iv i t ies
provided that
such
pol i t ical act iv i t ies are
ancil lary
and incidental to
i t s chari table act iv i t ies
and that substantially a l l of i t s
resources
are
dedicated to
charitable
act iv i t ies
carried on by i t .
The
Department
accepts the t e s t
that
substantially a l l of a
charitable
organization s
resources
be devoted to
charitable act iv i t ies
is
met where
ninety
percent thereof are
so
devoted. Accordingly,
a
charitable organization
may devote
up
to ten percent of i t s
resources
to ancil lary
and
incidental
pol i t ical act ivi t ies
of
a
non-partisan nature.
The
courts
have established that act iv i t ies
which are designed
essent ia l ly to
sway
public opinion
on
pol i t ical
issues
or matters of
public policy are pol i t ical in
the
sense understood a t law. These types
of act iv i t ies include the
following:
1. presenting
publications, conferences, workshops;
2. placing advertisements in newspapers, magazines or on
te levision or radio designed to
at t ract
interest in, or gain
support
for,
a charity s position on
poli t ical
issues
and matters
of
public
policy;
3. public
meetings
or lawful demonstrations that are organized to
publicize
and
gain support for
a
chari ty s
point
of
view on
matters of public policy
and
pol i t ical issues; and,
4. organizing
mailing
campaigns where a charity asks i t s members
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or the
public
to
write
to the media and government expressing
support for the chari ty s views on
pol i t ical issues
and matters of
public policy.
The
fact that
such act iv i t ies
are
carr ied
out
by
an
organization with
charitable
objectives
does
not
make
the nature
of
the
act ivi ty less
poli t ical .
We
refer
you to the enclosed Information Circular 87-1
enti t led
Registered Charities
ncillary and
Incidental
Polit ical
Activ i t ies
On
the
contrary, i t
appears that
the
Charity
is
devoting
substantial
financial, material
and human
resources to
pol i t ical act iv i t ies
which
are not
incidental
and
ancillary to
charitable objects.
That
is purposes
and act iv i t ies that are directed a t legislat ive
change
or
change in public policy or
attitudes
are
considered
poli t ical in
nature, and not
charitable a t law.
For
example,
these
activi t ies
and
related expenditures include
your fundraising le t ter campaigns
and
various ar t ic les in the Greenlink publication.
You have also made your
resources available to an organization which carr ies
out
pol i t ical
act ivi t ies;
more
specifical ly non-interest
bearing
loan
to
Greenpeace Canada discussed below.
Based
on the
above
analysis, i t appears
that
the
Charity has not
devoted
substantially a l l of
i t s
resources
to charitable
act iv i t ies
and
therefore has fai led to
meet
the prerequisite of subsection 149.1(6.2)
of the Act.
Once
again, pursuant to paragraph 168(l)(b) of the Act, fai lure to
comply with the provisions of the Act relat ing to a char i ty s
registrat ion may
cause
the Minister to
propose
revocation.
DISBURSEMENT QUOT
Registered chari t ies are
required
in each year of operation to meet or
exceed a
disbursement quota.
This
quota relates to
expenditures
that
must be
made
during
the
year
and
that
are of
a
charitable
nature.
In
the case of
a
charitable organization, the
Act
st ipulates that this
minimum
annual
disbursement quota is equal to eighty percent of
the
prior year s official ly
receipted
donations less certain types of
gif ts
received.
s discussed above, t
would
appear that the Charity
has
not
made
the
required
amount
of
expenditures
on
charitable
act iv i t ies .
This has
resulted in
a
disbursement quota
short fal l
as follows:
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Disbursement Quota
for
1990 -
80 of
1989
Receipts:
(410,387 x .80) 328,310
Less claimed
1989 charitable
expenditures
Disbursement
Quota
for
1991 -
80
of
1990 Receipts (306,920 x .80)
Disbursement Quota for 1992 -
80
of
1991
Receipts (625,734 x
.80)
Disbursement Quota for 1993 -
80 of
1992 Receipts (637,900 x
.80)
(154.851)
Shortfal l
173,459
245,536
500,587
510,320
As a resul t
i t
appears
that the
Charity
has
fai led to meet the
requirements
of
p r g r p ~ 149.1(2)(b) of the Act.
Paragraphs 168(l)(b) and 149.1(2)(b) of
the
Act provide
that
for a
registered chari ty to be
ent i t led
to retain i t s registered
s tatus t
is
required to comply
with
the requirements of
the
Act relat ing to i t s
regis t rat ion as
such. I f
a regis tered
chari ty ceases to
comply
with
these
requirements,
the
Minister may give notice to
the
charity
tha t he
proposes to revoke i t s regist rat ion.
OFFICIAL
DONATION
RECEIPTS
The law
provides various requirements in respect of
official
donation
receipts issued
by
registered
chari t ies . These
requirements are
described
in
some
detai l
in
Interpretation
Bullet in IT-110R2 ~ n t i t l e
Deductible-Gifts
and
Official
Donation
Receipts
a
copy
of
which
has
been enclosed for your review. Official donation receipts shal l be
issued
only
in
respect of
gif ts and
donations
(Regulation 3500). A
gi f t
or donation can
only be
considered to have been
made when
a l l three
of
the
following
conditions have been met:
1)
property was transferred;
2) the t ransfer was
voluntary; and,
3)
the
t ransfer
was made without
expectation
of return.
The Spring
1994
publication ent i t led News Update states that Partners in
Action
members
receive benefits
in
connection with access
to
the
computerized
bul le t in
board
enti t led
Alternative
BBS
the
100
sign
up
fee is waived and members are given a
free
one-year
subscription which
costs 79 to the public. Where a donor receives from a
chari ty
something
of
more than nominal
value
as an inducement for making a
contribution, no
offic ia l
receipt
may
be issued. This
is
so even i f the
amount
of
the contribution exceeds the value of the inducement.
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Paragraph
168(l)(d) of the Act provides
that where
a registered
charity
issues an off ic ia l donation receipt for a gi f t or donation otherwise
than in accordance with the
Act
and
Regulations
or issues a receipt
that
contains
false
information,
the
Minister
may give
notice to the
registered charity that he
proposes
to revoke i t s
registration.
CONCLUSION
The consequences to a registered charity of losing i t s
registrat ion
include:
1.
the
loss
of i t s tax exempt
status
as a registered charity
which
means tha t the
Charity
would become a taxable enti ty under Part I
of the Income Tax Act unless, in the opinion of the Director of
the applicable Dist r ic t Taxation Office,
i t
qualif ies as a
non-profi t
organization as described under paragraph 149(1)(1) of
the Act;
2. loss of the
r ight
to issue official
donation
receipts for income
tax
purposes which means that
gif ts
made to the Charity would
not
be allowable as.a
tax
credit to individual donors as provided by
subsection
118.1(3)
of the
Act
or as a
deduction allowable
to
corporate donors under paragraph l lO.l l ) a) of the
Act;
and
3. the
possibi l i ty of
tax
exigible under Part V
subsection
188(1)
of
the Act.
For your
reference,
we
enclose
a copy
of Information
Circular No. 80-lOR
ent i t led Registered
Charities Operating
Registered Charity and we
bring to
your attention
Appendices
C and D which
describe
the provisions
of
the
Income Tax
Act
concerning
revocation
of
registration,
the
tax
applicable
to revoked
chari t ies
and the appeal provisions from the
Minister s issuance
of a notice of intention to revoke a registered
chari ty s registrat ion.
I f you
do not agree
with
the
above,
or i f
you
wish to present your
reasons as
to
why the Minister
of
National Revenue should not revoke the
regis t ra t ion of the Charity in accordance
with
subsection 168(2) of the
Act, you are invited to submit your representations to us within s ixty
days from
the date
of this le t ter . Subsequent to this date,
the
Director,
Charities
Division,
will
decide
whether
or not
to
proceed
with
the
issuance
of a notice of
intention
to
revoke
the
registrat ion
of the
Charity in the manner described in
subsection
168(1) of the
Act.
I f you appoint
a
third
party
to
represent
you
in this
matter,
please
notify
us in
writing.
Ye attach as Appendix A our
response
to your queries respecting proposed
act iv i t ies for the future. However our review of
the
Charity s current
operations give us reason to believe that i t does not
qualify for
continued
registered status.
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I f you have any questions on
these
matters please
telephone
me at
r J Shelvock
a t
I . or write to 400 Cumberland
Street
Room 5004C, Ottawa
Ontario
KlA OL8
Yours sincerely
/Jd de
Richard Labelle
CGA
Assistant
Director
Audit
Section
Charities Division
Enclosures:
IC
80-lOR
IC
87-1
IT
110R2
Undertaking
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Revenue Revenu
Canada Canada
BY REGISTERED MAIL
Greenpeace Canada Charitable Foundation
185
Spadina
Avenue
Toronto,
Ontario
MST
C6
Attention: Ms.
Jeanne
Moffat
DE
Dear Ms.
Moffat:
RE:
GREENFEACE
CANADA
CHARITABLE FOUNDATION
Your file Vot ' rel6 'nce
Sl
z
Nolte
relefflff tl
Tel:
(613) 954-1362
I
refer
to
the Department's
l e t te r
of
August
16,
1994, copy attached,
requesting
your representation$
as
to why the Minister of National
Revenue
should
not revoke
the regis t ra t ion
of
Greenpeace Canada
Charitable Foundation
( the
Charity )
in accordance with
subsect ion
168(2) of
the
Income
Tax ct
( the Act ).
We
have reviewed representations
made
on
your beha l iby Chan Co. in
~ h i r
l e t t e r s
dated November
29,
1994
and
March
27,
1995,
as
well
as
representat ions made to our auditor when she
attended
a t your
accountant 's office. on
August
24 and
25, 1995 to
review addit ional
documentation submitted
by
you
(including
the
Chari ty 's
1994
act iv i t ies . We
also refer to a meeting held a t your request on
October
10, 1995 a t our office and
attended
by Mr. John Doherty, Mr. Chris Chan,
Mr.
Arthur Drache and
yoursel f on behalf of the Charity.
We must
advise tha t
the
submissions did
not al levia te our
concerns.
As
a resul t , we have determined tha t the Charity does not sa t i s fy the
def ini t ion of a chari table organization in accordance with
subsection
149.1(1),
has fa i led to
meet the prerequisi te of
subsection 149.1(6.2),
has fa i led to
meet i t s disbursement
quota in accordance
with the
requirements
of
paragraph 149.1(2)(b)
of
the
ct
and
has
issued
off ic ia l
donation receipts which are not in compliance with
Part
XXXV
of the
Regulations to
the
Act.
Canada
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CHARITABLE ACTIVITIES
Greenlink
In your November
29,
1994 l e t t e r you s ta te tha t
the
publication of the
newsletter
is
one
of the
functions
of
the Information
Office
and
as such
i s not
in and of
i t s e l f
the
only chari table act iv i ty of the
Chari table
Foundation . Your l e t t e r also refers
to
a number of educat ional and
research ac t iv i t i es conducted
by
the Information
Office. You
have
attached
a l i s t of
meetings organized
d ~ r i n g 1993
and
1994 by the
Charity,
but s ta te tha t no writ ten formal documents
or
speeches are
avai lable.
Your representations
do not
convince
us that the described ac t iv i t i es
under Information Office were conducted by
the Charity
and, even i f
such
should
be the
case, the resources
devoted
to
ac t iv i t i es other
than
the
newslet ter
are minimal.
The
predominant act iv i ty of the Information
Office i s the publicat ion
of
the newsletter: Greenlink and the French
Reseau
Vert
As s ta ted in our
attached
l e t t e r
the courts
consider tha t simply
providing
se lected
information and opinions on a
subject
i s
not .
educational
in the
chari table
sense. A regis te red char i ty i s permit ted
to
publ ish
a
newslet ter , but
since
th is
i s
not
an
act iv i ty which i s
chari table in and of i t s e l f
i t .must
be clear ly anci l la ry and incidental
to
the
organizat ion 's
s t r i c t ly
chari table purposes
and
ac t iv i t i es .
The
newslet ter
does
not refer to ac t iv i t i es of the
Charity
i t s e l f .
A
careful
perusal
of the
newsletter indicates tha t the content
i s general
information
on
the ac t iv i t i es of Greenpeace Canada. You make reference
.to a circula t ion
of
the
publication
of each issue of
between 150,000
and
200,000.
However, the
publication
advert ises tha t the
newslet ter
i s
offered
to
members of Greenpeace Canada who pay a membership fee to
Greenpeace Canada of $30 per
year.
You s ta te tha t the Information Office was star ted by
the
Charity in
May 1993. However, the
Charity's
l e t te r
of
November
12,
1993
to the
Department refers
to the
Information
Office and
newslet ter as proposed
ac t iv i t i es
nor did
the
Charity s ta te tha t th is
was
one of i t s
ac t iv i t i es
during
the audit
conducted in May 1994.
We make-the
following addit ional comments:
The
predominant act iv i ty of the
Information Office is
the
publicat ion of
the newsletter; the
resources
devoted
to
th is
ac t iv i ty
in 1993 and
1994 as
a
percentage of to ta l
c h ~ r i t b l e
expenditures
(as
indicated
on the T3010
Charity
Information
Returns) were
100 and 78
respect ively. In addi t ion, the
Charity
was
al located 65
($70,643) of Greenpeace Canada's
newslet ter
costs in
1992.
You
have
also indicated
tha t the Information Office commenced in
May 1993. However,
expenditures
charged to the Charity for the
cost
of
newsletters
commenced in 1992.
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The
documentation submitted
on
the
Antarctica World Park does not
make reference to the
Charity.
In fact , the
documentation
refers
in teres ted par t ies to
contact the Greenpeace
Antarctica
Campaign
in
the following
countries: Greenpeace
USA Greenpeace
International ,
and
Greenpeace
New
Zealand.
The
Charity did
not
maintain
any minutes of board meetings
pr ior
to January, 1993;
reference
to the Charity is
found in
the
minutes of
Greenpeace
Canada.
Absent from
the
minutes
is reference to the act iv i t ies in
Antarctica.
You
have referred to weekly campaign
reports
from Greenpeace
Internat ional on
the Antarctica
Campaign. These reports are
to
Everyone and appear
to
be e-mailed to a l l Greenpeace
offices.
You
have
s ta ted
tha t the
February 11,
1991 facsimile
from
Mr. Brian I l e r of
the
Charity to Greenpeace
Internat ional
i s only
a
formal confirmation to the verbal agreements
made
in 1990
.
. However, the e v i d ~ n e indicates that the agreement made in 1990
was
for the
Charity
to receive future proposals from
Greenpeace
International ,
ra ther than
to approve
specif ic ac t iv i t i es
There are i n o n s i s t e n ~ i e s in the reports
from Greenpeace
Internat ional
tha t
the Charity provided as
evidence
tha t t
di rected
the.use of i t s funds in the
Antarctica
campaign:
The Charity claimed
to
have disbursed the sum of $700,000
during
1990 on the
Antarctica
campaign on
i t s
199 T3 1 Charicy
Informaciop Recurn
At
the
Department's
request,
Greenpeace
Internat ional
submitted
on June 1, 1994, confirmation tha t the Charity contributed
$350,000 for expenses
incurred
on i t s behalf during
1990.
You
subsequently provided
confirmation from Greenpeace
International , ~ x e d to the Charity on November 29,
1994,
tha t
the Charity contributed
$1,400,000 to
the Antarct ica
Campaign;
$700,000
for 1990, and
$350,000
for each of 1991
and
1992.
We
do
not accept th is subsequent confirmation
as
evidence
tha t
the funds were
actual ly
applied to ac t iv i t i es carried on
by
the Charity i t s e l f
The supporting reports
provided
do not show
tha t
the
Charity
di rected
or
control led
the
expenditure
of
funds,
nor was a
separate accounting provided as
required
under the
agency
agreement.
The evidence shows tha t any funds advanced to
Greenpeace
International by the
Charity
were made on the understanding that
Greenpeace Internat ional would
re turn
these
funds
to Greenpeace
Canada.
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As discussed with you,
the
l e t t e r
of
April 8, 1991 from Greenpeace
International to Mr.
Brian
I ler and
the
March 31,
1992
memo to
Ms. Vicki
Slemin
show that the
Charity's
1991 payment
of
$700,000
(which is reported in the
Charity's
records as an
expenditure in
1990)
was
l inked to
a
payment
back
from
Greenpeace
Internat ional
to
Greenpeace
Canada
and
that Greenpeace
Canada
would use
a
subs tant ia l
portion of
th is payment ($500,000) to reduce i t s loan
payable to the Charity.
You
have
submitted tha t the 1991 and 1992 t ransact ions between
Greenpeace Canada and Greenpeace Internat ional are
in the
ordinary course of non-profi t act iv i t ies car r ied out by
Greenpeace
Canada and
these
are
completely
different
t ransact ions from
pledges
to Greenpeace
International
by the
Charity.
The fac t
remains tha t the Charity
did
not pay any amounts
to
Greenpeace
International
under
the agency agreement;
the
funds were paid
direc t ly to Greenpeace Canada.
Use
of Resources
by Non-Qualified Donees
We bel ieve the facts cumulatively show tha t the Charity was allowing the
majority
of
i t s resources to
be
used by
Greenpeace
Canada. We do not
accept
the
repor t ing of the loan
as
unsecured
and non-interest
bearing
as
a
c le r i ca l
error . The f inancial
statements were
audited and
reviewed.
These
actions
are
in direct
contravention
of
the
undertaking
provided to the
Department
on regis t ra t ion tha t the Charity
would
not
allow i t s
resources
to be used by a
non-qualified
donee.
The
records show tha t the loan has been increasing yearly, repayment
schedules have not
been
adhered to, and the in teres t for 1992 and 1993
was accrued, but not paid, only subsequent to our August 16, 1994
l e t t e r .
The working papers show tha t the
loan
increased, during 1994 from a
January
1,
1994 balance
of
$830,074 to
a balance
owing
on
December 31, 1994
of
$1,324,670.
In
addition, the loan agreement
subsequently
provided,
executed on August 25, 1995, shows that as
of
tha t
date,
the
Charity had
not
received any
payments on
the
loan
during
1995 and tha t the f i r s t payment
is not due unt i l
December
31,
1995. The
loan receivable represents
85 of
the Charity's
to ta l resources.
We do not consider
the
mailing
l i s t
to be tangible securi ty for the
loan: there has been no valuation on the loan and the original mailing
l i s t purchased by Greenpeace Canada from the
Charity
has been writ ten
off the
books.
You
indicated
during
our
attendance in Toronto on August
25,
1995,
tha t the
$800,000
loan
between Greenpeace n t e r n a t ~ o n a l
and
Greenpeace Canada, which
also pledged
the
mailing
l i s t
as securi ty ,
did
not actua l ly occur. However, our review
of
the minutes of October 1-3,
1993 of Greenpeace Canada sta te that the
loan
from Greenpeace
In terna t ional has been
secured and
t ransferred.
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6
During your
at tendance a t
our of f i ce
on
October 10,
1995,
you s ta ted
tha t
the loan
had
now been reduced
by
$125,000 on p r i n c i p a l and $94,000
on
i n t e r e s t .
e are unable to accept th i s payment,
which
still leaves
an
unpaid balance
o f $1,105,670,
as
an
acceptable
so lu t ion
to our
concerns .
In add i t ion ,
we
bel ieve t ha t
the
loan
balance
should
be
inc reased
by an add i t i ona l
$500,000, plus accrued i n t e r e s t ,
which
amounts r ep r esen t
the
c i r cu l a t i on
of
funds
from
t he
Chari ty ,
to
Greenpeace In t e rna t iona l ,
to
Greenpeace
Canada,
and
back
to the
Char i ty
in
1991.
In our view,
the
Char i ty has been
plac ing
i t s as se t s
a t r i s k
by
advancing funds
to
Greenpeace
Canada
in
a
non-arm's
l eng th arrangement.
As a
r e s u l t ,
we bel i eve
t h a t the
Chari ty has
f a i l ed
to
devote
a l l i t s
resources
to .cha r i t ab l e
a c t i v i t i e s ,
and the re fo re does no t meet
the
d e f i n i t i o n o f a cha r i t ab l e
organiza t ion
pursuant to subsec t ion 149.1(1)
o f
the e
Paragraph 168( l ) (b) of the c t provides tha t for a
r eg i s t e r ed
char i ty to
be
e n t i t l e d
to
r e ta in
its r eg i s t e r ed s t a tu s , it
i s
r equi red to comply
with the
requi rements o f
the
c t r e l a t i ng
to
i t s
r e g i s t r a t i o n
as such.
f a r eg i s te r ed char i ty
ceases
to
comply
with these requi rements , the
Minis ter
may
give not i ce to the
char i ty t ha t he
proposes to revoke
i t s
r e g i s t r a t i o n .
POLITICAL ACTIVITIES
You
make
re fe rence to
Appendix
B
of
Information
Circular 87- l
t i t l e d
Regi s t ered Char i t i es nc i l lary nd
Inc identa l
Pol i t i c a l c t i v i t i e s
which r e f e r s
to
a cha r i t y t ha t asks people
to
p ress for s t r i c t e r
l e g i s l a t i v e
s tandards fo r environmental protec t ion and th i s
ac t iv i ty
i s
deemed
as
subordinate to
i t s char i t ab le ac t iv i ty . Please
note
t ha t
a l though
t h i s c ~ i v i t y i s allowed,
it
i s
sub jec t
to the
es t ab l i shed
expendi ture
l imi t a t i ons .
e
have determined t ha t
the
Char i t y ' s
re sources devoted
to
p o l i t i c a l a c t i v i t i e s are
in
excess o f
anc i l l a ry
and
i nc iden ta l
a c t i v i t i e s .
e remain
o f
the
view
t h a t
the
Char i ty ' s p o l i t i c a l c t ~ v ~ t ~ e s
and
r e l a t e d expend i tu res
inc lude i t s
fundrais ing
l e t t e r campaigns and
var ious
a r t i c l e s
in
the
news le t te r .
t
has a lso made i t s
resources
ava i lab le
to
Greenpeace
Canada, an
organizat ion
which
ca r r i e s
ou t
p o l i t i c a l
a c t i v i t i e s .
These
resources inc lude
the
pr inc ipa l amount
of
the loan r ece ivable
and
in te r e s t
foregone
on the debt .
Based
on the
above ana l ys i s , it
appears
t ha t
the
Char i ty
has no t
devoted
s u b s t a n t i a l l y a l l
o f
i t s resources to
char i t ab le
a c t i v i t i e s ,
and
t he r e f o r e
has f a i l ed
to meet
the
prerequi s i t e of
subsec t ion 149.1(6 .2)
o f
the c t
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Once
again,
pursuant to paragraph l68(l)(b) of the Act fa i lure to
comply with the
provisions
of the Act relat ing
to
a
char i ty s
regis t ra t ion may cause
the Minister to
propose
revocation.
DISBURSEMENT QUOTA
As
d ~ s u s s e d above,
we
are unable to accept
your
representations tha t
the
Chari ty
fa i led to
include
chari table expenditures
of 20,157 in
i t s
expenditure on chari table
act iv i t ies
due to a cler ica l e r ror .
Likewise,
the Chari ty has not
provided
us with substant iat ing documentation to
prove tha t
gi f t s of capi ta l
received
by
way of
bequest
or
inheritance
for the years 1989 to
1992
should be removed from i t s disbursement quota
calculat ion.
As
indicated
above,
we
remain
of the
view tha t the Charity
has fa i led to carry
out
char i table
act iv i t ies for the years under audit
(1990
to
1993).
In addit ion,
your
representat ions
for
the
1994
year
indicate
tha t
the Charity
has
incurred an addit ional disbursement quota
short fal l .
As
a resu l t , t
appears
tha t
the
Charity has fa i led to meet the
requirements of paragraph 149.1(2)(b) of the Ace
Paragraphs 168(l)(b)
and 149.1(2)(b)
of the
ce
provide tha t for a
regis te red char i ty to be ent i t led to re ta in i t s
registered
sta tus ,
t
is
required to comply with
the
requirements of the ce re la t ing to
i t s
regis t ra t ion
as
such. I f a registered chari ty ceases to comply
with
these
requirements,
the
Minister may give notice to the char i ty tha t
he
proposes to revoke i t s regis trat ion.
OFFICIAL DONATION RECEIPTS
Yeti s ta te on page 8 of
your
l e t t e r of November 29, 1994, tha t the
inducements
offered
in connection with
access
to the computerized
bul l e t in
board have
no rea l economic benefi t
to
the donor as the
membership is not
t ransferrable and has
no
resale
value.
However,
the
fac t tha t
the
membership is not t ransferrable i s not an
indicat ion of
the fa i r market value of the
inducement,
which the
Charity
puts a t 179
in i t s
advertisements.
Paragraph 168(l)(d) of
the Act
provides
tha t
where a
regis tered
chari ty
issues
an off ic ia l
donation
receipt
for
a
gi f t or donation otherwise
than
in accordance
with the Act
and Regulations, or issues
a
receipt
tha t contains false
information,
the
Minister
may give notice to
the
regis tered
chari ty
tha t he
proposes
to revoke i t s regis t ra t ion.
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draw
your
at tent ion to
paragraph
149 1) 1) which s ta tes the def ini t ion
of a non-profi t organization
and
subsection
149 12)
which s tates the
f i l ing requirements of
a non-profit organization.
Attachments
c c
Mr.
Arthur
Drache
Yout'S.
t ruly,
R.A. Davis,
CGA
Director
Charit ies Division
Drache, Burke-Robertson Buchmayer
184 Lisgar Street
Ottawa,
Ontario
K P OC