The question I’m most asked about the audits of charities for their ‘political activities’ concerns how Canada Revenue Agency could end up singling out charities from the “progressive” end of the political spectrum, particularly environmental charities working on issues around various aspects of energy policy.
How is it that the process has been politicized? People wonder whether a cabinet minister told a senior CRA bureaucrat who to audit, and then it got passed down the line. That would be a clear violation of the separation of administrative taxation decisions from the political arm of government.
But it’s also the hardest to prove, because a smoking gun would probably involve a memo from a senior bureaucrat discovered through a freedom of information request. Given how wrong it would be for a senior bureaucrat to follow such instructions from a cabinet minister or political operative in the Prime Minister’s Office (equally wrong as giving such instructions in the first place), it’s hard to imagine a ministry official writing about it.
So if that’s how the political interference is taking place, it’s unlikely there would be a smoking gun. That said, it’s telling that some of the charity leaders I interviewed thought it possible for this to happen in the current political climate. Perhaps trust is not high for the integrity of government ministers and senior bureaucrats?
The best explanation though, is what I’ll call the “Constructing the Funnel” approach to ensuring CRA targets organizations that have different policy preferences to those of the government. Now, keep in mind that for this to work it does not have to be a conscious, well-thought-out strategy. Whether very deliberate or the result of a series of actions, the funnel gets constructed and the charities get distracted and muffled.
Starting in 2012 and lasting all the way to the 2014 federal budget, federal cabinet ministers, with back-up comments from the Prime Minister, write and speak in public of charities in the same breath as money-launderers, criminal organizations, and terrorist organizations. Environmentalists are labeled “extremists” undermining Canadian families. Environmental organizations are added to the national terrorism strategy as potential threats to security. CRA staff see this as surely as the rest of us and know who the government is concerned about.
In 2011, a political employee leaves the employ of federal cabinet minister Jason Kenney to found Ethical Oil, an aggressive private non-profit that advocates on behalf of Canada’s petrochemical sector. The organization starts a website and files complaints to the CRA against energy-issue charities, accusing them of breaking regulations concerning “political” and partisan activities. The operative returns to Ottawa with a promotion to the Prime Minister’s Office. People with connections to the Conservative Party continue to run Ethical Oil.
The 2012 federal budget sets aside $8 million for stepped-up CRA audits of “political activities” and other matters, at the same time as other government departments get cuts in an austerity budget that laid off approximately 2000 government scientists and massively reduced environmental regulations and public consultation processes. In discussing the changes, Finance Minister Jim Flaherty refers to citizen complaints.
CRA now has the financial resources to increase audits for “political activities” and aims for 60 over three years. Staff check files to discover which organizations are declaring higher percentage of resources devoted to “political activities” (most charities are allowed up to 10 percent of resources, smaller charities up to 20 percent). These tend to be organizations with different ideas than the current government about the best public policies for Canada.
CRA finds multiple complaints from Ethical Oil in the files of organizations that address environmental and economic issues around climate change, expansion of the oil sands or gas extraction, pipeline and train transportation, export by ocean tankers, and protection of habitat and species in Alberta and BC related to the above.
Interestingly, a February 6, 2014 news report by CBC quoted Alberta Conservative MP James Rajotte noted that he assumes CRA “receive all sorts of information from all sorts of Canadians, in terms of who they should or should not audit.”
Perhaps there are complaints from individuals or groups in the CRA files of charities in other sectors my data identified as targeted—development/human rights groups and groups with significant funding from labour unions—or perhaps there are other yellow or red flags that drew CRA attention.
Charities with high self-declaration of “political activities” and/or complaints are given early and particular attention for auditing.
The federal government has consistently denied that it either targets individual charities or tells CRA to do so. In any case, three sectors are being targeted for audits. It seems that the government has, unintentionally or by design, constructed a funnel that increases the likelihood of audits focusing on groups that have different ideas than the government about public policies, and are more likely to voice their dissatisfaction.
My funnel is derived from the comments of 16 charity leaders and five experts who participated in my thesis research on condition of anonymity, along with a survey of literature on the Canadian charity and voluntary sector. It is a reasonable explanation for explaining the targeting now being experienced, and reflects the experiences of charities, charity lawyers and former government staffers. As they say in the TV commercials, “Actual results may vary.” There’s no trademark on this funnel; feel free to share it.
Meanwhile, please check out my Master’s thesis and feel free to forward and tweet it. And you can follow me on Twitter: @garethkirkby
I am a former journalist and media manager who recently completed my Master’s thesis for Royal Roads University and now work as a communications professional. I have earned a Webster Award of Distinction, among other awards, for my reporting.