End of the Political Activities Audit: What Does it Mean for Charities?

We’re not lawyers at COCo but we do our best to provide legal information! If you want information about how the law applies to your particular situation, contact a lawyer. 

Organizations across the country have been celebrating the announcement by Revenue Minister Diane Lebouthillier that they would be “winding down” the political-activity audit of charities, a widely detested program originally started under the last government. In the week since, the government has been getting a lot of credit for ending an audit that was almost over anyways.

“But with 90% of the audit going forward as planned, we’re not sure the announcement deserves the fanfare it’s receiving”

The political activities audit was a 4-year program that aimed to audit 60 charities. As of now, 30 of those charities have been audited, and the Liberals will continue to audit the 24 other charities whose audits are currently in progress, sparing only 6 at the end of the day. Widely panned as a “witch hunt”, and largely ineffective in catching any non-compliance with political activity regulations, the audit will not be missed by anyone in Canada’s charitable sector. But with 90% of the audit going forward as planned, we’re not sure the announcement deserves the fanfare it’s receiving. It is also unclear whether the long-term impacts of the audit will in any way be reversed, including the “advocacy chill” created during those 4 years.

“Many charities avoid activities that are perfectly legitimate out of fear and a lack of clarity; others spend more than they can afford retaining charity lawyers”

Moreover, the end of the audit doesn’t change one of the biggest problems with Canadian charity law around political activities: that it is vague and confusing, and encourages self-censorship. Many charities avoid activities that are perfectly legitimate out of fear and a lack of clarity; others spend more than they can afford retaining charity lawyers. Here at the Centre for Community Organizations, we’ve made a point of both opposing the Canadian restriction on charities spending no more than 10% of their annual budget on political activities (it’s a very low limit, and starkly different than, say, the UK’s 49% rule), and trying to keep charities as informed as possible about what “political activity” actually means.

Here are 3 major misconceptions people have about the limits on political activities:

1. Most people think the limit on political activities is 10% of your budget. In reality, it depends on your budget (smaller organizations can use more). You can also request exceptions, for instance, if you want to run a big campaign one year but not use your budget the next.
2. Providing it is within your mandate, meeting with government officials and politicians does not count as a political activity as long as your argument to them is “well-reasoned”— i.e. based on facts.
3. Public awareness campaigns, again providing they are “well-reasoned”, also do not count as political activity (again, providing they are within your mandate).

It’s a shame when charities, who could have beneficial and important impacts on decision-making in Canada, shy away from advocacy roles because of fear and misinformation. If you’re interested in learning more, the CRA has created some great resources.

And lastly, the question of the week: does the discontinuation of the audit change reporting requirements for charities? The answer is no. The reporting requirements remain the same (they can be found here), and as per usual, the CRA will audit about 800 charities this year for any number of reasons. The political activities audit targeted an additional set of organizations, based on the same rules we all follow.

Thanks for the ever helpful input of Samuel Singer, a charity lawyer based in Montreal, for answering questions about this article. He can be found at samuelsinger.ca.