Supporting Syrian Refugees: Public Benefit or Private Benevolence
By: Karen Cooper
With the recent focus in the media and among grassroots organizations, many Canadians are supporting or thinking about supporting the settlement of Syrian refugees to Canada. Oftentimes they are doing so with the direct or indirect involvement of registered charities that may, or may not, already have experience and programs related refugee resettlement. When responding to appeals to appeals to support Syrian refugees, and for that matter to any request to support individuals or families in need as a result of unforeseen circumstances, charities must ensure that they continue to fulfill their obligations as charitable organizations, including meeting the charitable public benefit test and issuing receipts only for valid donations, in order to maintain their registration. The rules related to compliance with these obligations have caused some confusion with respect to what financial support from Canadians for refugee resettlement is receiptable.
One of the first things for a charity to consider is whether refugee resettlement or related activities fall within the charitable purposes or objects of the organization as set out in its constating documents, such as its letters patent, articles of incorporation or continuance, or memorandum of association. Many organizations being asked to support Syrian refugees have been registered by Canada Revenue Agency (CRA) on the basis that their charitable purpose is advancement of religion (church groups) or some other purpose related to their activities prior to the refugee crisis arising. This means that the only activities that the organization should be engaging are those related to their charitable purposes and those purposes may not authorize activities related to refugee resettlement. Charities whose purposes are limited in this way should be looking to other registered charities to deliver the relief being sought and transfer any funds received to those registered charities for ultimate distribution to those in need.
If a charity has charitable purposes that authorises the delivery of programs in areas such as relieving the conditions associated with poverty (for example providing access to shelter, food, and other basic necessities) or assisting vulnerable populations (such as refugees and new immigrants), then it might be in a position to provide direct support to individuals and families in need provided that the support is provided through a program that meets the public benefit test.
Public Benefit Test vs Private Benevolence:
To support refugee resettlement, charities must not only have charitable purposes that authorise the particular activities, the activities must also meet the public benefit test. This means that charities must be able to show that their purposes and activities provide a tangible benefit to the public as a whole, or a significant section of the public. This notion of public benefit has also been called the “public character” of charity, in that it seeks the welfare of the general public, it is not concerned with the conferment of a private benefit. Whether or not a particular group of the public comprises a sufficient segment of the public to meet the public benefit test will depend on, and may change according to, the charitable purpose being considered.
Conversely, an activity will not be charitable if it confers private benefits. A private benefit is considered by CRA to occur when one of the reasons for the program is to confer individual benefits to a limited group of persons on the basis of criteria that are not relevant to the charitable purposes of the organization. Charities that confer a private benefit unrelated to their charitable purposes are not engaging in a charitable activity.
What is the difference between public and private benevolence? A common understanding of private benevolence involves a gift given directly from one person or organization to another. For example, if a charity is aware of a single individual or family in need and they are provided with direct financial support in the absence of a program of public benevolence, then the charity is engaging in private benevolence. If a charity engages in a fundraising campaign to specifically assist that named individual or family, it may also be engaging in private benevolence, i.e., facilitating gifts between individuals. On the other hand, a charity that raises funds for a group of persons in need and that qualify as charitable beneficiaries of an existing program of the organization, eg. refugee resettlement program, and, thereafter, provides direct support to those individuals in accordance with a process and criteria under the control of the charity, the charity would be considered to be engaging in public benevolence, which is a charitable activity.
This somewhat fuzzy line between public benevolence and private benefit is at the source of the confusion over receipting.
Funding and Fundraising
There are several ways that a refugee settlement fund or direct assistance fund may be funded: by resources from the general operating budget through the annual budget process; by funds designated by donors for a particular fund; or by funds received through a special appeal or fundraising campaign.
Charities should be particularly careful when accepting donor designated funds to ensure that the donor has not specified a particular person or family. Such a gift is considered by CRA to be a gift to the person or family and not to the charity and, therefore, cannot be receipted. However, donations subject to a general direction from a donor that the gift be used in a particular program operated by the charity, eg. refugee resettlement, are acceptable, provided that no benefit accrues to the donor, the directed gift does not benefit any person not dealing at arms’ length with the donor, and decisions regarding utilization of the donation within a program rest with the charity. The latter concern is particularly important if the charity wants to avoid being perceived by CRA as conduit for a local community group that may be engaging in most of the actual support to the refugees.
When considering engaging in a special appeal or fundraising campaign, charities should be careful to ensure that the materials in support of the campaign indicate the purposes that the funds will be used for in sufficiently general terms to provide some flexibility, that the funds will be distributed and used by the charity in accordance with the policy, and that any surplus funds will be used for the general purposes of the charity and/or similar charitable purposes.
While some commentators have suggested that CRA should adopt policy to ensure that all contributions to support Syrian refugee settlement are considered charitable donations, such changes will not likely occur overnight and charities should be careful, in the meantime, that they comply with their obligations as charitable organizations.