 Print
Transparency, Accountability and Anti Avoidance Rules in Charitable Organizations
10-22-2014
Managing a charitable organization can be very complex. Funders, donors and consumers are demanding more transparency and accountability, board and staff need to keep on top of their legal compliance requirements, and everyone needs to be concerned with safeguarding their organization from misuse.
Many critics of Islam have accused prominent Muslim groups and individuals of condoning or ignoring violence and diverting charitable funds to violent groups. The most effective response to all criticisms is calm, reasoned discourse and open accountability. It should be self-evident that any and all public organizations should adhere to ethics of conduct that include transparency of responsibility and bookkeeping.
The Qur’an demands fair, open and ethical behavior in all business transactions. As one example, Verse 2:282 requires that financial transactions be made through witnessed, written contracts. Numerous other verses exhort believers to fulfill their contracts faithfully and testify honestly (see, e.g., Verses 4:135, 5: 89. or 5:108).
Honesty, accountability, reliable bookkeeping, and dependability should be the hallmarks of Muslim organizations.
Some non-Muslims hold Muslim organizations to a standard higher than they observe themselves or demand of other groups. It is not the standard that is unfair, but the pressure that is based on prejudice. Nonetheless, as the Quran asserts, the lapses of others do not offer any excuse for lapses on our own part (see, for instance, Verse 5:8 which teaches Muslims that hatred or prejudice are never a reason to swerve from justice).
The standards of accountability and transparency laid out in the Qur’an are the standards we should aim for, whether or not we receive approbation from the greater community, and whether or not they have different standards for Muslim versus non-Muslim organizations.
Anti-avoidance rules and designated gifts
The 2010 Federal Budget introduced new anti-avoidance provisions regarding gifts made between registered charities that are not at arm's length. The budget also introduced the concept of a designated gift.
Anti-avoidance rule
A registered charity that receives a gift from another registered charity that is not at arm's length must spend 100% of the fair market value of the gift (determined at the time of the gift):
· on its own charitable activities; or
· on gifts to qualified donees that are at arm's length.
A registered charity must meet this anti-avoidance spending requirement in the fiscal period the gift was received, or in the following fiscal period. If a charity does not spend the amount on time, it may be subject to a penalty of 110% of the amount that it failed to spend, or to revocation of its registered status.
Footnotes: Footnotes: This column is presented as a general source of information only and is not intended as a solicitation for business. It is always recommended that you consult a qualified tax professional beforeembarking on any of the suggestions outlined above. Mohammed Yasin, CGA, is the principal of M. Yasin & Co. Inc., Certified General Accountants and has offices in Vancouver & Surrey,B.C. For more information on this topic or any other taxation matters, please contact taxes@alameen.ca.
|