“Charities have an ethical obligation to open their books to the public. Too much money is at stake for donors to operate on good faith alone. All charities should be required to post their full audited financial statements on line. It’s the best way to inspire public confidence in giving.”
Toronto Star Editorial, November 16, 2011
In January, while looking through Charity Intelligence’s data base, it came to our attention that 137 large charities from our database of almost 700 charities do not provide audited financial statements. Each charity has this information. Each charity includes the financial statements in its annual filing. To access this information, Charity Intelligence has to request the auditeds from the CRA Charities Directorate. This information request requires that the CRA Charities Directorate pull the file, scan the documents, and email this to Charity Intelligence. This is a thorough waste of government time and tax payers’ money.
Let’s call these charities that do not provide financial statements the “Dark Pools”. These charities are not small, struggling frontline charities, to whom audited financial statements would be an onerous burden. These Dark Pools are among Canada’s largest charities. Each receives more than $1 million in annual donations, with average annual donations of over $5 million. In the last year Charity Intelligence analysed these charities, the combined donations exceeded $750 million.
This is a problem – a big problem – and a problem Charity Intelligence can tackle. It will be enormously time consuming, but Charity Intelligence will telephone and email each charity to request this information. Charity Intelligence will encourage each charity to adopt best practices in financial disclosure. And, after a reasonable time, Charity Intelligence will muster every media contact to name the Dark Pool charities.
Financial transparency is the foundation of any market transaction. It is also a matter of principle. “To whom much is given, much is expected.” Those charities that receive enormous generosity and are allowed to operate tax free must be financially transparent.
Nearly every donor expects charities to be financially accountable – 98% in the most recent national survey[i]. It is 2016 after all. The number one question donors have about a charity is how is the money spent. The audited financial statements are the gold standard. Queen’s University’s Best Practices in Charity Annual Reporting finds unanimously that the most transparent disclosure is to include a full set of audited financial statements[ii]. CRA filings are not independently audited and lack financial notes. As such, CRA filings are not a substitute for audited financial statements.
Charity Intelligence frequently hears from these Dark Pool charities that they prefer to keep their audited financial statements in house. Charity Intelligence respects each charity's decision and will nationally report on it.
[i] Muttart Foundation, Talking About Charities, 2013 national survey, https://www.muttart.org/wp-content/uploads/2015/11/2.-Executive-Summary-2013.pdf
[ii] Steve Saltiro and Patrick Legresley, “Best Practices in Charity Annual Reporting” 2013 edition, CPA Queen’s Centre for Goverance https://smith.queensu.ca/centres/centre-for-governance/voluntary-sector-reporting-awards/resources.php