AGENCE DU REVENU DU CANADA. J ~:. n s 2001

Transcription

1 1+'1 CAtWlA REVENUE AGENCY AGENCE DU REVENU DU CANADA. J ~:. n s 2001 BY REGISTERED MAIL North America Missing Children Association Incorporated 136 Route 420 South Esk, New Brunswick E1V 4N8 Attention: Mr. John Hughes, President BN: RR 0001 SUBJECT: Notice of Intention to Revoke North America Missing Children Association Incorporated Dear Mr. Hughes: I am writing further to our letter dated September 8, 2006 (copy enclosed), in which you were invited to submit representations to us as to why the Minister of National Revenue should not revoke the registration of the North America Missing Children Association Incorporated (the "Charity") in accordance with subs~ction 168(1) of the Income Tax Act (the "ITA~). We have reviewed the minutes of the a~nual meetings for 2002, 2003, 2004,. and 2005 and found them lacking in content pertaining to the activities of. the Charity: As of this date, we stitl have not re~eived any response to the other issues mentioned in our letter. Consequently, for each of the reasons mentioned in our letter dated September 8, 2006, I wish to advise you that, pursuant to the authority granted to the Minister in subsection (2) of the ITA, and delegated to me, I propose to revoke the registration of the Charity. By virtue of section 168(2) of the ITA, the revocation will be effective on the date of publication in the Canada Gazette of the fouowing notice: Notice is hereby given, pursuant to paragraphs 168(1)(b), 168(1)(c), and 168(1)(e) of the Income Tax Act, that I propose to revoke the registration of the organization listed below under subsection (2) and that the revocation of registration is effective.on the date of publication of this notice. Business Number RR 0001 Name North America Missing Children Association Incorporated South Esk, New J3runswick Place de Ville, Tower A, 320 Queen Street, 1 jh floor Ottawa, Ontario K 1 A OL5.../2

2 -2- In accordance with subsection 168(2) of the ITA, you can suspend this process (i.e. seek an extended period befo~e revocation) by applying to the Federal Court of Appeal or a judge of that court for a stay. The Court will acknowledge your application and provide you with an action number. We require a copy of the Court acknowledgement of your request for a stay to stop the revocation process. Should you wish to appeal this notice of intention to revoke the Charity's registration in accordance with subsection 168(4) of the ITA, you are advised to file a Notice of Objection within 90 days from the mailing of this letter. This.notice is a written statement that sets out the reasons for the.objection and all the relevant facts. The Notice of Objection should be sent to: Tax and Charities Appeals Directorate Appeals Branch Canada Revenue Agency 25 Nicholas Street Ottawa, ON K1A OL5 Please note that, notwithstanding the filing of a Notice of Objection, the Charity must seek the above-noted stay to prevent revocation from occurring. Unless the Canada Revenue Agency receives notice that an application for a stay has been filed to the Federal Court of Appeal or judge of that court regarding this revocation, we intend to proceed with the;l publication of the above notice in the. Canada Gazette in 30 days thereby affecting the revocation of the organization's registration. Consequences of a Revocation As of the date of revocation, which is the date upon which the above-noted notice is published in the Canada Gazette, the Charity will no longer be exempt from Part I Tax ~sa regi$tered charity and will no longer be permitted to issue official donation receipts. Additionally, by virtue of section 188 of the ITA, the Charity will be required to pay a tax within one year from the date of the Notice of Intention to Revoke the Charity's registration. This revocation tax is calculated on prescribed form T -2046, "Tax Retum Where Registration of a Charity is Revokecf'. The return must be filed and the tax must be paid on or before the day that is one year from the date of the Notice of Intention to Revoke a charity's registration. For your reference, I have attached a copy of the relevant provisions of the ITA (Appendix "A") concerning revocation of registration and the tax applicable to revoked charities as well as. appeals against revocation. Form T-2046, along with the related guide RC-4424, "Completing the Tax Return Where Registration of a Charity is Revoked', are also attache.d for your information.... /3

3 -3- Furthermore, the Charity will no longer qualify as a charity for purposes of subsection 123(1) of the Excise Tax Act (the "ETA"), effective on the date of revocation. As a result, it may be subject to obligations and entitlements under the ETA that apply to organizations other than charities. If you have any questions..about your GST/HST obligations and entitlements, please call GSTIHST Rulings at A copy of the relevant provisions of the ETA that apply to charities (Appendix "8") is also attached for your information. I also wish to advise you that pursuant to subsection 150(1) of the ITA, a return of income for each taxation year in the ease of a corporation (other than a corporation that was a registered charity throughout the year) shall without. notice or demand therefore, be filed with the Minister in prescribed form containing prescribed information. Yours sincerely, ~ k Jifi~abeth Tromp Director General Charities Directorate Attachments: Our letter dated September 8, 2006 Appendix "A", Relevant provisions of the Income Tax Act Appendix "B", Relevant provisions of the Excise Tax Act. Form T-2046, "Tax Return Where Registration of a Charity is Revoked' Guide RC-4424, "Completing the Tax Return Where Registration of a Charity is Revokecf

4 Canada Revenue AQency Agence du revenu du Canada. REGISTERED North America Missing Cbjldren Association 136 Route 420 South Esk, N.B. ElY 4N8 Your file Voila refhenca Our61e Natre retemnce Tel: Mr. Keith Bowers Date: September 8, 2006 Dear Mr. John Hughes; Re: Audit of North America Missing Chlldren Association Incorporated For the Fiscal Periods Ending Mareh 31, 2003 and March 31, 2004 Business Number: RR0001 This letter is further to our audit of the books and records of North America Missing Cbil~ Association Incorporated (the "Charity'') b~evenue Agency (the ''CRA"). The audit related to the operations of the re~~ty for the period from April 01,2002 to March 31, The results of this audit indicate that the Charity appears to be in contravention of certain provisions of the Income Tax Act (the ~'Acf') or its Regulations. In order for a registered charity to retain its registration, it is required to comply with provisions of the.act... ~amfu:able to registered charities. If these provisions are not complied with, the Minister \'~maylevoke the Charity's registration in the manner prescnoed. in ~ection 168 of the Act. The balance of this letter descn"bes ho~ the CRA considers ~ ~:f:rumty contravenes the.act. FaBure to Keep Ptoper Books and Records: Subsection 230(2) of the Act $tes, "Every registti-ed charity and registered Canadian amateur athletic association sba1l keep records and books of account at an address in Canada recorded with the Minister or designated by the Minister containing (a) informatic:>n in such fonn as will enable the Minister to determine whether there are my grounds for the revocation of its registration under this Act; (b) a duplicate of each receipt containing prescnbed information for a donation received by it; and (c) other information in such form as will enable the Minister to verify the donations to it for which a deduction or tax credit is available under this Act" POBox Hams Street Halifax, N.S. B3J 2T5 CP Hollis Street Halifax, N.S. B3J 2T5 Can ad 'I

5 North America Missing Children Association P!lge 2 of8 The Charity lacked proper account::4lg records to enable the determination of both its financial position and the charitable activities beipg carried on. The books and records were either non-existent or were completely inadequate. The Charity could not provide a general ledger prepared on a daily basis. The only document provided was an Excel ~heet of amounts paid out. A summary was made by the director's brother,. -from the spreadsheets and entered into a Simply Accounting program so as to ~a financial statement. This individual also prepared the T30 10 information return. The only documents provided were bank statements, with the cancelled cheques being provided at a later date. No bank reconciliations were provided. Expense vouchers were not sorted into their appropriate year and, in many cases, only the monthly statements of account were provided not the actual mvoices. The Charity has not provided any Minute Books. During our conversation on August 02, 2006, you were advised that we would need to see the Minute Books which you stated were prepared b~ Although I was unable to contact you the following week, you were -a~ was going to be needed. To date, these minutes have not been provided.. The numbers on the T30 10 return did not match the spreadsheet summaries. For the period. ending March 31, 2004, a detailed review was done from the information provided. The results were as follows: I) Although $600 per week or $24,0oo for the period was paid to ~ salary and wages, no T4 slip was prepared. Regulation 200(2) of the Act requires that where an amount has been paid that is required to be included in determining a taxpayer's income from an office or employment, an information slip in respect of such payment shall be.issued to that individual or contractor. Pursuant to Subsection 153( 1) of the Act, every person paying a salary or wages or other remuneration shall deduct or withhold therefrom such amount as may be determined in accordance with prescnoed rules and at such time as may be prescnoed, remit that amount to the Receiv.er General of Canada Regulation 200(1) further requires that the person prepare information returns, such as T 4's, at the end of the year. II) Vehicle expenses as per the withdrawals from the bank and from the ~heet provided indicates the total paid out was $11, The T3010 reported travel and vehicle at $7, From the information provided, it could not be verified that these expenses were incurred entirely for charitable purposes. There were no insurance contracts provided to determine the actual vehicle being insured. Details of the

6 North America :tv!issing Children Association Page 3 of8 Ford Credit/Premium Finance payments was not provided to determine which vehicle they pertained to or whether if it was a lease or a loan. Actual details regarding the charitable use of the vehicle was not provided. ill) IV) Utilities paid of $2, do not appear to be of a charitable nature. The verification of a functioning office could not made during this audit or in the previous audit conducted by Consulting and Audit Canada. Office expenses of$7, do.not appear to be of a charitable nature. The verification of a functioning office could not be made during this audit or the previous audit conducted by Consulting and Audit Canada. The amounts paid to- or itemized expenses appears to be for gas and meals for w~le purpose has been provided. Other payments included in office expenses did not indicate that they were expended for charitable purposes. V).fundraising fees, as indicated on the financial statements, of$101, represents 50% of the amount paid out to fundraisers. The other 50% is shown on the statements as public education, which is not factual. The mere fact that fundraisers give out a small pamphlet from the Charity does not constitute public education. There is no indication that these pamphlets are given out in all cases, in fact, when the auditor was approached in his own home, by one of your fundraising people, I had to specifically ask for any information they may h~ve. Withdrawals from the various bank accounts were not properly supported as to the use of funds. Under subsection 149.1(2) of the Act, the Minister may revoke the registration of the registered charity in the manner as described at paragraph 168( 1 )(e) of the Act because the registered charity has failed to comply with or contravenes any of sections 230 to of the A ct. Official Donation Receipts: Regulation ( 1) of the Act provides various requirements of official donation receipts issued by registered charities. The following are the r~uirements: Every official receipt issued by a registered organization shall contain a statement that it is an official receipt for income tax purposes and shall show clearly in such a manner that it cannot readily be a#ered, (a) the name and address in Canada of the organization as recorded with the Minister; (b) the registration number assigned by the Minister to the organization; (c) the serial number of the receipt; (d) the place or locality where the receipt was issued;

7 North America Missing Children Association Page4 of8 (e) where the donation is a cash donation7 the day on which or the year during which the donation was received7 (e.l) where the donation is a gift of property other than cash (i) the day on which the donation was receiv~ _ (ii) a brief description of the property7 and (iii) th~ name and address of the appraiser of the property if an appraisal is done; (f) the day on which the receipt was issued where that day differs from the day referred to in paragraph (e) or (e.l)7 (g) the name and address of the donor including~ in the case of an individual7 his first name and initial; (h) the amount that is t-; :--..zj (i) the amount of a cash donation, or (ii) where the donation is a gift of property o~ than cash, the amount that is the fair market value of the property at the time that. the gift was made, and. (i) the signatur~ as provided in subsection (2) or (3)7 ~fa resp!!nsible individual who has been authorized by the organization to acknowledge MOO~. ) Although fundraising revenue in the amount of $280,000 was shown on the T30 10 there was no amount shown for Tax Receipted gifts on Line You have advised me that the fundraisers do this and you have no information regarding whether receipts were issued or not. The Charity was not able to provide an accurate listing of donors or of the tax receipts issued.. Under subsection '(2) of the Act, the Minister may revoke the registration of the registered charity in the manner as descnoed at paragraph 168(1 )(d) of the A.c~ because the registered charity has issued a receipt for a gift or donation otherwise than in ~ce with the Act and the reguiations or that contains false information. Devotion of Resources: The Act permits a registered charity to carry out its charitable purposes, both inside and outside Canada, in two ways. First; it can fund other organizations, wbich ~ qualified donees as descnoed in the subsection (1 ); second, it can carry on its own charitable activities. As stated in 149.1(1), a charitable organization must devote all its J;eSOurtes to charitable activity carried on by the orgmrlz3.tion itself. The Act reinforces tbis requirement in paragraph (2) (b), by authorizing the Minister to revoke the registration of a charity organization if it fails to make required expenditures on charitable activities.

8 North America Missing Children Association Page 5 of8 No information has been provided to verify that this organization is anything more than a conduit for fundraising. The website for the Charity has not been updated in a number of years and it appears the information on the website originally came from other similar websites. You have indicated that you put on finger print clinics in local schools but you have yet provided us yith any proof of this. As per your own website you indicate: OUR MANDATE r; -To help locate missing persons, to notify national and local pollee age~cies and to assist where possible. No verification has been provided that this is actually being done. You have provided no actual case files regarding missing persons. Phone calls inade by this office to some local and National Police agencies did not indicate that the Charity has provided any information to assist in the locating of a missing person..._.,.. To educate the public In all matters pertaining to missing persons. No information other than the outdated website has been provided, which indicates how you have educated the public in all matters pertaining to missing persons. - lj: To pro~ide volunteers to.help in neighborhood searches for abducted, lost or.missing persons. No verification has been provided that the Charity is performing this.fimction. llll iii To obtain, publicize and spread Information to communities concerning persons who have gone missing... No information other than the outdated website has been provided, which indicates that you are providing communities with information concerning persons wlio have gone missing. w iay To. provide Information, assistance and counseling referral services to. relatives, friends and other individuals affected by the loss of a missing person... Nothing has been provided, which indicates that you have staff with the expertise to perform this mandate. liiii ~ To rai~ funds to support NAMCA's mandate. Fundraising is done by paidfimdraisingfirms throughout Canada and an average of70 to 7 5% of all.funds collected are paid back to the fundraiser and not used to support the Charities "mandate.

9 North America Missing Children Association Iaage 6 of8 Tlzis mandate is the same as the memorandum of association for the Charity dated June 1995 and filed with the CRA and which has been used to obtain it's charitable status. Under subsection (2) of the Act, the Minister may revoke the registration of the registered charity in the manner as descn1jed at paragraph 168(1 )(b) of the,4.ct because the registered charity has failed to comply with the requirements of the Act for its registration as such. ACTIVITIES The Act permits a registered charity to carry out its charitable purposes, both inside and outside Canada, in only two ways: 1. It can make gifts to other organizations that are qualified do:p.ees as set out in the Act. Qualified donees include Canadian registered charities, certain universities outside Canada as listed in Schedule VITI of the Regulations to the Act, the United Nations and its agencies, and a few foreign charities. 2. It can carry on its own charitable activities. In contrast to the relatively passive transfer of money or other resources involved in making gifts to qualified donees, carrying on one's 0\Yll activities implies that the Canadian charity is an active and controlling participant in a program or project that directly achieves a charitable pmpose. 'rhe Act reinforces this requirenient in Paragraph 149.1(2)(b), by authorizing the Minister to revoke the registration of a charity if it fails to make required expenditures on charitable activities carried on by it and by way of gifts to qualified donees. "TOLL FREE UNE Our toll free tip line was established In 1995 and is available 24 hours a day, 7 days a week. We welcome any tjps or sightings on any of our cases; the only tip we believe to be unwarranted Is one that is not reported. We immediately report any tips or sightings to the Investigating police agency for further investigation. All calls are confidential. Your website indicates as above that you maintain a Toll Free Line 24 hours a day, 7 days a week. On three separate occasions in July 2006 we called your tip line and left a message which was never returned. When we did speak with you, you advised me that you bad gone to Montreal We also sent an to you through the website with no ~~-.... The only activity, which has been done by the "Charity" is the website, which appears to be outdated. It should be noted that North America Missing Children Association is listed as a non-recognized organization by the Royal Canadian Mounted Police, Missing Children's Registry website.

10 North America Missing Children.Association Page 7 of8 Under subsection 149.1(2) of the Act, th~ Minister may revoke the registration of the registered charity in the manner as descnoed at paragraph 168( 1 )(b) of the Act because the registered charity bas failed to comply with the requirements of the Act for its registration as such. Delinquent FDing of Information Returns Subsection 149.1'(14) of the Act states that, "Every registered charity shall, within 6 months from the end of each taxation year of the charity, file with the Minister both an information return and a public information return for the year, each in prescnoed form and containing prescnl;>ed information, without notice or demand therfor." A review of the Charity's filing history indicates that it has filed its information retutn only once within the requu.oo period of time since its registration in Under subsection {2) of the Act, the Minister may revoke the registration of the registered charity in the manner as descnoed at paragraph 168(1 )(c) of the Act because the registered charity has failed to file an id.:formation return as and when required under the Act or a regulation. Conclusion: For each of the reasons listed above, it appears that there are grounds to revoke the Charity's status as a registered charity. The consequences to a registered charity of losing its registration include: 1. the loss of its tax-exempt status as a registered charity, which means that the Charity would become a taxable entity under Part I of ~e Act, provided it does not qua.1ifi as a non-profit organization as descnoed in paragraph 149(1 )(1) of the Act; 2. the loss of the right to issue official donation ~receipts for mcome tax purposes which means that gi:fts made to the Charity would not be allowable as a tax credit to individual donors as provided at subsection.118.1(3) of the Act or as a deduction allowable to colporate donors under paragraph 110.1(1)(a) of the Act; 3. the possibility of a tax payable under Part V, section 188 of the Act; and 4. the loss of the Charity's status as a charity for purposes of subsection 123(1) of the Excise Ta:x Act (hereinafter, the ETA), which means that - its supplies will no longer be exempt from the Goods and Services Tax/Ham1onized Sales Tax (hereinafter, the "GST/HST") under Part V.1 of Schedule V to the ETA; - it may, if not cmrently, have to register for GSTIHST purposes under subsection 240(1) of the ETA;

11 North America Missing Children Association Page 8 of8 - it may no longer calculate its net tax for GSTIHST purposes using the calculation method set out under subsection (2) of the ETA; - it will no long~ qualify for the public service body rebate under subsection 259(3) of the ETA as a charity; and - it may be subject to obligatious and entitlements under the ETA that apply to organizations other than charities. If you do not agree with the filets outlined above, or if you wish to present any reasons why the CRA should not revoke the registr_at:ion of North America Missing Children. Association Inc. in accordance with subsection 168(2) of the Act, we invite you to submit your representations within 30 days from the date of this letter. Subsequent to that date, the Director General of the Charities Directorate will decide whether or not to proceed with the issuance of a Notice of Intention to Revoke the registration of North America Missing Children Association Inc. in the manner descn"bed in subsections 168( 1) and (2) of the Act. If you appoint a third party to represent }rou in this matter, please send us a written authorization naming the individual and explicitly authorizing that individlial to discuss your file with us. If you have any questions or require further information or clarification, please do not hesitate to call the undersigned at the number indicated below; you may also write to me at the address indicated at the bottom of this letter. Yours truly, Mr. Keith Bowers Charity Audit Section. Verification and El+forcement DiVision Canada Revenue Agency Attachments Appendix "A", Relevant provisions of the Act - Appen9ix "B", Relevant provisions o~the ETA