Can ad~ 1+1. Notice of Penalty Reimer.Express Foundation Inc. REGISTERED MAIL

Transcription

1 1+1 Canada Revenue Agency Agence du revenu du Canada REGISTERED MAIL ReimerExpress Foundation Inc. 201 Portage Avenue, Suite 2900 Winnipeg MB R3B. 3K6 Attention: Mr. Nelson Olfert. Administrator BN: RR0001 File #: Subject: Notice of Penalty Reimer.Express Foundation Inc.. Dear Mr. Olfert: I am writing further to our letter dated March 11, 2011 (copy enclosed), in which you were invited to submit representations as to why we should not assess a penalty to ReHmer Express Foundation Inc. (the Foundation) in accordance with section of the Income Tax Act. We have now reviewed and considered your written response of April 8, The Foundation did not challenge the assessment that it was not in compliance with the requirements of paragraph 110.1(1)(a), subsection 118.1(1) and subsection 149.1(1) of the Act as a result of gifts it had made to non-qua.lified donees. 'f. However, based on the Foundation's response, the amount subject to a penalty is being_ reduced in order to exclude the item reported on the Foundation's attachment to the Qualified Donees Worksheet I Amounts Provided to Other Organizations (T1236), which was identified under areas of non-compliance in our proposal letter. We acknowledge that the Foundation mistakenly reported the gift of $25,000 made to David C. Cook Foundation BN/registration RR0001, a qualifi.ed donee, as a gift to Cook International BN/registration number RR0001, not a qualified donee, on its T1236. Consequently, for each of the reasons mentioned in our letter dated March 11, 2011, I wish to advise you that, pursuant to subsections (4) and {5) of the Act, I propose to assess a penalty to the Foundation. Can ad~ Place de Ville, Tower A 320 Queen Street, 13th Floor Ottawa ON K1A OLS R350E(oa)

2 -2- Penalty Assessment: The penalty assessed by the Canada Revenue Agency (the CRA) is calculated as follows: ' Fiscal Period Ending November 30, 2009 Gifts to non-qualified donees $165, Penalty applied as per subsections 105o/o 188.1(4) and 188.1(5) of the Act Total Penalty Owing as per subsections $17 4, (4) and (5) of the Act In accordance with subsection 189(6.3) of the Act, the penalty may be paid to an eligible donee as defined in subsection 188(1.3). An eligible donee in respect of a particular charity is a registered charity: \ 1. of which more than 50% of the members of the board of directors or trustees of the registered charity deal at arm's length with each member of the board of directors or trustees of the particular charity; 2. that is not subject to a suspension of tax-receipting privileges; 3. that has ho unpaid liabilities under the lncom e Tax Act or the Excise Tax Act; 4. that has filed all its information returns; and 5. that is not subject to a security certificate under the Charities Registration (Security Information) Act. The CRA requires the following documentation to confirm that the eligible donee received the penalty payment: a letter adc;fressed to the Director, Compliance Division (m.ail to address below), signed by an authorized representative of the eligible donee, confirming the penalty payment was received and the amount paid; and a copy of ~ither the cancelled cheque or evidence of a non-cash transfer. Should you choose instead to make your payment to the CRA, please make the cheque payable to the Receiver General for Canada and mail it to:. Director C.ompli~nce Division Charitjes Directorate Canada Revenue A~ency 320 Queen Street, 7 h Floor Ottawa ON K1A OL5

3 -3- Please note that in accordance with subsection (1.1) of the Act the penalty payment made to ~n eligible donee shall not be deemed to be an amount expended on charitable activities nor a gift made to a qualified donee. Failure to pay this penalty amount or make arrangements for payment will result in us reconsidering our decision not to proceed with the issuance of a Notice of Intention to Revoke the registration of the Foundation in the manner describeq in subsection 168( 1) of the Act. If you have any questions or require further information or clarification regarding the penalty payment,. please contact Mr. Eli Morad at ,. Appeal Process: Should you wish to appeal this Notice of Penalty in accordance with subsection 165(1-) of the Act, a written Notice of ObjeGtion, which includes the reasons for objection and all relevant facts, must be filed within 90 days from the mailing of this letter. The Notice of Objection should be sent to: Public Notice: Tax and Charities Appeals Directorate Appeals Branch Canada Reven~e Agency 250 Albert Street Ottawa ON K1A OL5 By virtue of paragraph 241 (3.2)(g) of the Act, the following information relating to the Foundation's penalty assessment will be posted on the Charities Directorate website: Penalty Assessment: Name. of Organization: Reimer Express Foundation Inc. Registration Number: RR0001. Effective date of Penalty: July 20, 2011 Reason for Penalty: Gifts to non-qualified donees ' Act Reference: 188.1(4) and 188.1(5) Amount of Penalty: $174, Should you require any further information on this or other related. issues please. fe~l free to contact our General Enquiries line at 1M You may also wish to consult our website at

4 -4- I. trust the for~going fully explains our position. Attachments: - CRA letter dated March 11, Organization's response of April 8, 2011

5 Canada Revenue Agency Agence du revenu du Canada NOTICE OF ASSESSMENT- AVIS DE COTISATION Date of mailing Date de I' envoi Business Number- Numero d'entreprise Taxation year - Annee d'imposition July 20, RR NAME OF ORGANIZATION - NOM DE L'ORGANISME Reimer Express Fo~ndation Inc. Penalty amount Amount paid Balance owing $174, $174, Montant de la penalite Montant paye Solde dft Explanation of assessment - explication de Ia cotisation Penalty assessed in accordance with subsections (4) and {5) for making gifts to non-qualified donees. The penalty is equal to 1 05% of the amount found to be gifted to non-qualified donees. Linda Lizotte-MacPherson C01nmissioner of Revenue Commissaire du revenu,. Canada CanadN R350E(08)

6 12' - - ~ CANADA REVENUE AGENCY AGENCE OU REVENU DU CANADA REGISTERED MAIL Reimer Express Foundation Inc. 201 Portage Avenue, Suite 2900 Winnipeg MB R38 3K6 Attention: Mr. Nelson Olfert, Administrator BN: RR0001 File #; M~uch 11, 2011 Subject: Audit of Reime r Express. Foun'datioil Inc. Dear Mr. Olfert: This letter is furthet to the audit of the books an.d records of the) Reimer Express Foundation Inc. (the Foundation) conducted by the Canada Revenue Agency (the. CRA). The audit related-to the operations of the Foundation for its fiscal period ended November 30~ The CRA has identified specific areas of non-corrfpliance With the provisions of the Income Tax Act and/or its Regulations in the following areas: AREAS OF NON-COMPLIANCE: Issue Ref~rerice 1. Gifts to non-qualified donees 110.'1(1)(a), 118.1(1) and (1) The purpose of this letter is to describe the areas of non-compliance identified by the CRA during the course of the audit as they relate to the legislative and common law rc;k~uirements applicable to registered charities, and tq provide the Foundation with the opporti.n1ity to make additio.nal fepresentations or present additiohal h'lformation. Registered charities must comply with the law, failing which penalties and/or suspensions may be applicable pursuant to sections and/or of the Act, which include suspension of the Foundation's authority to issue official receipts and suspension of its status as a ''qualified donee". Notice may also be given of our intention

7 2 to revoke the reg~stration of the Foundation by issuing a Notice of Intention in the manner described in subsection 168(1) of the Act. Penalty Proposed: The Foundation made disbursements that CRA has determined were gifts to non-qualified donees. The penalty in these circumstances is. 105,% of the amount ofthe benefit (gifts), as per 188.1(4) and 188.1(5) ofthe,act. The balance of this letter describes the identified areas of non-compliance in further detail. Previous Audit Findings: The previous a~dit, which related to its operations for its fiscal periods ended November 30, 2003 and November 30, 2004, found that the Foundation had made gifts to non-qualified donees. The Compliance Agreement signed at the conclusion of the previous audit outlined that the Foundation had "gifts made to individuals and to charitable organizations in the Unit~d States and in the United Kjngdom totalling $82, in 2003 and $163, in 2004". These individuals and charitable organizations in the United States and in the United Kingdom were n~n-qualified donees. Identified Areas of Non-Compliance: A regi.stered charity rn.ay Qhly use its resources (funds, per$onnel and/or property) in two ways, both inside and outside Canada - for charitable acthlitie.s undertaken by the charity itself under its continued supervision, direction and control, and for gifting to "qualified donees., as defined in the Act The current audit revealed that the Foundation continued to make gifts to nonqualified donees. The CRA found that fot tj1e. p~riod under audit the Foundation made gifts to non-qualified done~s under the follo~ihg circumstances: Amounts from Qualified Donees Worksheetlf:tmounts Provided to Other Organizations The Found~t~on for the current period under audit reported on its attachment to the Qualified Donees Worksheet (Amounts Provided to Other Organizations {11236), gjfts to 66 organizations totalling $2,058, We were able to verify through the BN/registration numbers that 65 of these organizations were registered charities. in Canada, and as such qualified donees.

8 -.: 3 However, the Foundation reported a gift of $25,000 to Cook International BN~registration number RR0001. According to our records, the BN/registration number belongs to an organization named Bible Literature International of Canada Inc. This organization was revoked for failure to file in 2006, and as a result was not a qualified donee during the current period under ~udit. Furthermore, during the previous audit the Foundation made a gift. to a non-qualified donee in the U.S. named c ook CQmtnunication Mihistry International. As a result, without evidence to the contrary, CRA. consid~red this to be a gift to a non-qualified donee... Amount gifted as "Foreign -Donations" The Foundation reported in its Registered Chflrify Information Return (T301 0) that it made "Foreign D.onations" for the current period.under audit. The Foundation provided information that it disbursed funds to four organizations (listed below) totalling $81,912 as "Foreign Dor:-ations". Christian Solidarity Worldwide United Kingdom Shepherd Serve United States Ministries United States Lamplighters International United States CRA found no record that any. of these organizations were registered charities in Canada, or were otherwi-se qualified donees. The information found by searching the orgamizations' websites confirmed that each was established outside of Canada.. CRA explained du.ring the previous audit-that llmost organizations outside of Canada such as foreign charities and international aid agencies are. not qualified donees." Furthermore, of the four organizations that received fund~ during the current audit periqd, three of the Qrganizations, Christian Sol.idarity Worldwide, Shepherd Serve and Etam Ministries, were found to ~e recipients of gifts from the Foundation as non~qualified donees during the previou$ audit. '. It appeared that the Foundation was merely forwarding funds to the four organizations listed above, who were non-qualified donees. However; the Foundation did complete Schedule 2 ~Activities Outside of Canada of its T301 0, which indicated that it had conducted its own charitable programs outside of Canada. The Foundation did not provide any information in Schedule 2- Activities Outside of Canada about how the funds were used to conduct its own charitable programs, either ~rougtl intermediaries using written agreements or through its own employees or volunteers.

9 4. The CRA, in its Jetter of December 14, 2010, requested the list of the organizations that received the amounts reported as "Foreign Donations". This information was required in order to verify if the Foundation was conducting its own activities. outside of Canada that were under its continued supervision,. direction and control or if it was gifting to non-qualified donees. The li.st was requested to include a description of the activities performed on the Foundation's behalf, and an explanati.on as to how the Foundation maintained direction and control over its. funds. In ~ddition, the CRA, in its letter of January 21, 2011, requested a more detailed des.cription of the activities outside Canada and any documentation that demonstrated the Foundation's control of the activities conducted with Christian Solidarity Worldwide and with Shepherd Serve. The Foun~ation in its correspondence of January 11,. 2011, and. February 15, 2011, did not provide evidence that it conducted its own activities outside of Canada under its continued supervision, direction and control. Specifically, the Foundation did not: provide an adequate or detailed description ofthe activities :undertaken. The Foundation only provided a one-line synopsis for each of its alleged activities and a general description that it worked "to secure rights and freedoms for persecuted religious gr9ups~~ in northern Africa, the Middle East arid southetn Asia. The one-line synopsis for each of its alleged activities and a general description provided by the Foundation was consistent with the activities described by each organization on its website. For example, Elani Ministries appeared to have. been established to promote Christianity in Iran; p.-ovide a breakdown of the specific expenses incurred; enter into any written agreements with any of ~he fqur organizations outside Canada, as stipulated in the Compliance Agreement: rather the Foundation stated it 'had verbal agreements. As a result, there was no evid~nce that any of these organizations acted as intermediaries and conducted activities on the Foundation's. behalf; and - provide any documentation that substantiated the funds it disbursed and stated it was unable to provide any documentation.

10 5. We coi:jid not conclude that the Foundation conducted its own activities outside of Canada under its continued supervision, direc~ion and control. It is CRA's opinion that the Foundation continued to gift funds to foreign charities that were non-qualified donees. This was even more troubling because the majority of these gifts went to the same non-qualified donees that were outlined in the Compliance Agreement signed at the conclusion of the previo~:~s audit. Amount of "Honoraria ' found to be gifts to individuals I The Foundation at the close of the previous audit asked if it Was acceptable to pay honoraria to retired pastors. The Foundation was told that "if it is a small token amount for their volunteered time and effort in assisting tlie Charity then it should be considered honoraria." The Foundation reported in its T3010 that it made payments as "Honor~ria" for the eurrent period under.audit. The payments of "Honoraria" were reported to be "expenditures on charitable programs". There was no further detail in the Foundation's. T3010 or financial stat~ments.about ~ny cha~able programs that it co~ducted itself. The Foundation in its correspondence of January 11, 2011, provided information that i.t disbursed funds to 24 individuals totalling $84,019 as "Honoraria Donations to Individuals". CRA had questio.ns about whether these amounts were "Honoraria" paid to individ.&jal.s who conducted the Foundation's. activities or if ttjey were "Donations to Individuals". Th~ Foundation's gifts to non-qualified donees during the previous audit included gifts to individt)a1s ror personal-use.".. CRA requested in its letter of J of the activities undertaken and the Consultation services ed We asked why the Found~tion considered thes~ to be its own activities. We requested any documentation that substantiated that the activities undertaken were the Foundation's own, such as minutes to meetings, employment/service contracts, and anything else the Fou~qation deemed useful The Foundation in its letter of February 15, 2011, stated that these individuals did. not actually conduct "direct charitable activi~ for the Foundation. The Foundation reported that these individuals provided "consultative services" and "support work for which the Foundation does not maintain operational, administrative or advisory staff." The Foundation d~d oot provide documentation that substantiated these payments.

11 6 It is CRA's opinion that the Foundation had taken the amounts t~at had were found to be gifts to individuals for "pers.onal use" during the previous audit and reclassified them as "Honoraria~ during the current period under audit. Our opinion was based on the reasons outlined below: The amounts. disbursed to each individual were not token amounts. The lowest "Honoraria" paid Were for $2,500.. There was no record of the.paynient of "Honoraria" to any of these ind~viduals. lf the individuals had done work on behalf of the Foundation the,y should have been issued T 4As. The Foundation does not maintain a payroll account. Of the 24 recipients for the cu.rrent audit period 14 were also recipients during the previous audit period. The funds disbursed to these individuals during the previous audit, as described above, were described as "for your personal use." The gifts were made directly to the individuals and were found to be gifts nonqualified donees. As result, CRA is of the opinion that the disbursements of "Honoraria", continued to be gifts to individuals, and as such continued to be gifts to non-qualified donees. This was evan more:tro~bling, because the majority of these gifts went to the same nonqualified donees that were outlined in the Compliance Agreement signed at the conclusion of the previous audit... Due to the serious and continued nature of the rion~compliance issues described. above, it i$ our position that a penalty onder (4} and {5) of the Act should be appliect to the Foundation. Please note that the CRA is proposing the assessment of a penalty in accordance with section of the Act in Oeu of issui ng a Notice of Intention to Revoke. According to our calculations, the penalty payment would be approximately $200~, based on: Amount from T1236 Amount g_ifted as "Foreign Donations" Amount gifted of "Honoraria" Total Gifts to Non-Qualified Donees Penalty of 1 05% Total Penalty $25, $. 81, $ $190, )( 105% $200,478.08

12 7.. _The Foundation's Options: a) No Response You may choose not to respond. In that case, the Director General of the Charities Directorate may proceed with the application of the penalty described in section of the Act. b) Response Should you choose to make representations regarding this proposal, please provide your written representations and any additional information regarding the findings outlined above within 30 days from the date of this letter. After considering the representations submitted by the Foundation, the Director General of t~e Chanties Qirectorat~ will decide on the appropriate course of action, which may include: no compliance action necessary; the issuance of an educational letter;.resolving these issues through the implementation of a Compliance Agreement; and. the application of the penalty provided for in section of the Act. If you appoint.a third party to represent you in this matter, please send us a written authorization naming the individual and explicitly authorizing that individual to discuss yo ur file with us. Should you require further informatiqn, clarification, or assistance, please contact the undersigned at Yours sincerely, Patrick Skinner Office Audit Officer Compliance Division Charities Directorate Canada Revenue Agency Place de Ville, Tower A 320 Queen Street, 7th floor Ottawa ON K1A OL5