WATCH: Rethinking Direction & Control: A New Way Forward

On June 9, 2020 Senator Ratna Omidvar participated in a webinar with the Canadian Council for International Co-operation. 

The Canadian Council for International Co-operation hosted a one-hour webinar with charitable sector leaders  including Senator Omidvar to discuss re-thinking direction and control.

Before defining the term “direction and control”, some background on the requirements that charities are required to fulfill under the Income Tax Act is necessary. The Canada Revenue Agency (CRA) only permits registered charities to spend their resources on grants to qualified donees or on their “own” charitable activities. Most Canadian charities that work internationally operate at least in part by sending funds to local organizations in their target region. However, because most organizations outside Canada do not constitute “qualified donees” under the definition in the Income Tax Act, Canadian charities must be able to establish that activities carried out with their resources are their “own activities”. Therefore, Canadian charities must enter into a structured arrangement with a foreign organization (called an “intermediary”) under which the organization conducts local activities on the Canadian charity’s behalf.

In order for activities conducted through an intermediary to be found to be the “own activities” of the charity, the CRA requires that the arrangement provide for “direction and control” on the part of the Canadian charity. This means that the Canadian charity must provide ongoing instructions on the project to be conducted, ongoing oversight including financial reporting, and periodic transfers of funds conditional on the Canadian charity being satisfied that funds previously provided have been spent properly.

While this does not sound like a bad thing, in practice the current regulatory regime is unnecessarily cumbersome and makes it very difficult for registered charities to engage in international charitable work or work in Canada with non-qualified donees.

The webinar was moderated by John Clayton, Director of Programs of Samaritan’s Purse Canada, and included the following participants:

• Denise Byrnes, Executive Director of Oxfam-Québec
• The Honourable Ratna Omidvar, Independent Senator for Ontario

Click here to watch the recording of the webinar

Click here to learn more about direction and control