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So it says on the website for the Elora Festival and Singers — still. But, what happens to a small to mid-sized arts organization when their status as a registered charitable organization is revoked?
The Canada Revenue Agency (CRA) revoked the organization’s charity status on January 27, 2018, the day it was published in the Canada Gazette. The revocation applies to both the Elora Singers under #135807824RR0001 and the Three Centuries Festival, being the corporate name of the Elora Festival, under #119263945RR0001.
Registered charities are required to file financial documentation to the Canada Revenue Agency yearly in order to maintain their status. According to the CRA’s website, the last period when statements were filed on behalf of the Elora organizations was 2015. Nonetheless, the revocation becomes effective on the January publication date.
Charlotte Logan, Chair, Elora Festival and Elora Singers Inc., provided a statement via email.
“I can confirm that our charitable status was revoked due to our failure to file within the appropriate time fame. This administrative issue was compounded by the fact that notifications from the Charitable’s Directorate, which would normally alert us to this error, were not received by us.”
According to her statement, the missing paperwork — a T3010 form that is required by the CRA to maintain registered charity status — has now been filed. “As soon as we became aware of the situation the required information was filed within three days and we have been assured that the current delay of reinstatement is solely a matter of ‘process’ rather than ‘substance’.”
What are the implications? First and foremost, the organizations cannot issue tax receipts to their donors. Any monies that have been donated since January 27 must be held in trust, and none can be spent until the matter is resolved.
Logan said she is looking into the option of having another registered charity step into the breach, but they have yet to make such a partnership.
Mark Blumberg, a partner at Blumberg Segal LLP, specializes in advising Canadian non-profits and registered charities. As he explains it, revocation due to non-filing of documentation is not uncommon in Canada, and represents the vast majority of cases where registered charitable status has been lost. “Canada has one of the strictest regimes it the world,” he notes.
While the organization tries to find another registered charity that can step in to help and issue tax receipts in the interim, Blumberg believes any dampening effect on donations is likely to be felt at the level of major corporate donors. Individual donors may be more tolerant and able to wait until at least an interim solution is put into place, but corporations cannot afford to do so. If the situation drags on, those charitable dollars may well go somewhere else. Private foundation donations to the arts generally do require registered charity status.
Charitable status also affects tax calculations and a number of other accounting issues. Most seriously, if an organization has had their charitable status revoked, and the matter is not resolved within a year or so, the organization is required to divest all their assets to another, valid registered charity, or pay what is called revocation tax.
While many small and mid-level arts organizations struggle with shoestring budgets and a largely volunteer staff that may not have the required expertise for specialized roles, in the absence of a specific statement, the reasons why the organization failed to file the paperwork on time, or, apparently, for the last three years, remain unclear. Why the CRA’s notices of default, which are ostensibly sent out routinely in such cases, were not received is also not clear. In addition to the Artistic Director’s position recently vacated by Noel Edison over claims of sexual impropriety, their website features a staff list that includes the positions of General Manager, Volunteer Coordinator, and Bookkeeper, along with the Elora Singers’ Manager & Librarian.
On the website, the organization credits other funding to a number of organizations, including the Ontario Arts Council, Ontario Arts Foundation, Canada Council for the Arts, Canadian Heritage, and the Ontario Arts Council. Government arts grants generally do not require registered charity status, however, the ramifications can be complex.
The Elora Festival will be receiving a grant of $92,000 from the Celebrate Ontario fund, which funds tourism-related projects. The criteria requires requesting organizations be a federally registered corporation. The Ontario Arts Council has also granted the organization just under $30,000 for an operating grant, which does require non-profit status. The Three Centuries Festival is set up as a non-profit corporation, and as such, it is eligible for the grant per se. However, an operating grant is based on an organization’s effectiveness and viability. If the loss of status affects financial projections made in the grant proposal, it may affect the OAC’s calculation of the amount it will pay. It is up to the organization to notify the OAC of such changes, and they would also have to form part of the post-grant reporting.
One of the stipulations for the OAC grant is that the requesting organization must “have proof of sound financial management”. However, for grants between $25,000 and $50,000, no audited financial statements are required.
The organization would not confirm details on what percentage of their revenues come from charitable donations, but a report in The Waterloo Region Record notes they make up about 30 percent of the revenues of both organizations — certainly, a chunk significant enough to create uncertainty just a few months before the 2018 Festival.
Along with the recent Noel Edison scandal, it’s a lot of weight to struggle under.