Thank you, Mr. Chairperson.
Good afternoon. Thank you for the invitation to appear this afternoon on Bill C-470.
I am Cathy Hawara, the director general of the charities directorate within CRA. With me is Bryan McLean, the director of policy, planning and legislation division.
I would like to explain the existing legal and regulatory framework administered by the CRA in our role as the federal regulator of registered charities in Canada.
The CRA administers the Income Tax Act, which confers significant tax advantages on registered charities, and prescribes the requirements for obtaining and maintaining charitable registration.
CRA has the authority to revoke a charity's registration if it fails to comply with the registration requirements of the Income Tax Act. An example would be if the charity uses its resources for non-charitable purposes, including providing undue personal benefits to any member. An undue benefit would include a situation where a charity pays or otherwise compensates a person beyond reasonable remuneration for services rendered, irrespective of the level of compensation.
For example, paying an individual $50,000 for services rendered would constitute an undue benefit if, in reality, there were no services provided or if compensation did not correspond with fair market value.
Every year charities must provide information to the CRA by filing what is called an information return. The return includes information about compensation. It is made public on the CRA website and is taken into account as part of our audit program. The CRA's current audit practices include reviewing situations where staff compensation exceeds fair market value for the services rendered. In that regard, we would consider the degree of benefit conferred and whether an advantage was conveyed inadvertently or whether the situation was structured specifically to yield excessive benefits.
The current legislative framework allows the CRA to take a measured approach to resolving non-compliance based on the severity of the offence. For example, if the infraction is not found to be intentional, serious, or egregious, the CRA may choose corrective measures that provide the charity an opportunity to remedy its non-compliance. If, however, our review reveals serious or repeated offences, we may impose intermediate sanctions in the form of monetary penalties and/or a suspension of receipting privileges, or proceed directly to revocation.
With respect to disclosure requirements, the Income Tax Act provides a framework for public accountability in the charitable sector. To this end, the CRA posts on its website the registered charity information returns completed annually by each registered charity. This provides Canadians with access to detailed information about charities' annual operations, including expenditures and programming.
To enhance the clarity and relevance of public information on charities, in 2009 we updated the salary range categories in the annual information return. The upper end of the range was increased to accommodate larger charities, such as hospitals and universities, and provide the public with more meaningful information. Charities are now required to identify the salary range for their 10 highest-paid positions, and the salary categories have been expanded, with the last threshold being $350,000 and above.
In 2008, which is the last complete year that we have data on, 86% of charities reported compensating all of their employees combined less than $250,000. While our 2009 data is not yet complete, early indicators suggest that individual compensation above $250,000 principally occurs in health care charities and, to a lesser extent, in universities and educational charities. To date, fewer than 1% of the charities have reported compensating individuals in excess of $250,000.
In closing, the current legislative and regulatory frameworks allow the CRA to monitor salaries based on the information that is currently reported and made public, so that we may investigate further where warranted. The legislative framework also provides a range of compliance options to allow us to take a measured approach to remedying situations involving undue benefit, based on the specific facts in each situation, up to and including revocation of registration.
Mr. Chair, we would be pleased to answer any questions the members of the committee may have.