Recent events, particularly the controversy in Alberta over the dealings of Trinity Christian School Association and various people and organizations connected with the Association, make a review of the question of charities and non-arm's length transactions timely. So that's the subject of this column.
The Trinity Christian School Association matter surfaced in the context of the funding Alberta's Ministry of Education provided to the organization as part of its programming to support home schooling initiatives. It is alleged that aspects of the use of those funds was improper. Some of the players involved are registered charities, others are not. Among the concerns was that certain transactions were among people or entities who were not "at arm's length". If true, that can be a problem not just in regard to use of public funds, but also with respect to charity law.
Followers of the recent American election campaign may recall the concerns raised over some of the dealings of Donald Trump's Foundation, which are alleged to have benefited his businesses or him personally rather than advancing charitable ends.
Suggestions of "pay to play", such as those made about the Clinton Global Initiative or the Trudeau Foundation, turn partly on whether the dealings are non-arm's length, but can also involve additional legal considerations (for example, laws governing the conduct of officeholders). Both Justin Trudeau and Hillary Clinton asserted, in response to claims of impropriety, that they had severed their ties with their respective organizations.
All this shows the variety of circumstances and how often non-arm's-length questions can arise.
Whether in Canada or the United States, there are strict rules around a charity having transactions with entities over which, owing to family or business ties, individuals associated with the charity have control legally or in practice or with people with close ties to the charity. The broad policy concern in the charity realm is to preclude monies raised or generated for charitable purposes being diverted to non-charitable uses. So, when the conduct involves entities or persons that do not have registered charity status in Canada, or the equivalent tax-exempt status in the United States, apprehensions are heightened.
The Americans address issues with non-arm's-length conduct by, among other measures, placing a wide ban on "self-dealing". This ban applies to a range of transactions that cannot be engaged in by...