A typo by an official at the Canada Revenue Agency has caused a $283-million error on a financial report of one of Canada’s largest charitable foundations and raised renewed questions about the accuracy of these filings.
The saga involves the Quebec-based Hewitt Foundation, which was established in 2017 when the Hewitt family sold its equipment business to Toromont Industries Ltd. for $1.02-billion. Jim Hewitt, the company’s former chief executive officer, launched the foundation to focus on “meaningful and sustainable social, economic and cultural change” and it has supported dozens of causes throughout Eastern Canada.
Last year, the foundation’s auditors sent the CRA the charity’s 2021 financial report, known as a T3010. These reports are not audited financial statements, but they provide an overview of a charity’s revenues, assets, expenditures and grants made to other charitable organizations. The filings are mandatory for registered charities and the CRA posts them on a website.
When the CRA posted the Hewitt Foundation’s T3010, the report showed that it had disbursed $292-million in grants, or 97 per cent of its total assets.
The filing caught the eye of Kate Bahen, managing director of Charity Intelligence Canada. She was stunned by the massive disbursement, but when she went to another section of the report and added up all of the grants the foundation had made, the total was $8.9-million. “Big gap between $292-million and $8.9-million,” she said.
When The Globe and Mail contacted the Hewitt Foundation, the charity’s CEO, Kim Anderson, had no idea a mistake had been made. “I wanted to thank you for alerting us to the error on the CRA website,” Ms. Anderson said in an e-mail. She contacted the agency and discovered that “a clerical error occurred when CRA inputted the numbers, inverting two of the lines on their T3010 form.”
CRA spokesperson Anne-Flore Gnamaka confirmed that “there was an error made when keying the organization’s form T3010.” The CRA has corrected the filing and it now shows total expenditures of $13.7-million, which include grants and other expenses.
The typo has raised fresh questions about the accuracy of the T3010 reports. These forms are critical resources for donors, analysts, charities and policy-makers, and this isn’t the first time mistakes have been found.
Ms. Bahen said that in 2018 a similar typo led to the CRA reporting that Quebec-based Redemption Ministries had $67-million in annual revenue. In fact, the charity’s annual revenue was closer to $142,000.
Officials in the charitable sector say those kinds of big mistakes are rare, but they are concerned about whether charities fill out the forms correctly.
There are no standard requirements for how to calculate various entries for the T3010, which leaves it up to charities to decide what to include. Small charities also often rely on untrained volunteers to complete the reports.
In 2021, the Edmonton-based Pemsel Case Foundation analyzed data from the T3010 reports as part of its submission to the Department of Finance on the government’s proposal to increase the disbursement quota.
That quota is the annual amount of money charities are required to spend on grants or programs. The rate is based on the value of a charity’s assets and in 2023 it was increased to 5 per cent from 3.5 per cent.
Pemsel researchers reviewed more than 80,000 T3010 filings, which are used to calculate a charity’s disbursement quota. They found that “data are missing, and there are significant mathematical and other errors reflected on the T3010 reports.”
Of the T3010s they examined, 36 per cent had no entries for “total liabilities” and 28 per cent had nothing listed for “expenditures on charitable activities.” The study said just 42 per cent of charities had listed all of the financial components that made up total assets. The others had no breakdown of what they included in the total assets figure or had incomplete information.
As a result of the data flaws, the study said it will be difficult to reach any conclusions about the impact of increasing the quota.
Bruce MacDonald, CEO of Imagine Canada, an umbrella group for charities, said another concern is that most of Canada’s 86,000 registered charities file their T3010s by mail, leaving CRA staff to manually input the numbers. Only around 20 per cent of the reports are filed electronically, he added.
“When that happens, there’s a higher probability that there’s going to be some errors,” he said. Imagine Canada has been pressing the government to give the CRA sufficient resources to improve data quality. The organization is also working with charities to encourage them to file electronically.
Ms. Bahen has called on the CRA to require large charities to file their reports electronically. And she has urged officials to follow the example of Britain and Australia, which require charities that have revenues greater than $1-million to file audited financial statements with regulators.
Ms. Gnamaka said the CRA relies on charities to provide correct information. The CRA accepts the T3010s “as they are submitted by each registered charity and … those filings are not necessarily reviewed for accuracy or completeness by the CRA prior to public disclosure.”