One of Canada's largest charities revoked: a case study for donors to avoid bad charities.
Few have ever heard of the charity called Beth Oloth, including experts in Canada’s philanthropy sector. Yet, Beth Oloth was one of Canada’s largest charities. It was the same size as more familiar charities like Doctors Without Borders, Queen’s University, and United Way Montreal. On January 12, 2019, the Charities Directorate revoked Beth Oloth’s charity status. Beth Oloth has 90 days to appeal this decision.Beth Oloth is a huge Canadian charity. Beth Oloth most recently reported receiving $59.4 million in donations and grants from foundations.[i] That’s incredible fundraising for one staff and two directors acting alone.
This is a cautionary story for donors. Just because a charity is big, does not make it “good”, and just because it is getting lots of money, donors cannot neglect due diligence. For those who care about giving intelligently, there were early warning signals.
Subscribers to Charity Intelligence’s star ratings got the heads up in August 2017. Charity Intelligence rated Beth Oloth zero out of four stars. Our concerns made us take the extra step to add a donor advisory. Charity Intelligence’s research and rating subscription can help you give better, instead of simply using gut feel and emotion.
Early warning signals
When most donors think of “bad” charities, they most likely picture small scams or hucksters going door-to-door, and not elite Canadian charities. Yet, Beth Oloth was part of our Major 100 Index, among the largest charities in Canada.
To recap, Charity Intelligence’s Major 100 index is a list of Canada’s largest 100 charities measured by donations and support from fundraising and special events. The Major 100 Index represents the elite 0.1% of Canada’s 86,000+ registered charities. Together, Canada’s Major 100 charities received $6.2 billion in donations in their most recent reported year. This is approximately 38% of total Canadian giving (assuming total Canadian annual giving is $16 billion).
Beth Oloth is the sixth of Canada’s Major 100 charities to be revoked in the last seven years. When large public companies run into problems, there is media attention alerting shareholders, as there was in the case of Enron, BreX, and Sino-Forest. Yet, donors get little notice about charities in trouble with regulators. Charity Intelligence believes early warning signals benefit intelligent donors.
These Major 100 charities that were ultimately revoked look alike. None had financial transparency. Results reporting grades are all Fs using the Keystone Accountability scorecard. Donors may be tricked into believing extremely low overhead costs show great value. Yet, when overhead costs are less than 5%, donors need to pay extra attention. This is exactly why Charity Intelligence’s overhead costs analysis has an upper red zone.
What about Gates of Mercy?
With Beth Oloth’s revocation, comments were made about what took the Charities Directorate so long.[i] Expert charity lawyer Mark Blumberg commented “if abuses like these are allowed to continue it will undermine the public’s confidence in the whole charitable sector” and the government should be embarrassed the charity was allowed to operate for so long.
Our current laws muzzle the Charities Directorate from informing us. The Charities Directorate must follow due process and do exhaustive audits and investigations. In the Beth Oloth case, the investigation was dragged on by lawyers and spanned more than two years. It is alarming that in these two years under investigation, Beth Oloth tax receipted $49.9 million in donations and received an additional $53.9 million from private foundations. Currently, the Charities Directorate cannot suspend “trading” or notify donors until it makes its final decision. In contrast, British laws allow its Charities Commission to prominently notify the public when a charity is under investigation.
Yet the Charities Directorate is not silent in the Beth Oloth case. Its investigation notes report a curious relationship between Beth Oloth and Gates of Mercy, another Toronto-based charity. Numerous cheques made out to Gates of Mercy were deposited into Beth Oloth’s bank account; an American GoFundMe page told supporters that money could be tax-receipted by Beth Oloth, with instructions to mail cheques to Rabbi Reidel, a director of Gates of Mercy. In the Charities Directorate’s investigation, Beth Oloth claimed there is no ongoing relationship between itself and Gates of Mercy.
Gates of Mercy is an active charity that Charity Intelligence rates. We rate Gates of Mercy zero for its financial transparency and give it a F grade on results reporting. Its financial statements are unaudited. It has one staff that raises $10.2 million in donations. It is extremely cost efficient with overhead costs of only 0.9%. Given these signs, Charity Intelligence has added a donor advisory.
Revocation of Beth Oloth Charitable Organization, Canadian Gazette, January 12, 2019
[i] Stewart Bell, “Government revokes charity status of Canadian Jewish group that supported ‘foreign armed forces’, Global News, January 28, 2019
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