Things got started when the Chief of the Henvey Inlet First Nation Community became suspicious about the charity, Henvey Inlet First Nation Community Support Organization, explains Chief McQuabbie in a press release
issued May 12th. The community filed a law suit against the former non-profit organization. Commenting on the report issued by the Canada Revenue Agency, Chief McQuabbie said
“Some of the information revealed in the CRA audit absolutely astounded us. The audit report alleges the charity maintained secret bank accounts, and it appears millions of dollars in so-called “donations” were funneled through those accounts and cannot be accounted for. Our First Nation was kept in the dark about the workings of the organization, which was actually run out of Winnipeg, not here.”
The small community of Henvey Inlet First Nation consists
of approximately 150 people who live on the shores of Georgian Bay some 90 km away from Sudbury.
Worried about how people will perceive Henvey Inlet First Nation, Chief McQuabbie said
“I want to emphasize, and I am sure that First Nations people know this, this issue didn't originate in our community, and it doesn't reflect on the character of the Band or its Members. We have operated in a completely open and transparent fashion. The results of the CRA Audit and the facts about what that charity was doing have been given to our members through community meetings and Band Council Meetings, as it became available.”
The Henvey Inlet First Nations Community Support Organization was founded by the Henvey Inlet First Nations in 1977. The organization, registered as a charity, existed for the sole purpose of fund raising for Henvey Inlet social programs, according to the lawsuit
. Somehow over the years, through the efforts of one or more people, the charitable organization become a money-juggling juggernaut through the creation of tax shelter. According to Revenue Canada
"... from April 1, 2003 to March 31, 2008, Henvey Inlet First Nation Community Support Organization (the Organization) issued in excess of $44 million in receipts for cash received through various tax shelter arrangements. The Organization, in turn, transferred 99% of the receipted amount to the tax shelter promoters as fundraising fees and investments in off-shore accounts. The Organization was able to immediately retain 1%, or $464,181, of the total cash flowed through its accounts and reported receiving cumulative interest and investment income of $378,256, or a 0.8% cumulative return on its off-shore investments. The CRA's audits have found that of the funds purportedly invested off-shore, all or most were directed to an off-shore investment vehicle and then immediately returned to the original lender of the funds."
Revenue Canada said
"A charity that has had its charitable status revoked can no longer issue donation receipts for income tax purposes and is no longer a qualified donee under the Income Tax Act. The organization is no longer exempt from income tax, unless it qualifies as a non-profit organization, and it may be subject to a tax equal to the full value of its remaining assets."
The audit by Revenue Canada
uncovered a convoluted scheme that saw the charitable organization profiting while donors received tax receipts worth far more than what they actually gave. Revenue Canada did not say if it would be turning the organization over to the police for investigation. Revenue Canada attributed the scheme to two individuals who had control of the charitable organization, saying the remainder of the Board did not exercise due diligence.
It is not known when the First Nations lawsuit will be heard in court, or if Revenue Canada is planning further steps against the directors of the Henvey Inlet First Nations Community Foundation.
Revenue Canada warns against tax shelters.