Charity Law Information Program (CLIP)

Social Media, Charity Compliance and Risk Management

Mark Blumberg (mark@blumbergs.ca)www.canadiancharitylaw.cawww.twitter.com/canadiancharity

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Introduction

• Legal information not legal advice

• Views expressed are my own

• Questions during and at end

• Logistics and timing

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Overview• Registered charities that use social media are expected to be

aware of and comply with legal requirements whether in the realm of social media or otherwise.

• Social media is very flexible, inexpensive, instantaneous and personal way to interact with stakeholders and others.

• Ease of use and decentralized nature can result in mission drift and confusion over the charity's priorities, incorrect or inappropriate information being disseminated widely, and depreciation of goodwill and alienation of stakeholders.

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Overview (cont)

• Organizations wanting to apply for charitable status may have greater difficulty if their social networking content is inappropriate

• Registered charities with inappropriate social media content are potentially more likely to be audited

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DefinitionsLegal – binding minimum rules and regulations

Ethical – higher standard than legal – ‘applied ethics’ – trying to achieve moral and ethical outcomes in real-life situations consistent with our values and standards.

Risk management - identification, assessment, and prioritization of risk (loss or adverse event) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events. (Wikipedia)

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Voluntary Sector in Canada

• 161,000 non-profits in 2003 (federal and provincial and unincorporated)

• 85,250 Registered Charities (as of 2010)

• $180 Billion in revenue, 2.4 million on payroll

• 2/3 have revenue under $100,000

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Variety of CharitiesEvery charity is different:

• Objects

• Areas of charitable work

• Risk tolerance

• Public profile

• Donors and level of government support

• Independent vs. affiliated

• Resources

• Values and knowledge

• Local vs. international activities

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What is a Registered Charity?

1) Purposes must be exclusively and legally Charitable

(4 heads of charity – relief of poverty, advancement of education; advancement of religion; and other purposes beneficial to the community in a way the law regards as charitable)

2) Must be established for the benefit of the public or a sufficient segment of the public (Public Benefit)

3) Apply to Charities Directorate of CRA for registered charity status and be accepted. (Registered)

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Maintaining Charitable Status• Conduct allowable charitable activities and avoid prohibited activities

• Keep adequate books and records

• Properly issue official donation receipts

• Meet annual spending requirement (disbursement quota)

• File T3010 Registered Charity Information Return

• Maintain status as a legal entity

• Inform CRA of certain changes

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Social Media

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Social Media/Web2.0

• Blogging – e.g. globalphilanthropy.ca

• Micro Blogging - Twitter

• LinkedIn

• Facebook

• RSS

• Video sharing (YouTube)

• Wikis – Wikipedia

• VOIP – Skype

• Instant Messaging – MSN

• Podcasts

• Webinars – online web meetings

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Why Social Media?

“The enemy is engaged in this battlespace and you must engage there as well”

US Airforce

http://www.af.mil/shared/media/document/AFD-090406-036.pdf

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Why Social Media?

• Raising profile of charity

• Communications (especially at difficult times)

• Programming

• Advocacy

• Governance and Administration

• Volunteer recruitment

• Raising money (Fundraising)

• Networking

• Inexpensive

• Dialogue with stakeholders

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Return on Investment (ROI)• Biggest challenge

• How much is it costing you?

• Can you do it cheaper and more effectively?

• Is social media promoting mission or just fad/personal empire building?

• What are goals? How does this fit in with charity’s strategic plan?

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Use of Social Media at Work

• Can become addiction

• Can detract from work

• Can affect work life balance

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Planning is an unnatural process; it is much more fun to do something. The nicest thing about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and depression.

- Sir John Harvey

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Reputation Management

• Reputation for many charities is most valuable asset

• Reputations take a long time to build, but can be destroyed quite quickly

• Social media can help or hurt

• Don’t ignore Web 1.0 (websites, e-newsletters)

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Policies on Social Media Use

• If everyone had common sense, understood technology and the needs of all stakeholders probably would not need policies.

• Here are some examples of policies:

http://socialmediagovernance.com/policies.php

http://laurelpapworth.com/enterprise-list-of-40-social-media-staff-guidelines/

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Ownership and Control of Accounts

• Employee/independent contractor or charity

• Social media channels can be valuable

• Upfront investment in promoting site can be substantial

• Much of following may come from charity’s goodwill

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Political Activities and Registered Charities

“A registered charity may pursue political activities to retain, oppose, or change the law, policy, or decision of any level of government inside or outside Canada provided the activities are non-partisan, related to its charitable purposes, and limited in extent.” (see T3010B)

• Social media used extensively in politics – be careful about line between personal views and that of the registered charity; amount of resources devoted to political; and impression given by social media to the public.

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Political Activities• Cannot have political purpose (object); only political activities

• No illegal or partisan political activities

• Political activities must be “connected and subordinate” to purpose (legal objects)

• Comply with “10% rule” and disbursement quota restrictions (political work not charitable and only if DQ room)

• Informative, accurate, and well-reasoned (not false, inaccurate, or misleading)

• Read CRA Policy Statement on Political Activities (CPS-022)(http://www.cra-arc.gc.ca/tax/charities/policy/cps/cps-022-e.html)

• Upholding Human Rights and Charitable Registration– http://www.cra-arc.gc.ca/tx/chrts/plcy/cgd/hmn-rghts-eng.html

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An Activity can be…• Prohibited (illegal and/or partisan political)

• Allowable Political

• Charitable:

- Public awareness campaigns

- Communicating with an elected representative or

public official

- Education

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Social media and political activities

• Be aware of rules

• Make sure everyone involved with posting or moderating knows rules.

• Be careful, especially at times of heightened political interest, like elections.

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CRA Fundraising Guidance

• Fundraising is important for charities but it is not a charitable activity

• Lots of media and donor concern about costs and practices

• CRA Guidance on Fundraising

http://www.cra-arc.gc.ca/tx/chrts/plcy/cps/cps-028-eng.html

• Social media may fall into low cost

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CRA Guidance for Fundraising

• Prohibited fundraising conduct (illegal, main purpose, too much private benefit, misleading or deceptive)

• Disclosure and transparency

• Apportioning expenses between fundraising and charitable

• Best practices

• Indicators of concern

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Indicators of Concern• Sole-source fundraising contracts

• Non-arm's length fundraising contracts

• Fundraising initiatives that are not well-documented

• Fundraising merchandise purchases that are not at arm's length, not at fair market value, or not purchased to increase fundraising revenue.

• Most of the gross revenues for non-charitable parties.

• Commission-based fundraiser remuneration

• Misrepresentations in fundraising solicitations or in disclosures about fundraising or financial performance.

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CRA Guidance on FundraisingBest Practices

a. Prudent planning processes

b. Appropriate procurement processes

c. Good staffing processes

d. Ongoing management and supervision of fundraising practice

e. Adequate evaluation processes

f. Use made of volunteer time and volunteered services or resources

g. Disclosure of fundraising costs, revenues, and practice (including cause-related or social marketing arrangements)

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Fundraising Ratio of Costs to RevenuesRatio of Costs to Revenues over

Fiscal Period CRA Approach (Cost to Revenue)

• Under 35%

• 35% and Above

• Above 70%

• Unlikely to generate questions or concerns.

• The CRA will examine the average ratio over recent

years to determine if there is a trend of high

fundraising costs. The higher the ratio, the more

likely it is that there will be concerns and a need for

a more detailed assessment of expenditures.

• This level will raise concerns with the CRA. The

charity must be able to provide an explanation and

rationale for this level of expenditure to show that it

is in compliance; otherwise, it will not be acceptable.

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Fundraising Guidance

• fair, truthful, accurate, and complete disclosure on social media

• If need more space link to website

• Low cost of social media fundraising can work well with fundraising guidance

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Receipting and Social Media

• Do not issue receipt when:– Donation of services to charity – volunteer doing social media

– Donation is intended for another organization that is not a registered charity

– Cannot determine the name of the true donor

• Make sure you have collected all information to appropriately issue receipt.

• Twenty free archived webinars on charity law including one on charity receipting http://www.capacitybuilders.ca/clip/clip.php

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Sample Official Donation Receipts

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Split Receipting

• New legislative idea – from 2002

• Pre-2002 – if donor received any advantage, then no receipt

• Now donors can receive some advantage eg. concerts, golf tournament, gala dinners, etc.

• Charity must determine the eligible amount of that gift for receipting purposes in order to issue an official donation receipt

• http://www.cra-arc.gc.ca/E/pub/tp/itnews-26/itnews-26-e.pdf

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Don’t “Lend your registration”

Caution: Lending registration numbersUnder no circumstances should a registered charity lend its registration number to another organization for receipting purposes. A registered charity is responsible for all tax receipts issued under its name and number and must account for the corresponding donations on its annual information return. A charity that lends its registration number risks losing its charitable registration.

http://www.cra-arc.gc.ca/tx/chrts/prtng/menu-eng.html

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Acting Outside Legal Objects

Charities in Canada have legal objects in their founding documents (eg. Letters Patent, Trust deed etc)

Charities must not act outside of these legal objects.

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Non-Charitable Activities

A registered charity must devote its resources (funds, personnel, and property) to charitable activities (the work that advances the charitable purposes).

Certain non-charitable activities are allowed within limits like administration, fundraising, related business, social and political.

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Social Media and easier collaboration

• Registered charities increasingly working with parties that are not registered charities

• Social media will increase this trend

• Is organization qualified donee or not?

• If not qualified donee be careful to follow rules about transfers of resources to non-qualified donees.

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Avoid Gifts to Non-Qualified Donees

Charities conduct activities in two ways:

1. By gifting to “qualified donees”; or

2. By carrying on its own charitable activities.

Charities cannot gift to a non-qualified donee or be a “conduit”. (Gifts to non-qualified donees = 105% penalty on the amount of the gift and second infraction 110% penalty and greater chance of revocation.)

Need “direction and control” over funds and resources.

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Qualified Donee, eg.

Canadian registered

Charity, UN, prescribed

University, Canadian

Municipality, etc

Employee

VolunteerIntermediary –

agency, JV,

partner,

contractor

Canadian Registered Charity

“Own Activities”

[Direction and Control]

Structured

Arrangement -

Written agreement

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“Own Activities” or “Direction And Control”

When not working with qualified donee or own staff need tohave:

• Due Diligence of Intermediary (investigate)• Written agreement• Detailed description of activities• Monitoring and Supervision• Ongoing Instruction for changes• Periodic Transfers• Separate Activities and Funds• Books and Records showing above

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Charity Scams

• Charity scams, fraudsters and criminals in cyberspace

• Be careful who your “friends” are.

• Be careful who you “like”

• Your reputation is valuable

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Charity Gifting Tax Shelters

• People can donate to registered charities in Canada and get an official donation receipt which is very valuable and can cost the tax system a lot. Promoters and “charities” cannot, through various games and tricks, abuse the tax system to issue whatever receipt they wish.

• Usually “investor” or “donor” is told that the tax benefits and deductions arising from the scheme will equal or exceed the costs of entering into the arrangement or the property.

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Avoiding Abusive Charity Gifting Tax Shelters

• Over $5 billion in gifting tax shelters over last 6 years

• Over 175,000 Canadians being audited

• If it sounds too good to be true, it probably is

• Be careful of advice from people who have a financial benefit in the transaction

• Keep charity far from these schemes

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Employment Issues• Is person doing social media a unpaid volunteer, employee

vs. independent contractor - see CRA publication Employee or Self-employed?: http://www.cra-arc.gc.ca/E/pub/tg/rc4110/

• Withholding source deductions (CPP, EI, Income Tax)

• Remitting source deductions

• Proper employment agreements

• Excessive compensation / private benefit

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Unrelated Business Activities

Income Tax Act prohibits “unrelated business activities” by all charities

Charitable organizations and public foundations are permitted to engage in “related business activities” but private foundations may not engage in any business activity

“Carrying on business” - activity is commercial in nature (derive revenue and provisions of goods and services, intention to earn profit) and continuous

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What is a Related Business?

There are two kinds of related businesses that a registered charity can conduct:

1. Businesses that are linked to a charity’s purpose and subordinate to that purpose (for example, a hospital parking lot, church gift shop); and

2. Businesses that are run substantially (90%) by volunteers(for example, coffee shop run by volunteers).

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Privacy Issues/Confidential Info

• Legal issues – Personal Information Protection and Electronic Documents Act (Pipeda)(Federal)

• Also other countries, provinces etc.

• Standards and ethics

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Common Privacy Mistakes

• To: CC: BCC:

• Reply vs. Reply all

• Storing confidential information on laptops, USB sticks

• Forwarding a long string of e-mails

• E-mail/Twitter/Facebook direct messages to wrong person

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Monitoring Employee Use

• Are they aware?

• Is their reasonable expectation of privacy?

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Intellectual Property

• Ownership of work by employees

• Ownership of work by independent contractors

• Ownership of posts by third parties

• Copyright/TMs of others

• Branding policies and standards

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Who “owns” social media product?

• Personal blog done on own time?

• Charity Facebook page?

• Twitter account?

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E-Volunteering Opportunities

• Social media can take advantage of volunteers who are dispersed, have busy schedules etc.

• “Crowdsourcing refers to the act of delegating a task to a large diffuse group, usually without monetary compensation. The basic idea has to do with harvesting and harnessing creativity, knowledge, labor, resources and money from the masses in a collaborative effort. It is about using the crowd to do things better, faster and cheaper. Internet companies such as eBay, MySpace and Wikipedia are just a few that have crowdsourcing business models”

• http://mycharityconnects.org/web2_0glossary

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Manage Volunteer Risks

• Have policies

• Have volunteer coordinator

• Do basic risk management

• Have applications and volunteer contract

• Proper orientation and training

• Proper monitoring

• See my article “Managing Risk with Volunteers in Canadian Charities”

• http://www.capacitybuilders.ca/files/resources/Managing_Risk_with_Volunteers_1256066635.pdf

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Prepare for mishaps

• Mistaken or inappropriate comment

• Hacker takes over social media account

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Prepare for criticism

• Negative comments can be opportunity – let managers know

• Are social media comments moderated?

• Are comments constructive? If not then remove them.

“Remember, we encourage you to comment on this blog. All viewpoints are welcome, but please be constructive. We reserve the right to make editorial decisions regarding submitted comments, including but not limited to removal of comments. The comments are moderated, so you may have to be a tiny bit patient in waiting to see them. We will review and post them as promptly as possible during regular business hours (Monday through Friday, 8:30 - 5:30).” Red Cross

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Monitor

• Use GoogleAlerts

• Google searches

• SocialMention (SocialMention.com)

• Have people watching social media.

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Social Media and Governance

• Communication

• To do lists

• Shared calendars

• Virtual meetings

• Electronic voting?

• Increased transparency

• Collaboration

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Metrics

• Beware of deceptive metrics

• “hits”

• Google Analytics – free and easy to use.

• Metrics are important part of evaluation

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Social Media is global

• Social media travels beyond borders

• Beware of non-Canadian sensibilities and law

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Social media and security

• Security of personal information

• Security of credit card information

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Social Media Policy Issues

• Do you have authority to speak on behalf of your charity?

• Do you identify if you are writing about your charity that you work for the charity?

• Do you inform your manager of your social media work?

• Do not share confidential, embargoed or proprietary information.

• Use of name and trade marks on private blog

• Is it allowed for an employee to be actively promoting another charity during or after work, that is competitive with your charity?

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Social Media Policy Issues

• Are you committing charity to any initiative or restrictions that could be problematic?

• Respect charity time and property

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Some ideas

• Respect privacy

• Try to be accurate

• Be respectful in posts

• Respect rules of venue

• Respect copyright, trademark

• Think twice before posting

• Everything posted may last forever (persistent or permanent)

• If in doubt do not post

• Can post be taken out of context? Is 140 characters enough to express matter? Otherwise refer to article

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Avoid

• Discriminatory comments

• Partisan political comments

• Vulgar or abusive language

• Personal attacks

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Disclaimers

• The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.

or

• "The postings are my own and do not necessarily represent _____ positions, strategies or opinions.“

• Perhaps with some senior leadership difficult to have “personal” views.

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Physical Security

11) Keep security in mind

Be particularly careful with what you are discussing online if you are in an operational context. Please make sure that you have read and follow your delegation's security requirements. Never talk about routes or times of planned convoys or distribution of goods. If in doubt, talk to the security unit or a security delegate. Never post personal details such the home addresses of yourself or colleagues. Bear in mind that personal details of local staff members can be very security sensitive in many operational areas – this includes their names and pictures. To guard against burglaries, do not post information on when you are travelling or away from your duty post.

http://sm4good.com/wp-content/uploads/2009/11/Red-Cross-Red-Crescent-SocialMedia-Guidelines.pdf

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Capacity Builders• Capacity Builders is a division of the Ontario Community

Support Association (OCSA) and it runs the Charity Law Information Program (CLIP)

• CLIP provides training, workshops, and webinars to Canadian charities to enhance their understanding of their legal, ethical, and governance obligations

• http://www.capacitybuilders.ca/clip

• CLIP Communiqué – sign up for free

• (416) 256 – 3010 x 232 or 1-877-484-3030

• clip@capacitybuilders.ca

• The Charities Directorate of CRA has provided funding for CLIP

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Charities Directorate of CRA

• Regulates registered charities

• Based in Ottawa

• Website: www.cra.gc.ca/charities

• E-mail list: www.cra-arc.gc.ca/esrvc-srvce/mllist/sbscrbchrts-eng.html

• Webinars: www.cra-arc.gc.ca/tx/cmmnctn/sssns/wbnrs-eng.html

• Telephone: 1-800-267-2384 (English) 1-888-892-5667 (Bilingual)

• Through CPOP supporting registered charities conducting educational work on legal and Income Tax Act compliance issues.

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Blumberg Segal LLP

• Blumberg Segal LLP is a law firm based in Toronto, Ontario

• Mark Blumberg is a partner at Blumbergs who focuses on non-profit and charity law

• Assists charities from across Canada with Canadian and international operations and foreign charities fundraising here

• www.canadiancharitylaw.ca and www.globalphilanthropy.ca

• Free Canadian Charity Law Newsletter. Sign up at: http://www.canadiancharitylaw.ca/index/php/pages/subscribe

• (416) 361 – 1982 or 1-866-961-1982

• mark@blumbergs.ca

• Twitter http://twitter.com/canadiancharity