Watchdog Finds Bias Risks in CRA’s Charity Audits, Urges Major Reforms

A national intelligence watchdog has found significant flaws in how the Canada Revenue Agency (CRA) selects charities for audits over terrorism concerns, warning that the process risks bias and discrimination.

In a report released Thursday, the National Security and Intelligence Review Agency (NSIRA) said the CRA’s Review and Analysis Division lacks an evidence-based method to validate the risk indicators it uses to justify audits. The agency concluded that some charities were scrutinized even though there was no clear risk of terrorist financing, contradicting CRA’s assertion that it investigates only the highest-risk cases.

The report urged the CRA to ensure that audit decisions are based on current and credible intelligence.

Long-Standing Concerns About Bias

The findings follow years of criticism from civil rights groups that Muslim charities have been disproportionately targeted. A 2020 study by the International Civil Liberties Monitoring Group raised similar concerns, citing a lack of oversight and accountability in the CRA’s audit process.

Tim McSorley, the group’s national coordinator, said the new findings “substantially confirm what our research demonstrated several years ago, and that the CRA’s processes are deeply flawed.”

“We’re hopeful that today’s report makes it clear to the government that the status quo can’t continue and that something needs to be changed,” McSorley added.

Audit Data Reveals Imbalance

NSIRA found that of 37 audits conducted by the CRA’s Review and Analysis Division between 2009 and 2022, about 67% focused on Islamic organizations and 19% on Sikh organizations. However, the agency said it could not conclude the process was discriminatory because the CRA does not collect demographic data needed to meet the high evidentiary threshold for such a finding under the Charter of Rights and Freedoms.

The watchdog also found poor record-keeping, noting that in roughly half of the audit cases reviewed, there was no documented approval for audit selection. In five of the eight most recent audits, terrorism-related concerns were absent from the final findings.

“An undocumented process cannot support internal or external accountability or support an assessment that decisions were free from bias or discrimination,” the report said.

CRA’s Response and Next Steps

The CRA stated that it strives to ensure all registered charities are treated fairly and without bias. The agency said it accepts most of NSIRA’s recommendations and has begun improving oversight, including documenting risk indicators and implementing a new rating model to strengthen risk assessments.

However, the CRA rejected the recommendation to collect demographic data, citing privacy laws. “The Privacy Act protects the privacy of individuals… government departments must only collect information that relates directly to an operating program or activity,” the agency said.

Reaction from the Muslim Association of Canada

The Muslim Association of Canada, which previously went to court to halt a CRA audit, welcomed the watchdog’s findings.

Sharaf Sharafeldin, the association’s president for strategy, said the report confirms “deficiencies that put the CRA at risk of breaching the Charter of Rights and Freedoms,” and called on the government to implement reforms that make audits “fair, transparent, and strengthen rather than stigmatize Muslim charities.”

The report adds momentum to calls for reform of CRA’s audit practices. The watchdog’s recommendations, if adopted, could reshape how Canada balances national security concerns with the fair treatment of charities.