A sign outside the Canada Revenue Agency on Monday, May 10, 2021, in Ottawa. THE CANADIAN PRESS/Adrian Wyld

OTTAWA — A national spy watchdog has found "a lack of rigour" in the way the Canada Revenue Agency selects charities for audits over terrorism concerns, saying the process introduces risks of bias and discrimination.

In a newly released report, the National Security and Intelligence Review Agency says the Review and Analysis Division of the CRA's charities directorate lacks an evidence-based method of validating the risk indicators it uses to justify scrutiny of a charity.

The agency concluded that some charities were audited even though there was no clear risk of terrorist funding, contrary to CRA's claim that the Review and Analysis Division investigates only the highest-risk cases.

The agency recommends the CRA division ensure that the decision to launch an audit is supported by current and credible information or intelligence.

The Canadian Press obtained the review agency's report Thursday through the Access to Information Act. It was later posted on the intelligence watchdog's website.

The report's release follows concerns in recent years that Muslim charities have been unfairly singled out for scrutiny by the federal revenue agency.

Four years ago, a report by the Ottawa-based International Civil Liberties Monitoring Group said the revenue agency's Review and Analysis Division was carrying out audits with little accountability or independent scrutiny.

Tim McSorley, the group's national coordinator, said Thursday the intelligence review agency's report "substantially confirms 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."

The review agency found that of 37 audits the CRA division completed between 2009 and 2022, 67 per cent were believed to be aimed at Islamic organizations and 19 per cent aimed at Sikh organizations.

The review agency also said it could not conclude the CRA division's activities are biased or discriminatory because the CRA doesn't collect the data needed to meet the high evidentiary burden for such claims under the Charter of Rights and Freedoms.

The report says the CRA division's records do not clearly articulate when, or on what basis, the decision to audit a charity is made. The division conceded that in about half of its 37 audit files, "no documented approvals of audit selection were found," the review agency adds.

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

The review agency reports that in five of the eight most recent Review and Analysis Division audits, terrorism-related concerns "were not present" in the final audit findings.

It recommends the Review and Analysis Division limit its audits to those charities that present "a credible risk of terrorist abuse."

The Canada Revenue Agency said Thursday it tries to ensure that registered charities are treated fairly and without bias.

The CRA said it accepts most of the intelligence review agency's recommendations and that it has taken steps already to strengthen its processes and oversight.

It said those steps include explicitly documenting risk indicators considered in risk assessments that inform decisions to audit, and implementing a rating model that will quantify and complement the current qualitative risk assessment process.

However, the revenue agency rejected the recommendation that it collect and evaluate demographic data from the charitable sector to ensure that its treatment of charities is free from discrimination.

"The Privacy Act protects the privacy of individuals with respect to their personal information and governs the federal government’s collection and use of that information," the CRA said in a media statement.

"Furthermore, government departments and agencies must only collect information that relates directly to an operating program or activity."

The Muslim Association of Canada, which waged a court fight to try to halt a revenue agency audit, said Thursday the intelligence review agency report confirms what the association argued in its legal challenge.

The intelligence watchdog "found deficiencies that put the CRA at risk of breaching the Charter of Rights and Freedoms, reinforcing that everything we raised was true," the association's president for strategy, Sharaf Sharafeldin, said in a media statement.

Sharafeldin said the review agency's work "validates our concerns," adding the federal government should "finally implement reforms so audits are fair, transparent, and strengthen rather than stigmatize Muslim charities."

This report by The Canadian Press was first published Oct. 2, 2025.

News from © The Canadian Press, 2025