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Statistics Canada is expected to reveal Monday just how hard Canadian charities have been hit by the recession.

The federal agency is scheduled to release a report on charitable donations for 2008 and many experts expect the figures will show a sharp decline from 2007.

"The decline in giving in 2008 is expected to be the greatest annual drop in over 40 years," said Malcolm Burrows. head of philanthropic advisory services at the Bank of Nova Scotia. He is expecting a drop of as much as 10 per cent.

Charitable donations have been rising steadily for years and hit a record $8.6-billion in 2007, according to Statscan. That was up from $8.5-billion in 2006.

The recession and slumping stock markets hit donors hard and dried up many gifts. A recent study of Canadian health care charities found that donations fell 10 per cent last year and several universities have seen a 40-per-cent drop in gifts.

This fall the Vancouver Foundation surveyed 470 charities across British Columbia and found that 53 per cent had seen their revenue fall by an average of 19 per cent. Of the 27 per cent that reported an increase in revenue, many said it was due only to one-time grants. The survey paints "a picture of an important sector that is struggling and in some cases becoming more fragile with each passing month," the foundation said in its report.

"It was really very difficult last year," said Frances Lankin, chief executive officer of the United Way Toronto, which runs the largest annual fundraising campaign in Canada. Last year the organization fell short of its goal for the first time in nearly 20 years. It managed to raise $108-million, just $2-million shy of the target, but only after an unprecedented special appeal. The goal this year is just to match last year's figure.

Ms. Lankin said many smaller charities saw donations fall as much as 30 per cent last year. "For them, the United Way was critical because we were about the only place that [provided]stable funding," she said.

The recession hasn't been the only factor affecting donations.

Tax officials have also been cracking down on charities that use tax shelters. Those shelters have become big business in recent years, pulling in close to $1-billion in contributions in 2007. That represented nearly 12 per cent of all giving in Canada.

Many shelters operate on a so-called "buy low, donate high" basis. For example, some shelters used to buy massive amounts of artwork at a discount, have it appraised for a much higher amount and then donate the art to a charity. Participants in the shelter would receive a charitable tax receipt based on the appraisal value.

The Canada Revenue Agency (CRA) has been cracking down on these shelters, arguing they are tax dodges that serve no charitable purpose.

Last year, for example, the CRA shut down International Charity Association Network (ICAN), which issued more than $400-million worth of tax receipts in one year. CRA alleged ICAN was a tax shelter that provided inflated tax receipts to donors and offered few if any charitable services. Tax officials are now auditing more than 34,000 Canadians who participated in a related ICAN donation program.

The CRA's efforts are having an impact. Contributions to charity-related tax shelters fell to just under $500-million last year from nearly $1-billion in 2007, according to CRA figures. The number of Canadians participating in these shelters also dropped to 14,000 last year from around 33,000 in 2007.

"We've been quite aggressive going after the tax shelters and the charities that are involved with the tax shelters," said Terry de March, former director general of the CRA's charities directorate who is now an adviser to the department.

Economists seem divided on the question of whether the Canadian economy is recovering or not. What do you think?

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Bank of Nova Scotia
+1.21%51.78
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Bank of Nova Scotia
+0.94%70.07

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