What Can Charity Concentrations Tell Us About Program Fraud?

The discovery of some massive regional pockets of government program fraud in American states like Minnesota captured a lot of attention. A common feature of those criminal operations involved geographically and ethnically related communities that seemed to share methodologies.

I was curious to know whether there are suspicious patterns in Canadian charitable activities that could signal similar problems here. Long story short, the good news is that, whatever waste and fraud exist in Canada’s non-profit world, the evidence strongly suggests that we’re not seeing American-style crimes on a large scale.

Using charitable tax filing data for Canadian charities, I organized all 82,000 charities by the three-character Forward Sortation Area (FSA) from their postal codes. The idea was to look for geographic patterns in charity spending and, in particular, patterns in the money that governments spend through charities.

One useful specification of the postal code system is that, for low-density rural areas, the second character will always be a zero, while codes for urban areas always get a number between 1-9.

FSAs designated as rural are likely to serve between a few hundred and a few thousand addresses. Urban FSAs will probably average between 5,000 and 10,000 addresses. There are 183 rural FSAs out of the 1,669 currently in the system; around 11 percent of the total.

The first oddity I discovered is that 13 out of the 20 FSAs with the highest numbers of registered charities were rural. Last I looked, 13/20 is a lot higher than 11 percent. Here are the top five FSAs along with the total revenues all charities combined received from any level of government:

In fact, more than 26 percent of all Canadian charities are registered in rural communities. Those are astounding numbers for such small communities. Even going with the upper estimate for addresses in rural areas, those communities would have more than one registered charity for every ten addresses!

However it’s important to note that rural charities receive only 2.66 percent of the total government spending directed to charities. Rural non-profits are obviously built differently than their urban cousins.

Don’t get excited about the $301 million in government payments going to S0K. $234 million of that is provincial funding for two public school districts: Horizon School Div No 205 BoE and Prairie Spirit School Division No. 206.

In fact Prairie Spirit, which educates around 11,000 students scattered across a huge area, still manages to spend less per child ($10,500) than the Toronto District School Board ($12,970) with all of its fancy consultants and economies of scale.

It might be helpful to identify FSAs where there are particularly dense concentrations of charities receiving just federal funding. That’s in part because any systemic fraud of the kinds that we’ve seen in the U.S. would be more visible.

So I narrowed down my results to just organizations that received at least $10,000 from the federal government over the course of 2024. There were, in total, 9,682 of those.

When I divided the number of charities receiving federal funding within a single FSA into that area’s population - to get the density of charities within a population - I discovered 39 FSAs with more than two charitable organizations per 1,000 people. Some of those results were obviously the product of weird data anomalies (like the FSAs with just less than 20 people but as many as seven charities). I ignored those.

Here, however, are the top ten “normal” FSAs arranged by density per 1,000 people:

K1P, obviously, is downtown Ottawa. Even without looking you just know that most of those 43 organizations are built to carry out government-sponsored functions. That’s not to say that their spending isn’t all wasted, but it’s not what we’re looking for right now.

H3B, M5C, and R3B are all large business districts (within Montreal, Toronto, and Winnipeg respectively). You’d expect such areas to contain head offices for larger charities.

In fact, if there were large numbers of geographically concentrated Minnesota-style organizations fraudulently milking federal programs, we’d almost certainly see them among the top FSAs. After all, once one organization figures out how to game a resource, others would join in the feeding frenzy.

Obvious targets would include federal programs like Social Development Partnerships Program (SDPP), New Horizons for Seniors Program (NHSP), Sustainable Development Goals Program (SDGP), or Supporting Black Canadian Communities Initiative (SBCCI). But a quick scan of the organizations in the most dense FSAs doesn’t show multiple charities with telltale similarities between their mandates. From just a brief look, I can’t know whether those charities are legitimate. But I am pretty sure that there aren’t dozens of fake early childhood centres out there.

Why did Canada appear to dodge this particular bullet? Perhaps in part because:

• Canadian rules often include greater control of spending through pre-approved budgets, defined deliverables, and reimbursement-based payments rather than lump sums.

• Canada requires more detailed financial reporting and disclosures from charities.

• Canada requires multi-year financial histories, conflict of interest disclosures, and (often) audited statements.

• Funding is often delivered directly from the government or through vetting intermediaries rather than through layers of state, municipal, and third-party agencies.

We’re certainly not immune to program fraud - and continued diligence and oversight is necessary - but we do seem to be doing some things well.

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Further reading: