Note: I'll be on TVO's The Agenda with Steve Paikin tonight talking about Government 2.0.
Why does open data matter? Rather than talk in abstract terms, let me share a well documented but little known story about how open data helped expose one of the biggest tax frauds in Canada’s history.
It begins in early 2007 when a colleague was asked by a client to do an analysis of the charitable sector in Toronto. Considering it a simply consulting project, my colleague called the Canada Revenue Agency (CRA) and asked for all the 2005 T3010s - the Annual Information Returns where charities disclose to the CRA their charitable receipts and other information - in Toronto. After waiting several weeks and answering a few questions, the CRA passed along the requested information.
After spending time cleaning up the data my colleague eventually had a working excel spreadsheet and began to analyze the charitable sector in the Greater Toronto Area. One afternnon, on a lark, they decided to organize the charities by size of tax-receipted charitable donations.
At this point it is important to understand something about scale. The United Way of Greater Toronto is one of the biggest charities in North America, indeed its most recent annual charitable donation drive was the biggest on the continent. In 2008 - the year of the financial crisis started - the United Way of Greater Toronto raised $107.5 million.
So it was with some surprise that after sorting the charities by 2005 donation amounts my colleague discovered that the United Way was not first on the list. It wasn't even second.
It was third.
This was an enormous surprise. Somewhere in Toronto, without anyone being aware of it, two charities had raised more money than the United Way (which in 2005 raised target of $96.1M). The larger one, the International Charity Association Network (ICAN) raised $248M in 2005. The other, the Choson Kallah Fund of Toronto had receipts of $120M (up from $6M in 2003).
Indeed, four out the top 15 charities on the list, including Millennium Charitable Foundation, Banyan Tree, were unknown to my colleague, someone who had been active in the Toronto charitable community for over a decade.
All told, my colleague estimated that these illegally operating charities alone sheltered roughly Half a billion dollars in 2005. Indeed, newspapers later confirmed that in 2007, fraudulent donations were closer to a billion dollars a year, with some some 3.2 billion dollars illegally sheltered, a sum that accounts for 12% of all charitable giving in Canada.
Think about this. One billion dollars. A year. That is almost .6% of the Federal Government's annual budget.
My colleague was eager to make sure that CRA was taking action on these organizations, but it didn't look that way. The tax frauds were still identified by CRA as qualified charities and were still soliciting donors with the endorsement of government. They knew that a call to CRA's fraud tip line was unlikely to prompt swift action. The Toronto Star had been doing its own investigations into other instances of charity fraud and had been frustrated by CRA's slow response.
My colleague took a different route. They gave the information to the leadership of the charitable sector and those organizations as a group took it to the leadership at CRA. From late 2007 right through 2009 the CRA charities division - now under new leadership – has systematically shut down charity tax shelters and are continuing to do so. One by one, International Charity Association Network, Banyan Tree Foundation, Choson Kallah Fund, the Millennium Charitable Foundation and others identified by my colleague have lost their charitable status. A reported $3.2 billion in tax receipts claimed by 100,000 Canadian tax filers have so far been disallowed or are being questioned. A class action suit launched by thousands of donors against the organizers and law firm of Banyan Tree Foundation was recently certified. It's a first. Perhaps the CRA was already investigating these cases. It must build its cases carefully as, if they end up in court and fail to successfully present their case, they could help legalize a tax loophole. It may just have been moving cautiously. But perhaps it did not know.
This means that, at best, government data - information that should be made more accessible and open in an unfettered and machine readable format - helped reveal one of the largest tax evasion scandals in the country's history. But if the CRA was already investigating, scrutiny of this data by the public served a different purpose – helping to bring these issues out into the open, forcing CRA to take public action (suspending these organizations' right to solicit more donations), sooner rather than later. Essentially from before 2005-2007 dozens of charities were operating illegally. Had the data about their charitable receipts been available for the public's routine review, someone in the public might have taken notice and raised a fuss earlier. Perhaps even a website tracking donations might have been launched. This would have exposed those charities that had abnormally large donations with few programs to explain then. Moreover, it might have given some of the 100,000 Canadians now being audited a tool for evaluating the charities they were giving money to.
In the computer world there is something called Linus' Law, which states: "given enough eyeballs, all bugs (problems) are shallow." The same could be said about many public policy or corruption issues. For many data sets, citizens should not have to make a request. Nor should we have to answer questions about why we want the data. It should be downloadable in its entirety. Not trapped behind some unhelpful search engine. When data is made readily available in machine readable formats, more eyes can look at it. This means that someone on the ground, in the community (like, say, Toronto) who knows the sector, is more likely to spot something a public servant in another city might not see because they don't have the right context or bandwidth. And if that public servant is not allowed to talk about the issue, then they can share this information with their fellow citizens.
This is the power of open data: The power to find problems in complicated environments, and possibly even to prevent them from emerging.
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1 Tweets that mention Case Study: How Open data saved Canada $3.2 Billion | eaves.ca -- Topsy.com // Apr 14, 2010 at 9:47 am
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2 Mike // Apr 14, 2010 at 8:22 pm
And even when data sets are available – such as StatsCan's massive sets – they sometimes want to charge us for the privilege of receiving the detailed data. As if our taxes hadn't already paid for their collection of this information.
3 MT // Apr 15, 2010 at 2:57 pm
That's great — but how many people went to jail? Steal $1000 from a private purse you end up in the slammer, steal a billion from the public purse, you get scolded.
4 Tweets that mention Case Study: How Open data saved Canada $3.2 Billion | eaves.ca -- Topsy.com // Apr 15, 2010 at 2:03 pm
[...] This post was mentioned on Twitter by Simon Cahuk. Simon Cahuk said: case study: how open data saved canada $3.2 billion http://tr.im/VRlv [...]
5 cjottawa // Apr 16, 2010 at 4:55 am
Fantastic! This article is a powerful selling tool for pushing the idea of open data.
6 David Eaves // Apr 17, 2010 at 11:36 am
Mike – completely agree. The idea that StatsCan would charge for data
that we've already paid to collect is insulting. Possible, there was an
excuse when this information needed to be printed and shipped out so
there were some costs of redistribution involved, but this is simply no
longer the case.
7 mtedmonton // Apr 21, 2010 at 12:35 pm
Playing Devil's advocate here:
By your own admission:
1. the CRA might have been looking at this already, but may have been building their case slowly to make sure it was iron clad.
2. By exposing the fraud, you caused them to act sooner
Isn't is possible you risk them having a less solid case which they could lose?
8 David Eaves // Apr 21, 2010 at 9:18 pm
Mt Edmonton:
Good question. I confident that having more people become aware of the
fraud would not weaken the CRA's case… the CRA is concerned with
punishing fraud, which is why they move slowly – to construct their
case. I'm interested in the opportunity to prevent fraud. Had the data
been still more available maybe the outcome could have been that
100,000s of Canadians (now having their taxes audited by the CRA) might
have been spared the inconvenience (and millions of tax dollars spent
doing these audits would have been spared). Moreover, those who
committed the fraud may have been dissuaded to have tried in the first
place…
9 O'Reilly Radar // Apr 22, 2010 at 3:00 am
Four short links: 22 April 2010…
Whitehouse Released Open Source Code — four modules for Drupal with features the White House needed, including integration with the Akamai CDN. Android on iPhone — it’s like constructing an apartment building out of lasagne: an astonishing feat of e…
10 uccemebug // Apr 22, 2010 at 6:12 pm
It seems that the investigating party acted with this concern in mind. With ten years of experience in the Toronto charitable arena, “They knew that a call to CRA's fraud tip line was unlikely to prompt swift action. The Toronto Star had been doing its own investigations into other instances of charity fraud and had been frustrated by CRA's slow response.”
The route they took did nothing to publicize the issue, it went right back to CRA only with more impetus for action where action was not apparent.
That said, I wonder just how many organizations operating in the public sphere would come crashing down with this sort of light shone on the finances. ;^)
11 solinkable.com // Apr 23, 2010 at 7:55 am
Case Study: How Open data saved Canada $3.2 Billion…
Why does open data matter? Rather than talk in abstract terms, let me share a well documented but little known story about how open data helped expose one of the biggest tax frauds in Canada’s history….
12 cheve // Apr 23, 2010 at 11:08 am
I do not think CRA has an unclean hand on this issue. Please remember, CRA's job is to collect tax as much as that is being allowed/regulated by the law. CRA has won a few of these case before the court; but there are many legit one that are being caught in the middle . What CRA is doing now is trying to make all the cases go away by saying all these charities are no longer qualified as charitable orgarization; thus the donations should be disallowed for all. Let us think about this for a moment. It was CRA that approved these outfits to begin with. CRA only “acts” upon it, because these tax 'scheme' is reducing the overall tax stream. I should qualify the word 'acts' above; because as far as I know, CRA are still working on a case from 2003(and it is 201o now) .
13 Public nuisance // Apr 23, 2010 at 11:35 am
Great article. There are a couple of interesting features here. One is that the fraudulent charities
were reporting their charitable contributions on T3010s. If these were fraudulent, then the scam
was something like, “You pay me $10, and I will give you a receipt showing $100.” Then the
scammers reported the $100 on the T3010, in case the CRA checked the individual's return for
accuracy. This worked because the CRA assumed that the charity returns were accurate.
Two, the argument for open data sounds good but it has to be balanced by privacy concerns.
Tax return data is confidential (at least in the US) and protected by severe penalties against
disclosure. Most people would not want any more of their data made public. In most cases,
government data is data about people. Data on charities is already public. If you want to open
the tax returns of corporations, great. But I hope you are not advocating for exposing even
more data about individuals to public view.
data on their finances made public
14 The Technology newsbucket: blocking Facebook, HTML5 the non-killer, and more | Tech Blog // Apr 23, 2010 at 8:57 pm
[...] Case Study: How Open data saved Canada $3.2 Billion >> eaves.caFascinating: suspect charities were being used to funnel money for tax writeoffs. Open data meant they could be fingered – and stopped. [...]
15 The Technology newsbucket: blocking Facebook, HTML5 the non-killer, and more | Teh Lolz // Apr 23, 2010 at 10:22 pm
[...] Case Study: How Open data saved Canada $3.2 Billion >> eaves.caFascinating: suspect charities were being used to funnel money for tax writeoffs. Open data meant they could be fingered – and stopped. [...]
16 O'Reilly Radar // Apr 24, 2010 at 2:56 pm
Gov 2.0 week in review…
The pace of innovation and policy in the government 2.0 world hasn’t slackened. Here’s a round-up of gov 2.0-related news from the last week….
17 CIO Summit recap and links | eaves.ca // Apr 29, 2010 at 8:23 am
[...] – Read about how open data help find/push the CRA to locate $3.2B dollar in lost tax revenue. [...]
18 Human Centered ICT » Blog Archive » Case Study: How Open data saved Canada $3.2 Billion // May 2, 2010 at 2:46 am
[...] matter? Rather than talk in abstract terms, the author shares a well documented but little known story about how open data helped expose one of the biggest tax frauds in Canada’s history. Categorie: [...]
19 The Power of Data and the Power of One | e-Patients.net // May 5, 2010 at 11:06 am
[...] through, I saw it was a quote from this eye-popping post: Case Study: How Open data saved Canada $3.2 Billion. The writer concludes (emphasis added): When data is made readily available in machine readable [...]
20 Heroverweging 2.0: vijf kostenbesparingen met 2.0 en Het Nieuwe Werken — Ambtenaar 2.0 // May 7, 2010 at 12:00 pm
[...] [...]
21 Open Links #1 | Diritto 2.0 - Il blog di Ernesto Belisario // May 11, 2010 at 3:17 am
[...] [...]
22 How open data saved $3.2 billion // May 12, 2010 at 12:07 am
[...] is a story of fake charities and tax shelters. In an analysis of data from the Canada Revenue Agency (CRA), it was found that billions of dollars [...]
23 Open data can save Canadian taxpayers | AndrewDyck.com // May 12, 2010 at 10:30 pm
[...] very good case for open data is made by David Eaves on his personal website. David recounts a story where a consultant who was hired to analyze [...]
24 The Power of Open Data — Case Study: How Open Data Saved Canada $3.2 Billion « Legal Research Plus // May 13, 2010 at 10:28 am
[...] Case Study: How Open Data Saved Canada $3.2 Billion by David Eaves [...]
25 Case Study: Importance of Open Data « Open@Krishworld // May 13, 2010 at 10:32 pm
[...] policy advocate and one who evangelizes strongly for Open Government Initiative, has put up a blog post offering a case study on the role played by open data in reducing the fraud under the name of [...]
26 The Power of Open Data « The Network for the Post-Bureaucratic Age // May 14, 2010 at 3:38 am
[...] Power of Open Data 14 05 2010 I came across a fantastic post which detailed the very practical impact of open data. The final paragraph is worth quoting in [...]
27 birth records // May 14, 2010 at 7:07 am
Rather than talk in abstract terms, let me share a well documented but li.
28 I second that! Re: Parliament – Invite me to audit your books – Aaron McGowan // May 19, 2010 at 6:45 am
[...] Some would even ask what could come out of this and why not allow the “professionals” to do it themselves. Simply put – there is a lot of good that can come out of it and a an example of where the data was opened and resulted in saving us (Canadians) from paying $3.2 billion dollars. [...]
29 Parliament: invite me to audit your books (I’m not really asking) | eaves.ca // May 19, 2010 at 1:26 pm
[...] I made around why publicly accessible charitable receipts should be downloadable as such an act might have saved taxpayers $3.2 Billion. Here the stakes are smaller, but no less [...]
30 Thursday, May 20, 2010 « The Jeff Farias Show // May 20, 2010 at 12:45 pm
[...] Case Study: How Open data saved Canada $3.2 Billion CDN [...]
31 TANTO » Archivio » Open Government e Open Data: bilanci e prospettive // May 30, 2010 at 4:00 am
[...] Per comprendere meglio le potenzialità derivanti dall’uso degli open data, un interessante caso di studio ci viene offerto dal Canada, dove è stata scoperta una maxi frode fiscale che ha coinvolto le [...]
32 Von der öffentlichen Verwaltung zur offenen Verwaltung | Open Data Network // Jun 30, 2010 at 4:31 am
[...] eine Übersicht über Spendenzahlungen an Vereine – und deckte einen großen Steuerskandal auf (case study: how open data saved canada $3.2 billion [...]
33 Open Knowledge Foundation Blog » Blog Archive » The Business of Open Data // Jul 6, 2010 at 12:20 pm
[...] we still do not have a lot to show for it. Yes, there has been some innovation. Yes, corruption has been discovered. Yes, there are examples of data journalism where improved access to data has brought new insights. [...]
34 Von der öffentlichen Verwaltung zur offenen Verwaltung : netzpolitik.org // Jul 7, 2010 at 9:57 am
[...] über Spendenzahlungen an Vereine – und deckte einen großen Steuerskandal auf (“case study: how open data saved canada $3.2 billion” (eaves.ca [...]
35 The Business of Open Data « DataMarket blog // Jul 9, 2010 at 2:33 am
[...] we still do not have a lot to show for it. Yes, there has been some innovation. Yes, corruption has been discovered. Yes, there are examples of data journalism where improved access to data has brought new insights. [...]
36 Open Data at Ignite London – Aaron McGowan // Jul 15, 2010 at 7:24 am
[...] The entire case study on of this can be found on David Eaves blog – How Open Data saved Canada $3.2 billion. [...]
37 L’opendata dans tous ses états – Juillet III « // Jul 19, 2010 at 10:56 am
[...] http://eaves.ca/2010/04/14/case-study-open-data-and-the-public-purse/ [...]
38 A tech community & platform which can teach Governments – Aaron McGowan // Aug 25, 2010 at 9:16 am
[...] who identified multiple Charities within the Greater Toronto Area that were being used for fraud. David Eaves blogged about this exact story, talked about it last years Gov 2.0 Expo as well as I at London’s first Ignite [...]
39 Case Study: How Open data saved Canada $3.2 Billion | Rotterdam Open Data // Sep 2, 2010 at 11:15 am
[...] See the complete post on David Eaves blog [...]
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