A flicker of hesitation crossed Finance Minister Jim Flaherty's face as he paused to formulate a response to a question that many have been asking since last year: why is the federal government focusing its financial audits on charities that oppose oil pipeline projects?

When he responded to the Vancouver Observer, he almost appeared to lump environmental advocacy groups in the same category as charities funded by terrorism.

“We don’t choose who is audited by the CRA (Canada Revenue Agency). That’s up to the CRA," Flaherty said. “We do give policy direction; and one of the policy directions is that charities are not to be permitted to accept money from terrorist organizations, in Canada”.

Flaherty then began explaining that the CRA is cracking down on terrorist financing through charities, and on groups accepting money from countries listed as a supporter of terrorism, such as Iran and Syria.

He did not mention that of the 1 per cent of charities that the CRA audits to verify if they spend over a tenth of its budget on 'political activities', seven major environmental organizations such as the David Suzuki Foundation and Environmental Defence have been targeted for auditing. If the CRA rules that these charities have surpassed the 10 per cent limit, they could have their charitable status revoked and be shut down.

Despite being asked about the CRA's audits of environmental charities, Flaherty skirted the topic and continued speaking about charities that accept money from illicit sources.

“Charities are not to be permitted to accept money from sources that are illegal. We also have FINTRAC, which reports to parliament through me and it tracks transactions from around the world...I think if Canadians give money to charity they expect it to be for charitable uses and not other uses”.

The federal NDP slammed the Conservatives, accusing them of using the CRA audits to intimidate environmental charities.

"These environmental groups have gone through super audits – not the usual routine CRA audits, the most rigorous auditing by the CRA. This is the 'A team' that comes into town from Ottawa, sent to rattle the cages," NDP MP Murray Rankin said.

"They (the CRA) haven’t found anything yet, but they have cost these groups an incredible amount of money in audit fees -- which takes the spending away from what the groups are supposed to do, which is environmental education and advocacy".

"This a serious allegation - to use the state tax system to against government opponents" said Rankin. "But the dots are starting to connect, especially combined with the BC Civil Liberties Associations allegations against CSIS and the RCMP."

The CRA audits just one per cent of all charities in Canada per year, or roughly 700-800 charities, to investigate if they are spending more than 10 per cent of their budget on 'political activities'.

“I don’t audit – the CRA audits. And there is a rule that the CRA follows about the percentage that is permitted to be used for work that is not directly charitable” said Flaherty.

According to the CBC, at least one group -- Environmental Defence -- has received its report back from the CRA and they are appealing it. Sources said that the CRA report threatened to revoke their charitable status.

Although a number of spokespeople for environmental charities have denounced the audits for trying to "silence the opposition", Environmental Defence spokesperson said there was little in in today's budget to cause concern.

“There was nothing specific in today’s budget," Environmental Defence spokesperson Tim Gray said, "but we remain on high alert for the wording of the budget bill to be tabled around February 28.”