Proceedings of the Standing Senate Committee on
National Finance
Issue 18 - Evidence - October 5, 2010
OTTAWA, Tuesday, October 5, 2010
The Standing Senate Committee on National Finance met this day at 9:02 a.m. to examine the costs and benefits of Canada's one-cent coin to Canadian taxpayers and the overall Canadian economy.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Honourable senators, this is the fifth meeting regarding the costs and benefits of Canada's one-cent coin.
[English]
Over the previous four meetings, the committee has heard from government officials, the Royal Canadian Mint and the Bank of Canada. We have heard from academics about their position and from representatives of business communities and consumer associations. This morning we will turn our attention to the charitable sector.
When we first started talking about the pros and cons of eliminating the one-cent coin, it did not seem quite as complicated as it has turned out to be. There are many factors and interest groups, and many things to be considered, not the least of which is the charitable sector.
Therefore, we are very pleased to have with us today Michael Maidment, Area Director of Public Relations and Development and Federal Government Liaison Officer for The Salvation Army. Mr. Maidment, we would like to thank you very much for being here and for helping us understand this issue from the point of view of The Salvation Army. I understand you have a few introductory remarks after which we will get into a discussion.
Michael Maidment, Area Director, Public Relations and Development, Federal Government Liaison Officer, The Salvation Army: Thank you, honourable senators, and good morning. I want to first offer my condolences on the death of your colleague. I understand that our time was adjusted a little to account for the funeral that follows this meeting. On behalf of our organization, I offer our condolences.
I would like to thank you for the opportunity to present to you this morning about the costs and benefits of Canada's one-cent coin. As Canada's largest non-governmental social service provider and one of Canada's most well- known and respected charities, The Salvation Army has a unique connection to the Canadian penny. The iconic Christmas Kettle Campaign first began collecting coins to help impoverished Canadians in the late 19th century.
One hundred and nineteen years later, the Christmas Kettle Campaign remains an effective means of raising money to support people in need. Specifically, the Christmas Kettle Campaign, in 2009, raised $18 million across Canada. Approximately 42 per cent of that total amount raised during the campaign, or $7.5 million, was in coins. While it is difficult to pinpoint exactly how much of the $7.5 million were pennies, we know that pennies represent a significant share of donated coins.
While we value every donation, no matter its size, in a cost analysis of processing coin donations, the cost to process pennies likely outweighs their monetary value. In a scenario played out in Salvation Army centres across Canada each Christmas, volunteers and staff gather daily to count, roll and bring coin donations to their local Royal Bank of Canada branch. Strictly from a time-investment perspective, a penny is more costly to process than a one-dollar coin, a quarter or any other coin denomination. The time needed to count and roll 100 loonies and 100 pennies is the same, yet the value is very different.
With respect to the question of whether the elimination of the penny could impact donations to The Salvation Army, we are confident as an organization that there would be no decrease in coin donations. We expect that Canadians will simply choose the next available denomination when donating to a Christmas kettle. Although the evidence is anecdotal, in 1989 when the one-dollar bill was last printed, little impact was seen on donations to the Christmas Kettle Campaign. Canadians simply chose to donate the next available denomination, which was the two- dollar bill, the five-dollar bill or the replacement one-dollar coin.
As the Deputy Governor of the Bank of Canada shared with this committee on May 26, 2010, surveys conducted by the Bank of Canada found that almost three quarters of Canadians pay for goods with cash at least once per week compared to 64 per cent who do so with debit cards and 36 per cent with credit cards. We believe the shift away from using cash is of greater concern to The Salvation Army, and I suspect other charities, than the denomination of coin Canadians use when donating to the Christmas Kettle Campaign.
With this in mind, The Salvation Army has developed new fundraising initiatives to adapt to the decreasing use of cash. An example of this is a program called the iKettle, an online version of the Christmas kettle, that collects donations made using credit cards. We have equipped a number of Christmas kettle locations with credit and debit card machines across the country as a trial. However, they do not seem to make the same sound as a fistful of coins being dropped into a kettle. We hear that sound frquently, by the way, even on the radio and in news stories.
The Salvation Army expects that the elimination of the Canadian penny would have no negative impact on donations to our organization. However, we would expect a positive impact on income through the reduction of costs related to the processing of donated pennies.
I would like to make one last point. During the committee's meeting on May 26, which I referred to earlier, Senator Gerstein indicated that there were approximately 20 billion pennies in circulation, representing some $200 million. If the Canadian government chooses to eliminate the penny following your examination of this issue, The Salvation Army would certainly be interested in assisting the government in a strategy to remove the penny from circulation. I was throwing around some ideas on the weekend. The campaign title "Change Pennies into Hope" has a certain ring to it, we think. Thank you.
The Chair: A true statement from a development officer.
Mr. Maidment: I could not resist it.
The Chair: It was very good. Thank you very much for your comments.
We have had witnesses who indicated that they had to pay a fee to the banks to accept the pennies that they put in rolls; they did not clean them, but they rolled them up and organized them. Have you experienced that obstacle to using the penny as well?
Mr. Maidment: There are two scenarios. First, the Christmas Kettle Campaign is largely based on volunteers. We do kettle campaigns in 400 communities across Canada, so we see many volunteers in Salvation Army facilities counting the coin. There is no impact that way.
In some of the larger centres, Ottawa, for example, we raised just over $500,000 last year. If we extrapolate the percentage, I think the estimate was 42 per cent or somewhere around $200,000 in coin. We actually pay a coin- processing company to take that coin. Therefore, yes, we pay a fee. It decreases some of the actual manual labour, but we do pay a fee.
I am aware of other instances where, for example, a mall in Mississauga donates the coins from the mall's fountain. Those coins are collected and handed over to The Salvation Army in buckets. A seniors group sits in a church basement with these buckets of coins. The group is responsible for cleaning the coins, rolling them and then bringing them to the bank. The seniors are volunteers, so no specific cost or dollar amount is associated with their efforts. However, there is a cost when they bring those coins to the bank.
The Chair: You are indicating a cost for handling the coins, but is a fee charged to receive one-cent coins, and also other coins, by the financial institution where you are depositing?
Mr. Maidment: I do not know specifically for the cases that I have indicated. I know there is a charge to process the coin itself, but I do not know whether there is a specific fee to handle the penny. I would assume, based on what you have said about the other folks who have testified, that the fee we pay, as in the example of Ottawa, is in part to process the coin. Specific to the financial institution, I do not know whether a fee exists. We are one layer removed from it in this example. We bring the coin to a coin-processing centre that takes it to a financial institution. I assume a fee is built into that, but it is only an assumption.
Senator Callbeck: I understand from what you have said that eliminating the penny would be beneficial to your organization. As you said, when we eliminated the one-dollar bill, people gave the next higher bill.
Mr. Maidment: Yes, that is correct.
Senator Callbeck: You spoke about the new initiatives to adapt to the decreasing use of cash, and you mentioned that they have not caught on well with the Christmas Kettle Campaign. What are you planning to do about that?
Mr. Maidment: An interesting shift has occurred with the increased use of debit cards. People have given that feedback to us specifically. I have reached into my own pockets at a grocery store to find change to donate to a hockey team selling tickets to an event and found none because I regularly use a debit card or a credit card — apparently I use a debit card too much, so I am told by the keeper of our finances at home.
It has been difficult. In our Christmas Kettle Campaign, speaking specifically in Ottawa, we have increased the amount raised every year. That does not necessarily make sense because of the increased debit card use and decreased use of cash. It is difficult to correlate those facts. Maybe we have done a better job of promoting the campaign, or maybe more Canadians know about our work and want to give specifically to The Salvation Army. I guess I do not have a solid answer to your question. Certainly, we see it as a potential threat to the income of the Christmas Kettle Campaign. Eighteen million dollars raised in the Christmas Kettle Campaign represents roughly 10.4 per cent of our income. Donations from the public last year in Canada were roughly $173 million. It is a significant and very old campaign. We have used this method to raise money for 119 years. We have tried to adapt over the years to changing times and to work with other mediums for donation payments. As well, we have added other campaigns such as the iKettle program, which has been growing exponentially every year. It represents probably $1.5 million of the $18 million raised. It remains a small percentage but is growing.
Senator Callbeck: What are the percentages of donations accepted by mail, on the telephone, by email online and in other ways?
Mr. Maidment: Unfortunately I do not have that information. I know that mail would be the most significant method for receiving donations to The Salvation Army, although the website has been growing. We analyze the demographic of our donors across the country and find that most of them would depend upon traditional methods such as mail. We know that definitely. The Christmas Kettle Campaign represents about 10 per cent to 10.5 per cent of our donations across the country. I do not have the exact number but would hazard a guess that donations by mail would be about 80 per cent to 90 per cent of our donations. In summary, I would say that donations received are 80 per cent by mail, 10 per cent from the Kettle campaign and the remaining 10 per cent through other means, whether online or by telephone.
Senator Callbeck: The Salvation Army is in 400 communities across Canada. Is your organization growing?
Mr. Maidment: I do not know the answer to that. Typically, our organization is all about responding to the needs of communities. We never structure our organization to stop growing or to contract. We stop delivering programs when they are no longer needed and no longer effective, and we move on. There is always potential for new needs in communities for us to rise up to meet. The 400 locations in Canada have been fairly stable over the past number of years.
Senator Marshall: Mr. Maidment, I want to be sure that I understand what you said earlier. If the penny is discontinued, you do not expect donations to decrease significantly. Could you talk about the processing cost? From what you said, it seems that it does not cost you to roll and process pennies. Your expenses are fees paid to financial institutions for taking the coins.
The net donations to The Salvation Army should be the same or maybe increase a little, should they not? I would not want to do anything to harm the good work of The Salvation Army in communities around the world.
Mr. Maidment: It is difficult to be specific about the processing fees. Many of the campaigns are managed by volunteers, and it is difficult to put a hard cost on a group of volunteers counting and rolling pennies. Our organization generally banks with one institution in Canada. It is probably a little different for non-profits than it is for for-profits. If our organization were to go to the bank with a bucket of rolled pennies, it is likely that we would be excused from any fees, given who we are, our relationship and where the money is spent. I know that it is very anecdotal, but it is difficult to define the fee. In Ottawa, for example, we raised $520,000 in last year's Christmas Kettle Campaign. Roughly $180,000 to $200,000 of that amount was in coins, and we paid $3,000 to process those coins.
Senator Marshall: That is a good amount of money.
Mr. Maidment: Yes. The cost analysis of other campaigns in different areas includes the many volunteer hours, the materials used, the rolling machines, the coin rolls, other associated items and the cost of a staff member, so it is difficult to break it down precisely.
Senator Marshall: If the decision is to stop using the penny, has The Salvation Army given any consideration to launching a campaign to recall the pennies? If the penny were discontinued, it would leave a great many pennies out there not circulating. How long would it take to recall them? Have you given any thought to that? Some organizations collect pennies.
Mr. Maidment: That is a thought and, tongue-in-cheek, why I included the last comment I made.
If the recommendation of this committee is that the penny is eliminated and that decision is taken by the federal government, if that estimate is correct and there are $200 million in pennies in Canadians' hands, the other evidence that goes along with that is that many Canadians hoard those pennies. They may not be in active circulation. They likely are sitting in a yogurt container, as they are in my closet at home, or a jar. In many cases, we receive those pennies.
In a campaign last year, we had a young boy who brought us $50 in pennies. He lugged them in. He had been collecting them for a couple of years and brought them to The Salvation Army kettle and dropped them in very proudly. Therefore, yes, I think we would be interested in receiving those pennies and putting them to good use.
Senator Marshall: Is there a big downside to The Salvation Army if the penny is discontinued? Based on what you have said so far, I am not alarmed or overly concerned from the point of view of your organization. However, can you think of a downside of which you would like to make us aware?
Mr. Maidment: We have had this discussion internally since the invitation to appear before you was made. I do not see a negative impact right now; as an organization, we do not see a negative impact.
One concern that was raised is what the elimination of the penny might do to the amount of money that is in Canadians' pockets. I have read through some of the transcripts of the previous committee meetings. It seems to be that that was not a concern that was seen. From a donations point of view, we are comfortable. We think Canadians will just donate the next largest coins. Their pocketful of change, instead of consisting of pennies, may consist of dimes, nickels and other coins, so we do not see a risk to a decrease in donations.
The Chair: Mr. Maidment, your last comment raises the interesting point that we are not reacting to a piece of legislation that is proposing to eliminate the penny and therefore ask what are the impacts of this proposed legislation. We are at the earlier stage of trying to do a study and perhaps influence a policy decision by the government. We are not reacting to eliminating the penny; we are saying that we have a penny, what are the pros and cons of keeping it?
Therefore, your comment that you do not see a negative impact only goes halfway. We had the Canadian Bankers Association here, and they were basically neutral. They said that it would be fine if we eliminate it and fine if we keep it. Are you saying that your organization would be better off if the penny was not in circulation, or are you saying that it would be fine, you will not see any negative impacts, if we eliminate it; but if we keep it, that would be fine as well?
Mr. Maidment: If I were to answer in that context, I would say that we are fairly neutral. During this discussion internally, we were neutral. However, the benefit remains that we would potentially save money in the processing. For an organization such as us, with our reach and our working to put every dollar that we receive from Canadians to work, any cost savings that we can find as an organization are helpful.
We remain pretty neutral. However, if there is a potential cost saving, which we think there is, then we would be in favour of the penny's elimination.
The Chair: You remain pretty neutral, but you can save money if it were eliminated, is that correct?
Mr. Maidment: Yes, we think we could save money, so we would be in favour of the penny's elimination.
The Chair: That is not very neutral.
Mr. Maidment: However, we are not strongly in favour — I suppose you are looking for me to answer more strongly.
The Chair: You do not want to take the lead on recommending the elimination of the penny.
Mr. Maidment: It is an anticipated effect. We would not, as an organization, want to favour the penny's elimination and then find that there was a negative impact. We are operating on a former case study of the elimination of the one- and two-dollar bills, trying to use some of that information, and then trying to predict exactly what our cost is to deal with the penny. We are not jumping and screaming.
The Chair: We are the same as you. We would not want to recommend the elimination if there were negative impacts. That is why we are meeting in this instance with the charitable sector. Is The Salvation Army a member of a philanthropic association of fundraisers?
Mr. Maidment: We are part of many of those organizations across the country.
The Chair: I would have thought you were. Do you have discussions from time to time about this issue?
Mr. Maidment: I am not aware of a specific discussion about the penny within those organizations.
Senator Runciman: This is not a valuable contribution — probably not worth a penny — but the witness's position reminded me of an old political saying: Some of the people are for it, some of the people are against it; I am with the people.
The Chair: We tried to get a representative of UNICEF here because it is coming up to Halloween and the kids are picking up pennies and nickels and dimes, but we were not able to get a representative. Are you able to comment generally as to the impact on fundraising in groups that rely on small donations?
Mr. Maidment: I would probably stay away from commenting or speculating on behalf of other groups. However, for the amount of coin we take in as an organization, I think you could probably draw similarities between our organization and other organizations that collect money in this way. Our campaigns are a little different, given that we are in retail locations where people are physically out spending money, as opposed to being at their doorstep when folks may not have cash at hand and not be expecting to give a donation. That may be the one difference that I would see for another organization such as UNICEF.
For people who typically donate to the Christmas Kettle Campaign, it is a destination because they are in a shopping centre or some other retail location where they are spending money and likely have change — hopefully they do have change in their pocket and that money can be donated.
The Chair: We would be interested in any comment you may have on international experience. The Salvation Army is an international organization. Do you have any international experience concerning another country that has eliminated a coin and the impact that that might have had on your association?
Mr. Maidment: Unfortunately, I do not. We are an international organization in 122 countries at the moment. I had anticipated this question a little too late to get updated information. I sent a request to our New Zealand territory. I believe New Zealand has eliminated their penny, so I was seeking information on their experience with the elimination of their penny and what, if any, impact the elimination had on the Christmas Kettle Campaign.
The campaign started in the United States and then quickly spread into Canada through Newfoundland — first on the docks of St. John's and then through the rest of Canada. I assume that the New Zealand territory uses a kettle campaign. I would think they do. However, when I receive that information, I would be happy to pass it on through the committee's clerk.
The Chair: Did you say that it started first in the docks of St. John's in Newfoundland and Labrador?
Mr. Maidment: We say "in Canada," although Newfoundland was not a part of Canada at that time.
The Chair: They got us started in the right direction even before they joined us.
Mr. Maidment: I guess so; I am from Newfoundland as well.
The Chair: Thank you for that bit of history.
Mr. Maidment: That is just a little tidbit to throw in there — I have to claim it apparently.
Senator Murray: When we had organizations such as the Consumers' Association of Canada and others before us who were in favour, in principle, of eliminating the penny; they did so with a caveat to the effect that they certainly want to be consulted on the implementation of any such policy, if it were decided upon, because they could see possibilities of problems. They wanted to be sure these were taken into account in the elaboration of the legislation of the implementation plan.
For my part, I think that if this committee were to decide that we were in favour of eliminating the penny, we would have to go beyond that and indicate clearly to the government what the parameters of that decision should be and some of the implementation that we think ought to be adopted by the government. I hope the government would not simply bring in a bill and say "take it or leave it," that there would be prior consultation and perhaps a draft bill before a final decision is made.
Are there aspects of the implementation of the potential elimination of the penny upon which you would want to be heard? Can you help us with recommendations we might make to the government on implementation?
Mr. Maidment: We would certainly like to be involved. The Salvation Army operates some 300 thrift stores across the country, so our organization has that retail component, and from that perspective, we would be interested.
On the charitable side, I do not have strong feelings about the implementation of a program that may eliminate the penny beyond my understanding from previous witnesses that a large number of pennies are in existence that are not in active use. It would be very positive to be involved in the implementation strategy of the government if the one-cent coin were in fact eliminated. Transferring the money that is currently sitting unused in homes across Canada into something valuable for our sector would be very positive.
If the penny were eliminated, I assume it would be done over a certain time period. I assume that the one-dollar bill can still be used. However, if this strategy were adopted, I imagine that the government would want the pennies to be recycled.
The Salvation Army would like to be involved by using the pennies for the benefit of impoverished Canadians.
Senator Murray: There is also the question of an effective communications plan. If the government decided to do this, they would want to explain what they are doing, how and so forth. Do you think you could help us with that?
Mr. Maidment: I think so, yes. I suppose it could be done with natural attrition if it were more difficult to use the penny than not. I expect the government would choose something more proactive. Perhaps the charitable sector could be proactively involved in bringing in those pennies. A significant communications campaign could be mounted to do that, perhaps in conjunction with the Christmas Kettle Campaign. That could be very effective in reaching Canadians. People do feel charitable during the Christmas season, so that may be a good time to encourage Canadians to get rid of their pennies.
The Chair: When Senator Gerstein spoke on this issue in the Senate, he assured us that the elimination of the penny would not result in the elimination of the penny loafer.
Senator Gerstein: Mr. Maidment, I want to thank you for your excellent testimony this morning and the help you are giving the committee.
I have no question for you, but I want to take the opportunity to pay tribute to the tremendous work The Salvation Army does in Canada and throughout the world. They have a superb reputation for stepping up whenever and wherever a need arises. I think I can speak on behalf of the entire committee in expressing our grateful thanks to you and The Salvation Army.
Mr. Maidment: Thank you. I appreciate that. It is an honour to work for The Salvation Army.
The Chair: Tomorrow, we will hear from the Reserve Bank of New Zealand via video conference. They will be able to give us the history from a banker's point of view. If you receive any information from New Zealand from the point of view of charities, that would complement the information we will be obtaining. You can communicate any such information to our clerk, and it will be circulated to our members.
Tomorrow, we will hear from the Royal Canadian Numismatic Association, the coin collectors. At this stage, that will be our last meeting on this subject other than working on the report.
Senator Runciman: Mr. Chair, we have discussed this earlier, and we have reached out to a range of charitable organizations. However, I am specifically interested in Tim Hortons because they are the most visible collector of pennies. When I go in for my "double-double," I notice that very few coins other than pennies are being collected. Did they decline our invitation?
Adam Thompson, Clerk of the Committee: We did contact them last week after you raised that with us, and they were unable to appear.
Senator Runciman: Mr. Chair, could we ask them to consider a written submission with respect to any impacts they might foresee?
The Chair: Yes, we could do that. As well, anyone watching this who would like to send in a written submission is welcome to do so. On the weekend, I discovered one establishment that is rounding off, up and down; they do not want pennies at all. That is one issue we have to wrestle with, how the rounding off will be handled, but it is already happening in certain institutions. I thought that was an interesting development.
Mr. Maidment: There would likely be a difference when a donation is made with intent to a program such as the Christmas Kettle Campaign, where you might take the action to walk across a mall aisle and put money in a Christmas kettle versus having loose change that you do not want jingling in your pocket and you just discard it.
Similar to what the senator said, I was in a Subway restaurant recently where they had what appeared to be a tip jar. It just had a brand name on it with no indication that the money would go to charity. Again, a large amount of change was in the jar that people had obviously just discarded because they did not want to carry it. It would be interesting to hear what an organization such as Tim Hortons would say. We are a benefactor of some of the money that they raise across the country. I would expect some difference between that type of gathering of donations, namely, discarded change, and donations made with intent.
The Chair: Some establishment use a small dish of pennies for when a customer does not have the required pennies and also for dropping in extra pennies.
Mr. Maidment: I understand that the "leave-a-penny, take-a-penny" program started in the United States. Someone tried to add up how much change was sitting in these containers across the United States, and it was a staggering amount of money.
The Chair: If you happen to come across material on that, please forward it to us. All these anecdotal pieces of information are helpful to us.
Mr. Maidment: I do not want to give the appearance that everything I say is anecdotal, but I will verify it before I pass it on.
The Chair: Mr. Maidment, on behalf of the Standing Senate Committee on National Finance, I would like to thank you very much for being here representing The Salvation Army. As deputy chair, Senator Gerstein also wishes to thank you. Thank you for the good work that you are doing for The Salvation Army and internationally.
We now have Senator Ringuette for the last word.
Senator Ringuette: I really appreciated the comments of this witness. However, I would like to flag to our committee that Ms. Barrados, President of the Public Service Commission of Canada, is tabling a report this morning and Ms. Fraser is tabling a report on October 24. How early will this committee have these two officers of Parliament in front of us to discuss their reports?
The Chair: Thank you for reminding us that the report is coming out this morning. As you know, Ms. Barrados will be with us on the Tuesday when we return from the Thanksgiving break, which is the first day we were able to arrange for her to be here. We do not yet have a date with respect to Ms. Fraser. Each of these ladies and officers of Parliament will be retiring next spring, in 2011. This will probably be their last appearance before us, so we want to ensure that we have a good session and a good send-off for them when we do meet with them. Thank you for reminding us about the report.
I should remind you about another report. A note came around to everyone that the ways-and-means motion, which would morph in the House of Commons into budget implementation number 2, is on its way. There is a briefing tonight, I believe. I have requested a separate briefing for the Senate when that bill finally gets close to us rather than doing a briefing now because the facts will not be clear in our minds a month from now or whenever we receive it. It is beginning its journey. I believe a ways-and-means motion was filed last week.
Are there any other items of business? The steering committee will be meeting tomorrow. I hope to discuss some other items, but we are waiting for Supplementary Estimates (B), which will be coming before Christmas as well.
Mr. Maidment, thank you again for being here.
(The committee adjourned.)