Proceedings of the Special Senate Committee on the
Charitable Sector
Issue No. 6 - Evidence - September 18, 2018
OTTAWA, Tuesday, September 18, 2018
The Special Senate Committee on the Charitable Sector met this day at 9:05 a.m. to examine the impact of federal and provincial laws and policies governing charities, nonprofit organizations, foundations, and other similar groups; and to examine the impact of the voluntary sector in Canada.
Senator Terry M. Mercer (Chair) in the chair.
[English]
The Chair: I am Senator Terry Mercer, from Nova Scotia, chairman of the Special Senate Committee on the Charitable Sector.
As you are all aware, the committee will be conducting several panels today, and I would like to thank everyone for putting aside the time to hear from the individuals and organizations who have kindly agreed to participate today.
Today the committee will continue to examine the impact of federal and provincial laws and policies governing charities and non-profit organizations and foundations, and other similar groups, and to examine the impact of the voluntary sector in Canada.
For this meeting, we will focus on the fundraising and charitable and non-profit organizations.
Before we hear from the witnesses, I would like to start by asking the senators to introduce themselves, starting with the deputy chair.
Senator Omidvar: Good morning. My name is Ratna Omidvar. I am an independent senator from Ontario.
Senator Duffy: Mike Duffy from Prince Edward Island. Welcome.
[Translation]
Senator Gold: Good morning. Marc Gold, senator from Quebec.
[English]
The Chair: We welcome, from the Treasury Board Secretariat, Michael Lionais, Executive Director, Costing Centre of Expertise, Office of the Comptroller General of Canada, and from Public Services and Procurement Canada, Carolyne Blain, Director General, Strategic Policy Sector. Thank you for accepting our invitation to appear.
I would invite the witnesses to make their presentations, five to seven minutes each. Following that, we will go to questions, and we will ask our questioners to be short and to the point and we will ask the witnesses to be the same in your responses.
[Translation]
Ms. Blain, please begin.
Carolyne Blain, Director General, Strategic Policy Sector, Public Services and Procurement Canada: Good morning, Mr. Chair and honourable members of this special committee. Thank you for having us here today. My name is Carolyne Blain and I’m the Director General of the Strategic Policy Sector in the Acquisitions Program at Public Services and Procurement Canada. I understand you are examining how Canada can improve our laws and policies governing charities and non-profit organizations, and help them to overcome challenges.
The charitable sector plays a key role in bettering Canadian society, often through improving economic opportunities for under-represented groups.
[English]
At Public Services and Procurement Canada, we are exploring ways that the Government of Canada can contribute to that goal through the power of procurement. The Minister of Public Services and Procurement and Accessibility has a mandate to modernize our federal procurement practices. This includes leveraging procurement to support socio-economic policy goals. As the Government of Canada’s central purchasing authority, we buy approximately $20 billion of goods and services annually on behalf of roughly 100 federal organizations and involving approximately 9,000 suppliers. The government has clearly expressed its desire to leverage its significant buying power to generate positive societal impacts. Today I want to tell you about what we are doing to put this idea into action, and I am happy to answer questions about the pilot projects we have launched that focus on social procurement specifically.
For several years now, Public Services and Procurement Canada has looked at ways to integrate social outcomes into public procurement. We do recognize, however, that there are systemic challenges that make the federal procurement process difficult to navigate for many groups that wish to do business with the federal government. We have undertaken a number of initiatives to reduce those barriers and increase the diversity of our supplier base. These include supporting small and medium enterprises, including women-led and indigenous businesses, to navigate and participate actively in the federal procurement process. Our ultimate goal is to increase and diversify our supplier base, resulting in increased competition amongst suppliers, greater value for Canadians and opportunities for new and diverse suppliers, including social enterprises.
[Translation]
We are also looking at ways to create better opportunities for under-represented groups, including social enterprises, to become suppliers of goods and services to the Government of Canada. Social enterprises include not-for-profit organizations that seek to achieve social, cultural, or environmental goals through the sale of goods and services.
Part of our effort is to implement digital solutions that will simplify and streamline our procurement process, and make federal procurement more accessible to all. These solutions will also give us a strengthened capacity to track and monitor key information such as the participation of small and social enterprises to help inform our future decisions as we continue to diversify our supplier base.
As part of Public Services and Procurement Canada, the Office of Small and Medium Enterprises helps potential suppliers to better understand how the government buys goods and services, and how to to find business opportunities. The office also helps them to better understand the government contracting process and related tools through free seminars, webinars, and one-on-one meetings. The Office of Small and Medium Enterprises has a network of offices across Canada, as well as a toll-free telephone line.
[English]
Recently, we have undertaken some pilot initiatives that we think will provide valuable insight on how to successfully integrate social outcomes into procurement.
This past April, we launched a one-year pilot project for catering services in the National Capital Region that focuses on promoting our social procurement goals. For this project, we have established a list of social enterprises and small suppliers of diverse and under-represented backgrounds capable of delivering catering services in the National Capital Region. This list can be used within our department so that employees can fulfill their catering needs while supporting small and diverse suppliers, with no additional effort. In order to qualify, suppliers were required to answer a short questionnaire confirming their status as a diverse supplier or social enterprise and their ability to supply catering services in the National Capital Region. For us, this is an important first step in considering diversity when developing procurement requirements, and it will help us test and determine future approaches for including socio-economic policy objectives into procurement.
We have also another social procurement pilot project planned that will aim to increase the diversity of suppliers. In December 2017 and in June 2018, we consulted with industry on incorporating social objectives in the temporary help services method of supply. The results of the consultations are assisting in the development of our temporary help services procurement strategy. This strategy will look to increase the number of diverse suppliers who will be invited to bid on federal government opportunities for temporary help services.
[Translation]
As we push forward with these initiatives, we are closely following Bill C-344, which has been endorsed by the government, as it makes its way through the House and Senate. Bill C-344, an Act to amend the Department of Public Works and Government Services Act, emphasizes measuring the impact of federal spending in communities. It proposes to give the minister the authority to require an assessment of the benefits that a community derives from a construction, maintenance or repair project managed by Public Services and Procurement Canada.
We are also closely following progress on Bill C-81, the government’s Accessible Canada Act. Among other things, Bill C-81 outlines how the Government of Canada will require federally-regulated organizations to identify, remove and prevent barriers to accessibility. This would apply to the goods and services we buy for Canadians, which would not only further promote accessible business practices and services, but also improve conditions for public servants who have disabilities.
[English]
As the Government of Canada continues to make social procurement a priority, the lessons learned from our pilot projects and other initiatives will serve us well, which I am happy to discuss further with members of this committee. Thank you very much.
Michael Lionais, Executive Director, Costing Centre of Expertise, Office of the Comptroller General of Canada, Treasury Board of Canada Secretariat: Thank you, Mr. Chair, for the invitation to appear before your committee.
[Translation]
I am pleased to be here in my capacity as the Executive Director responsible for the Policy on Transfer Payments. With that in mind, I can only speak to the administration of grants and contributions, which fall under this policy.
[English]
As such, I would like to provide the committee with a summary of the work we have done on reforming grant and contribution programs and where we are today in delivering a policy that continues to better serve Canadians and Canadian interests abroad.
As you may be aware, the world of grants and contributions has evolved since 2006 when the Blue Ribbon Panel on Grant and Contribution Programs released its report concluding that fundamental change is required in how government understands, designs, manages and reports on grant and contribution programs.
[Translation]
In response to the expert panel’s findings, the Treasury Board Secretariat launched its action plan in 2008 to reform the administration of grants and contributions programs.
[English]
We committed to simplifying the processes, reducing administrative burden on recipients and ensuring stronger stakeholder engagement in the design and delivery of programs.
A 2013 self-assessment of the government’s progress in achieving our action plan commitments noted significant progress, most notably in the areas of funding practices, access to information, recipient engagement, and reporting and risk management. However, room for improvement was noted. Specifically, the 2013 assessment identified that more work was required to achieve a more consistent recipient experience across government through the implementation of grant and contribution service standards and the continued expansion of online information and services. It was also noted that opportunities existed to further streamline reporting obligations and audits for recipients that had multiple agreements.
[Translation]
We committed to reassessing our progress against the findings of the 2013 assessment. In 2017, the Treasury Board Secretariat released its second self-assessment.
[English]
The findings of this assessment concluded that we had made significant progress in the areas of service standards, simplified application processes and funding arrangements, flexible risk management, recipient engagement and streamlined administration. The findings also highlighted the need to better harmonize information and practices across departments for applicants and recipients to be able to interact with the government online, for the use of risk assessment results in the oversight of agreements, and finally, to leverage service standard information to allow for clear and meaningful reporting and to support a consistent service experience for recipients.
[Translation]
We continue to move forward on this agenda, most notably, in the form of a policy reset. In fact, findings from the 2013 and 2017 assessments are currently being considered as part of the current renewal of the Policy on Transfer Payments.
[English]
The renewal of the policy is important because it will continue to promote a whole-of-government approach in support of a common user experience for grant and contribution recipients. There will be a renewed focus on transparency, performance and meaningful reporting to Canadians.
In addition to the progress we have made in reforming grants and contributions policy, we have introduced an initiative to promote innovation in grants and contributions funding. Specifically, we have introduced a five-year pilot that commenced in 2017-18, called “generic terms and conditions.” This initiative allows departments to use microfunding, prizes and challenges, and incentive-based funding to promote innovation in transfer payments in communities across Canada, including the charitable sector.
[Translation]
Change in this area is not easy. However, with the renewal of the Policy on Transfer Payments, we are confident that the foundational pieces will be put in place to impact real change.
[English]
With that goal in mind, I look forward to your committee’s support in driving the reform of grants and contributions administration to the benefit of all Canadians. Thank you.
The Chair: Thank you very much.
Colleagues, I should perhaps caution us, myself in particular. Ms. Blain talked a lot about procurement, et cetera, and there is no need for us to talk about the Phoenix system here because it is not related to the study of the committee. Since I continue to ask questions on Phoenix, I will hesitate to do so here today, and I will discipline you not to ask about Phoenix because it is not related to the current study.
Senator Omidvar: I have a set of questions that are particular to your presentations. Thank you so much for the work you do and for being here.
My first question is to Ms. Blain. I am gratified that so much talk and work is being given to social procurement. It is an unleveraged lever of purchasing good and leaving a legacy of public good. I am pleased to tell you that I am, in fact, the sponsor of Bill C-344, which is the community benefit bill, so it all comes together wonderfully.
My question to you, Ms. Blain, is around social procurement and Canada’s experiment, I would say, with it at this point. Have you looked at what other jurisdictions doing outside Canada, maybe in the U.K., Australia or the U.S.? What have you learned from them?
Second, since social procurement is in the power of all governments — federal, provincial and municipal — is there thought to developing a sort of round table on exchanging policies and practices with all levels of government that are engaged? That would be a pretty big table if you include all of the municipalities, but sometimes it is municipalities that actually have the most useful, on-the-ground ideas.
That’s my question to you, and perhaps I’ll wait for that answer before I go to Mr. Lionais.
Ms. Blain: Thank you very much for your question and your support for Bill C-344.
In terms of international jurisdictions, I would say absolutely. I think there is a global awareness of the importance of using public procurement as a lever to support broad socio-economic objectives. We have been looking at other jurisdictions internationally with colleagues from Treasury Board Secretariat who are also joining PSPC in looking at the way forward for government policy in using our public procurement for socio-economic objectives.
Interestingly, last week I was at an international forum called the Social Enterprise World Forum. It was attended by 42 countries around the world, and over 1,400 candidates were participating. It was very tangible in terms of the awareness and importance of using public procurement to support social enterprises globally. It was a big theme out of the conference.
Domestically, we are having those conversations with partners at the federal level, particularly with our Treasury Board Secretariat colleagues, but also at the provincial, territorial and municipal level. In fact, this week we are hosting a meeting of the federal-provincial-territorial deputy ministers on procurement. One of the topics will be social procurement and socio-economic objectives that are being levered through our public procurement opportunities. There is a keen awareness in moving this forward.
As I mention in my presentation, we are aware of some of the barriers that pose some challenges in doing this as effectively as we could be. Part of that is what we are endeavouring to undertake through our procurement modernization initiatives that are part of our minister’s mandate letter.
Senator Omidvar: You mentioned the Social Enterprise World Forum, which I think I attended last year. Would you say that Canada is in primary school, secondary school or university?
Ms. Blain: It is hard to gauge. Certainly our attendance level was phenomenal. With the support of ESDC, we were able to have some solid attendance from a lot of social enterprises across Canada from coast to coast that participated in the forum.
In terms of what we are doing as a government, we are keen to be leading. We may not be leaders, but I’d say we are in the running. The leaders that are globally pursuing this, including the U.K. and Australia, are taking advantage of this opportunity to push the agenda forward. We have trilateral meetings at the federal level with the U.S. and the U.K. to discuss some of these topics and exchange ideas about how to do it collectively. We would like to learn from each other’s ways forward so that we can really build on the collective lessons learned and how to do it better.
Senator Omidvar: Chair, would you like me to go to my question to Mr. Lionais?
The Chair: Please.
Senator Omidvar: Thank you. I don’t want to take up other people’s time.
Mr. Lionais, in 2006, there was the Blue Ribbon Panel on Grant and Contribution Programs. That is 12 years ago. You said significant progress has been made, and you outlined some of the progress. Is the progress as a result of self-assessment, or was there stakeholder engagement from the recipients of grants and contributions as to what progress has been made since 2006?
Mr. Lionais: The formal reports were done through self-assessments with departments who were asked to engage with their recipients as part of responding to the self-assessment. We didn’t specifically go to the recipients when we did the 2013 and 2017 updates, but we had asked the departments to liaise with the recipients when we sent the questionnaires to them.
Senator Omidvar: So in fact, yes, there was stakeholder engagement if not directly but indirectly?
Mr. Lionais: Indirectly, but not by us.
Senator Omidvar: You heard you are on the path to progress but much improved?
Mr. Lionais: We can always improve, yes.
Senator Omidvar: I noticed that in your brief you mentioned introducing a risk assessment system. Can you describe that to us? Can you tell us whether or not the recipients — that is, the community organizations, charities and not-for-profits — are aware of this risk assessment and have had some indication of how they need to consider risk as they make proposals to you as well so it is not just you who are assessing the risk independently of their risk assessment?
Mr. Lionais: Our risk assessment is directed towards departments. We lay out the administrative frameworks that departments operate in, and we provide guidance to them about how they do risk assessments at a program level and at a recipient level. The departments are actually the ones working with the recipient to talk about how risky the proposal is or is not and what the mitigating controls would be. We don’t get involved in that directly.
Senator Omidvar: Again, are you saying that indirectly, through the departments, the risk assessment process is well-known to community agencies and grant recipients and they have modulated or moderated or considered a risk assessment as they develop their proposals? Do I have some comfort in understanding that?
Mr. Lionais: Yes. We are trying to align the risk assessment to the capacity of the organization.
Senator Omidvar: Can you explain that a little?
Mr. Lionais: We are looking at how the relationship exists between the department and the recipient. Is it a long-standing relationship, an ongoing relationship or a one-time relationship? Is it time limited? These different relationships involve different risk profiles.
Senator Omidvar: Can I assume that one aspect of the risk will be the size of the grant that is being requested? If it is a small amount, I hope we are not putting our organizations through the same reams of paper and work as for a half a million dollar grant?
Mr. Lionais: That is correct.
The Chair: Before I move on to the next questioner, Ms. Blain, I am from Nova Scotia. We have a large federal government presence in my hometown of Halifax through the military and through other government departments. In your discussion of procurement, you seem to be focused on procurement in the National Capital Region. There are other places in this country besides the National Capital Region. Don’t tell the people from Ottawa that. It is important that procurement be national in scope. Do you have a plan to engage procurement in the various regions of the country and measures of the opportunities of working with enterprises that may be related to the sector which we are studying?
Ms. Blain: Thank you very much for your question.
You are absolutely correct. There is procurement across the country from coast to coast to coast. We don’t actually focus solely on the NCR. In the pilots that I mentioned, there is one specific pilot that is focused only in the NCR, and that is quite small. It is to test out some new ideas. In the other pilot that I mentioned, in terms of the temporary help services method of supply, that is a national method of supply where we procure temporary help services across Canada for all government departments and agencies.
The other aspect I should mention in terms of national scope and public procurement is that we also have a solid partnership with provincial and territorial governments. In fact, we establish collaborative procurement opportunities where provinces and territories are now partnering and signing on to our different methods of supply so that we can have the collective buy of both the provincial level and the federal level using the opportunity through standing offers and supply arrangements. We have just about every province and territory now signed on through this collaborative procurement approach.
The Chair: Some of the provinces have come together, and the Council of Maritime Premiers have worked collectively over the years to try to have procurement have a regional effect for the provincial governments as well. We hope you are working with them to continue to have that effect, because it does drive jobs. It drives good jobs in the regions. It results, I hope, in good prices for the federal government and good services.
Senator Gold: Thank you for being here this morning.
I have an overarching question about the scope of the different programs you’ve described and their possible impact in the not-for-profit and social world. I’ll ask some specific questions, and if you don’t have all of the data at your fingertips — and I wouldn’t necessarily assume you do — perhaps you could provide it to the clerk of the committee when it is available.
There are two related areas. First, what was the total amount of federal funding allocated to grants and contributions programs in the past year, say in 2017, and of that amount, how much was allocated to registered charities and not-for-profit organizations? Within the framework of that question, what is the breakdown between large and small organizations, however you might define those?
I ask because an earlier report, the Voluntary Sector Initiative Report of 2003, expressed some concern that the diversity of voluntary sector was being compromised, if not indeed eroded, as smaller organizations are competing with larger ones that are better equipped both to seek and administer project funding. What efforts are being made to help the less large organizations access these federal grants and contributions programs?
That’s a lot of stuff in one question, but I’m sure you can sort it out. We will benefit from your response. Thank you.
Mr. Lionais: I cannot provide the information for the Public Accounts that are being tabled this fall because they are not yet public, but I can provide what we spent in the past.
We spend about $38 billion a year in grants and contributions funding. About $13 billion of that funding was provided to the charitable sector. Within the charitable sector, the Department of Indian Affairs and Northern Development — the old name — spent $6.4 billion, about 50 per cent of the money that went to the charitable sector. Health Canada spent about $1.9 billion, about 15 per cent, and ESDC spent about $850 million, about 6 or 7 per cent. That’s the main spending that we did in grants and contributions, which is about $13 billion of the $30 billion we are spending. It is about one third.
In terms of large versus small, I don’t have that data at my fingertips, but I will see what we can do and get back to you.
In terms of diversity eroded, that goes to the capacity of the organizations when they are applying for specific programs. The programs will be designed for different purposes. If some departments are specifically targeting small organizations to maintain the charitable sector, that would be a criteria in the design of the program. I can’t come up with an example off the top of my head, but it goes to the purpose of the program. Not all programming is generic; that would just allow large organizations to scoop the funding. Some of it would be structured in such a way to permit the small organizations to apply. Again, I can’t think of a specific example, but it all goes to the mandate of what is being sought in the programming.
Ms. Blain: From a public procurement perspective, in terms of federal procurement, I mentioned that we spend, on average, about $20 billion a year. About half of that goes to small and medium enterprises. Out of the 9,000 suppliers, almost 90 per cent are small and medium enterprises.
The breakdown within the small and medium enterprises is something we don’t track at this time. We don’t have data in terms of the composition of how many of those small enterprises are social enterprises, for example, or other characteristics of the enterprises themselves.
We are endeavouring through our procurement modernization initiatives — and it was announced in the last federal budget — is a significant investment in updating our electronic procurement system. Our e-procurement system will, in the future, allow us to start capturing that data so we have a better sense of who we are doing business with. That information will help drive more targeted policies and initiatives that we are endeavouring to pursue.
Senator Gold: Thank you for that.
The Chair: It would seem to me that the president of the Treasury Board would be interested in knowing the effect it has on small enterprises. The current minister happens to be my MP, by coincidence, and in Nova Scotia, there are many small enterprises that could be participating, and that would be in defence of Treasury Board and Procurement Canada’s mandates. I would suggest to you that having those details would be useful to you as well as to the general public so they know their tax dollars are not just being spent in one place with large enterprises but are having effects at the local level.
Senator Duffy: Thank you for coming. My colleague is carrying Bill C-344 in the Senate. Do you happen to know, on Bill C-81, who is carrying it and at what stage it’s at right now?
Ms. Blain: Actually —
Senator Duffy: That’s something we should know. Maybe Senator Martin knows from her position dealing with government business.
I’m trying to get at the accessibility piece here. We have many small community groups that are very concerned about accessibility. Is there a portal or a one-stop shop to have some of these concerns dealt with?
Ms. Blain: I’ll take the question from a federal procurement perspective. We do have a current portal called buyandsell.gc.ca, which allows all suppliers to access the business opportunities that are available through public procurement. We’re continuously making improvements to make it easier to navigate the portal, but we have heard through annual surveys with small and medium enterprises that it is difficult to find those opportunities through that portal. Our new e-procurement system will allow us to innovate and be at the forefront of new technologies that provide more facilitated guidance through those federal procurement opportunities. But the buyandsell.gc.ca system is currently available and is national in terms of all federal procurement opportunities that are reflected in that.
Senator Duffy: Is this a variation or improvement on MERX?
Ms. Blain: Yes.
The Chair: Senator Duffy, you asked a question of the witness, and the chair will answer the question: Bill C-81 is in first reading in the house.
Senator Duffy: It has not made its way here for sober second thought yet.
The Chair: We’ll stay sober when it arrives.
Senator Duffy: Mr. Lionais, you talked about the $37 billion in grants and contributions. Are you including industrial and regional development grants in that number?
Mr. Lionais: It would be all voted spending within the grants and contributions allocation.
Senator Duffy: So that’s impressive. Basically a third of it, if I’m correct, is going to small community groups?
Mr. Lionais: Charitable organizations.
Senator Duffy: Yes.
Mr. Lionais: Not necessarily small community groups.
Senator Duffy: Okay, so this would include the big national charities as well?
Mr. Lionais: Yes.
Senator Duffy: There was one other thing here, but maybe I will yield while I go through my notes.
Senator Martin: I apologize for being late for your presentation, Ms. Blain.
I wanted to follow up on a question that Senator Gold asked regarding the concerns around the diversity of the voluntary sector being eroded. In addition to that, I was wondering what efforts are being made and maybe outreach and being more proactive from your end, to help the small organizations access federal grants and contributions programs. From what we heard from a witness yesterday, a very hard-working group of volunteers who have a foundation or a charitable organization, they barely have the time to keep their organizations running, let alone understand what programs are available and take the steps to access them and handle the burdensome paperwork that is involved. What efforts are being made to reach out to such groups so that everyone has the opportunity to access these programs, not just the bigger organizations that are organized and have dedicated staff? We’re concerned about the little guys as well, especially when you talk about small and medium enterprises. That’s a pretty broad range. I’m always looking at the small businesses, family-run or organizations that are really just from a dedicated group of volunteers. What efforts are made and what outreach have you done?
Ms. Blain: Thank you for your question.
In terms of effort, at Public Services and Procurement Canada, we do have the Office of Small and Medium Enterprises. Our office is mandated to do a lot of outreach to support suppliers at all levels on how to navigate and do business with government, how to find opportunities, how to prepare for public procurement opportunities and how to prepare a bid. We do a lot of that outreach already. We have offices across all regions in Canada. There is a dedicated effort there particularly focused on small and medium enterprises, diverse enterprises, women-led enterprises and Indigenous businesses to really help them through that process.
But we also recognize that that’s not necessarily enough. We have to look at our own systems to ensure that they are accessible and easy to navigate. As part of procurement modernization initiatives, we have launched a contract simplification initiative. That is an internal process where we are looking at all our contract clauses and conditions and looking to simplify and streamline the process to keep contracts shorter and in simple language. There are some stories we hear where the contracts are quite onerous and difficult to understand. For small enterprises that are not necessarily equipped with all the legal teams and access to interpretation of contract law, this would be a potential barrier to entry into public procurement.
Those are the types of things we are endeavouring to do. That, joined up with a new e-procurement system, should help facilitate more participation of diverse and small enterprises into the public procurement sphere.
Senator Martin: Those are all very good initiatives. Do you also do the how-to outreach in other languages?
Ms. Blain: We do it obviously in both English and French. I have seen some of our material translated I believe in some Asian languages, particularly on the west coast through our Vancouver office, but I would need to confirm what outreach we do.
We do also provide outreach through accessible formats. We provide sign language interpretation when we do outreach with different groups that may require accessible approaches or formats that are conducive.
Senator Martin: I would be curious about your West Coast office. I’m from Vancouver. We have eight heritage languages that our ministry approved. There are growing communities where small businesses are at the heart of community growth. I would be interested in seeing some of the products that you have and what languages are potentially used.
Ms. Blain: I would be happy to follow up and share that information with you.
The Chair: If you could send that to the clerk, he will distribute it.
Mr. Lionais, many of the programs that support the sector are work-related programs. The names and titles of the programs evolve and change over the years. When I was executive director of the Canadian Diabetes Association in Toronto, I had access to a program of support where we hired four or five people who were unemployed. There was a support program to assist us at the Canadian Diabetes Association. It paid for those people and gave them work experience that hopefully led to further employment. Do you measure the success of those programs when you report back to government, for example, you spent $1 million on this program and the success rate was 2 per cent or 95 per cent, or some place in between?
Mr. Lionais: Yes. The Treasury Board Secretariat itself does not measure the success of individual programming, but when the program is designed, the criteria that will be measured, the results, as we call them, are actually identified. Over time, the department measures its achievement against its targets and reports it annually through its departmental reporting. It goes to Parliament every year and is available through websites to Canadians on an annual basis.
The Chair: As governments change and evolve, we should be looking at those programs to see which ones have been successful. In the program I referred to, the people that I hired at that time, at least three of the five people ended up with full-time employment in the charitable sector, not necessarily with the Canadian Diabetes Association, but they gained experience that was marketable for them to find permanent employment.
Mr. Lionais: That’s part of the evaluation strategy that every department does on its programs. They look at how successful the programs have been and how the programs should be adjusted over time.
Senator Omidvar: I have a series of somewhat disjointed questions, so forgive me.
I want to get back to social procurement. You mentioned the efforts are located within your Office of Small and Medium Enterprises. You are working with primarily suppliers who come from different backgrounds. Is there a policy decision or at what stage will you go to the next level, which is asking your big supplier to submit a community benefits plan for a certain proportion of the contract to you as part of the bidding process? That is really what all the efforts on community benefits are focused on, working with big projects in the country and ensuring that community benefits are embedded in their working culture as well and having some success on the subway extension line in Toronto, et cetera. Are you observing those? At what time will you be ready to go from primary school to secondary school?
Ms. Blain: Thank you for your question.
In terms of social procurement, we have a considerable amount of procurement that embeds social objectives and social benefits into the procurements. For example, I can take you through the defence procurements. Through the Department of Innovation, Science and Economic Development, there is the Industrial and Technological Benefits Policy that currently exists. That is applicable to defence procurement. For large procurements that are undertaken for defence projects, there is a requirement to embed an industrial technological benefits aspect to it. My colleagues would be best placed to speak to that program but, in essence, it requires the bidders of large defence contracts to incorporate an industrial technological benefit, so a value proposition, to their bid. That is then assessed as part of the overall bid evaluation. That equates to about 100 per cent the value of the contract. That’s one example. That’s done under defence procurement.
We also do benefits assessments for Indigenous procurement, for example. We’ve done that through the procurement strategy for Aboriginal businesses. That is led by CIRNA right now. Again, they would be best placed to elaborate on their program, but we ensure there are opportunities that are leveraged through the public procurement requirements that support and benefit Indigenous communities most impacted by the procurement.
These are just examples, obviously.
Senator Omidvar: I imagine, then, if they are part of an agreement with different departments, then there is a reporting mechanism that helps us understand whether the promised community benefits are actually delivered.
Ms. Blain: Correct. There are reports generated for both of these programs I just referenced. ISED publishes on their website a report on the industrial technological benefits program, and that is reported annually. It’s the same thing with the PSAB program, the Procurement Strategy for Aboriginal Businesses. There is a report generated on an annual basis that is produced by CIRNA.
Senator Omidvar: Staying on this theme, I’m sure you’re aware of the minister’s advisory panel on social finance and social procurement at ESDC. They have tabled their report. What impact does that report have on what you do?
Ms. Blain: It’s a significant report. It has some very important recommendations. One of those recommendations is one associated with public procurement and how we can leverage public procurement to support social objectives; provide more guidance, training and outreach; and help facilitate the navigation of social procurement embedded into public procurement opportunities. We are working with our partners at ESDC who are leading the effort in developing a government response and government strategy in response to what we’ve heard through that report.
It also aligns with a recent study led by OGGO on small and medium enterprises — women-led as well as Indigenous-led enterprises. They tabled a very comprehensive report in June, with 40 some recommendations. We are in the process of preparing our government response to that recent study.
Senator Omidvar: Could we ask you for two things: one, to get the clerk a copy of the report, and two, to get us your response when it’s available in public?
Ms. Blain: It will be tabled October 18.
Senator Omidvar: That’s perfect timing.
Do I have time for a third question?
The Chair: We have seven minutes left, and Senator Duffy is ready.
Senator Duffy: I’ll yield my time to Senator Omidvar.
Senator Omidvar: My question is to Mr. Lionais. I sometimes find that it’s useful to get to ask a question in the negative. Which recommendations of the blue ribbon task force — and let’s even go back to VSI — have not been implemented?
Mr. Lionais: We have to work harder or more fulsomely on the horizontality. We are not very good at leveraging programs across departments. That is the largest area that we have to focus on, and that’s part of the new policy reset we are exploring right now; namely, how to better tackle this issue of horizontality to make it easier for recipients to have a consistent user experience with the Government of Canada and make programming more readily available to recipients.
Senator Omidvar: Could you also look in your information for this: How much does IRCC spend on grants and contributions?
Mr. Lionais: I don’t have that information with me.
Senator Omidvar: Could you get that for us?
Mr. Lionais: Yes.
The Chair: You provided the committee with amounts allocated under the grants and contributions. Does that figure include all grants and contributions or only those over $100,000 or those in Public Accounts?
Mr. Lionais: Public Accounts include all grants and contributions. What happens is 100,000 and above is listed individually; below $100,000 is pooled.
Senator Duffy: The question I had to ask is about temporary help services. Speaking of horizontality, how has that extended out across the country, this idea of hiring temporary help? New Brunswick had a fantastic program called New Brunswick Works. I’ve lost touch with it now, but it was taking people in vulnerable sectors and training them how to work in an office environment and making sure they got their start. It was a fabulously successful program. Your temporary help project sounds to me like it has the potential to do the same thing for some of these vulnerable people. How has it worked so far in terms of getting it spread across the country, and are the provinces on side as well as the federal government?
Ms. Blain: Thank you for that question.
It is a national procurement strategy that we employ. All departments and agencies have access to that temporary help services method of supply. It’s a supply arrangement.
Through the pilot initiative I spoke about, we have reached out to the diverse suppliers and all suppliers of temporary help services to ask them about how we can embed more deliberately diverse and underrepresented supplier groups into the temporary help services supply arrangement so that they can have more profile and an opportunity to bid on requirements as they come up.
Senator Duffy: How has the industry responded?
Ms. Blain: Very well. There is definitely an appetite and an interest to see that going forward, so we are working through those suppliers. Through the responses we got, we’ve done a lot of outreach through the department. We also have a supplier advisory committee that supports us with advice on how to do our business and how to reach out to the different supplier groups and ensure we can represent as much as possible the diversity of the supplier base across Canada.
Senator Duffy: I have one quick question on the joint procurement agreement with the provinces. Following on Senator Omidvar’s question, which provinces have not joined?
Ms. Blain: I will rely on my memory. I believe Quebec has yet to join. There are some legal aspects they needed to sort out. I think B.C. was also on the verge of joining, as well as Saskatchewan.
Senator Duffy: Thank you very much.
The Chair: Ms. Blain and Mr. Lionais, thank you for your participation today. You have added very much to our debate and answered some of our questions.
As I said to other witnesses, as you watch our meetings evolve, if you see something that you think we missed, if something has changed or if someone has given us information that may not be correct from your point of view, please do not hesitate to communicate that to us via the clerk. He will circulate that to us in both languages.
We do appreciate your time.
We will now hear from the McConnell Foundation, Stephen Huddart, President and Chief Executive Officer; from Miller Thomson LLP, Susan Manwaring, Partner and Leader, Social Impact; and from the Centre for Social Innovation, Tonya Surman, Chief Executive Officer.
Thank you for accepting our invitation to appear. I would invite the witnesses to make their presentations and remind them that they have limited time.
I also want to prepare you that when we get to the question period, you keep your answers short so we can get in as many questions as possible, and I will again discipline my colleagues to keep their questions short.
We will begin with Mr. Huddart.
Stephen Huddart, President and Chief Executive Officer, The McConnell Foundation: Thank you, Mr. Chair and honourable senators, for this important work that you’re undertaking and for the invitation to appear here today.
We live in a time when new ways of thinking, understanding and measuring are illuminating a promising and necessary shift in society’s direction. At the McConnell Foundation, a private national family foundation based in Montreal and working nationally, we work with partners and civil society, government and the private sector to improve community well-being, support the transition to an equitable low-carbon economy and advance reconciliation between Indigenous and non-Indigenous peoples in Canada.
We take a systems change approach to this, a significant shift in the way philanthropy is working and partnering. We employ social innovation and social finance tools to tackle the root causes of challenges, identifying through social R&D promising solutions that we test and then work with our partners to take to scale.
This work is now at an inflection point, and Canada is poised to become a world leader in turning our social and economic challenges into opportunities for inclusive growth. This is the call to humanity that we are here to respond to and, indeed, lead on.
However, to enhance this work, we need to do things differently, beginning with a restructured and renewed relationship between civil society and the public sector. This work is being done consciously with regard to the SDGs and our country’s commitment to realizing those ambitious goals over a fairly short timeline.
An example of this kind of collaboration was the recent process of co-creating recommendations for a Social Innovation and Social Finance Strategy where 17 members representing community, philanthropic, Indigenous, public and private sector perspectives worked together over the course of a year to develop a road map for our future.
One of those recommendations in the report is for the creation of a permanent multi-sector social innovation council to foster this type of collaboration on an ongoing basis.
Further, as noted by several other intervenors, in view of civil society’s contributions to inclusive economic growth, the regulations governing the charitable sector need to be modernized. In our report, we endorse the recommendations put forward last March by the consultation panel on the political activities of charities, of which Susan Manwaring was a member.
Related to this, we recommend the use of regulatory sandboxes, specific time-bound experiments and exemptions to allow development and assessment of new regulatory models. Government’s openness to granting charitable status to media companies, which would allow them to receive tax-deductible donations to support investigative and public interest journalism, is an example of where such an approach might be applied.
A central issue arising from our cross-Canada consultations was the need for new sources of capital to finance social change. We recommended establishing a social finance fund that would use public funds to leverage additional philanthropic and private capital to invest in positive outcomes for communities while generating financial returns. Such a fund could inject capital into existing social finance intermediaries, co-ops, mutuals and so on, financing outcomes, offering loan guarantees and first-loss capital and more, essentially enabling Canada to catch up to the U.K., Portugal, Japan and several other countries that have adopted this approach with very promising results. At a time when donations are declining in our sector in terms of overall amount and the participation of the younger generation, we need to ensure our social sector remains financially healthy. This is one way to do so.
There is also an important opportunity to improve societal outcomes by improving the data capabilities of the social sector. There is a wealth of administrative data being released into the public realm by governments but very little capacity in our sector to make use of it.
We think that the opportunities to better track and report on outcomes, to generate efficiencies and improve social productivity are significant and worth further investment. Our report calls for an initiative to address this lack of an evidence base for policy innovation in order to bridge the gap between research, in which we invest significantly in this country, and practice. There is a large and expensive gap right there that we can help to solve. The U.K.’s What Works Centres provide an interesting approach to this, serving stakeholders and civil society, government, academia and the general public.
On Indigenous reconciliation, while respecting the need for improved government-to-government relations, we believe there is a larger role for civil society to play, building new partnerships between all Canadians and Indigenous peoples. Examples that we work with include the Circle on Philanthropy and Aboriginal Peoples in Canada, the Martin Family Initiative, Indspire and an Indigenous innovation initiative that we are developing in partnership with Grand Challenges Canada.
Each of the 12 recommendations the steering group put forward in its report released just a few weeks ago,on August 31, is designed to complement the others and to support an ecosystem approach. We will only be successful if we can simultaneously address the interrelated challenges of funding, capacity building, use of data, knowledge dissemination, market access — I appreciated the conversation about procurement we were listening to a moment ago — governance innovation and an enabling regulatory environment.
This is an exciting moment for Canada. We are pleased you are looking at the impact of public policy on charities and the not-for-profit sector and that the government is committed to developing a social innovation and social finance strategy. We look forward to your report and are ready to work together on implementing the recommendations that have been developed on our committee.
Thank you for your time today. I look forward to your questions.
The Chair: Mr. Huddart, thank you very much for your presentation. I have been a fan of The McConnell Foundation for many years. We look forward to hearing more from you.
Susan Manwaring, Partner and Leader, Social Impact, Miller Thomson LLP: Thank you for the invitation to appear before you today. It is a pleasure to follow my friend Stephen Huddart. It puts into context the comments that I will have, because in my work, I deal with a lot of organizations that are grappling with social finance, social enterprise and all of these issues in the new world. Often someone will come in with large and excellent ideas of what they want to do, and then I am forced to sit down and try to see how that can fit or be done in the context of our existing rules, which are based on older rules.
My theme and my comments today are really focused on the fact that we need to move forward with modernization. I think it fits quite well, because that is something your committee has been looking at, and I hope it will continue to do so.
We have a strong, vibrant sector. We have to remember that. We often see on the front page of the newspapers, dare I date myself, negative things, but in fact we have quite a successful sector. One of the things that should be done as we move forward with this concept of modernization is to do it cautiously. That doesn’t mean holding back but making sure we are thinking about preserving the benefits of what we have. Organizations are continuing to look for new sources of funding, and there is a need for better rules that will include creating an enabling environment to allow for greater opportunity for social finance and social enterprise. In doing that, we also want to ensure we continue to work with the strengths of our sector.
The provisions of the Income Tax Act should, in my view, be changed — the regulatory provisions that apply — as well as the grants and contributions rules and others that have been talked about. Certainly, they need to be modernized. The rules in section 149.1 that govern how a charity can operate, generate revenues and invest are a patchwork of provisions that have been cobbled together. When reviewed from an overall perspective today, they don’t make much sense. On the one hand, they talk about charitable activities, which, to my mind, means only charitable activities, but on the other hand, they implicitly show that organizations do other than charitable activities. They are completely inconsistent, and that has made it very difficult for charities to do what they need to do and regularly administer. The recent experience in the political activity arena — and, as Mr. Huddart mentioned to you, I was on the panel that made recommendations to the minister about the need for change to the sector provisions — was a classic example of how the rules had been put together over time and didn’t work.
Thankfully, I wish to acknowledge that, on Friday, the government introduced draft legislation to implement some of those recommendations and to deal with that issue. Again, however, is it in the context of the whole provision, or is it a bit of a patchwork fix that, when we look at the whole provision, will not necessarily facilitate some of these funding initiatives and objectives that we could improve if we were to look at the whole provision? The sector is not only registered charities. It is also the non-profit tax-exempt organizations, and they too have been subject to rules that don’t make sense today. They are very old-fashioned and cobbled together.
Modernization is important and overdue. It should enable investment in favour of the public purpose, and it should assist sector organizations to generate revenues to support their activities. A lot of that has been done in the past and can be done today, but things like social finance and social enterprise are not necessarily new to these organizations. They have been innovative and working well to keep themselves sustainable for years, but it is very difficult to do. I would suggest that it is only those that have the resources to access appropriate advice and inputs that have been successful at it to date. That is wrong. We heard this morning about the bias toward larger organizations and smaller community organizations. We need a system that allows them all to access social financing or run a social enterprise that isn’t cumbersome or downright cost prohibitive.
What are the changes required? We need to consider a rethink of the whole system, as I know many witnesses have talked about. Our current system is very much like a closed system. Currently, dollars go into registered charities, and they can never really leave. They can be used by the clarity or given to other registered charities, but they can’t actually be invested and used outside of that system. The rules would prohibit that. If they want to do innovative partnerships with non-charitable organizations or work outside of Canada with foreign NGOs, they are subject to restrictions that fail to allow them to address some of our most serious problems.
In the 21st century, we now recognize that no one entity can solve the issues of the day. We know that collaborations and sharing expertise is key, yet our current system prohibits it. Modernization needs to remove those barriers. It can do this by requiring charities and non-profit organizations to account for the funds they are spending and to demonstrate how their expenses further their charitable purpose without controlling how they do that. Such expenditure responsibility would enable them to have more effective service provision permit making investment in things that are good for communities that otherwise would not have been permitted because they aren’t a registered charity and allow organizations to move forward without unnecessary devotion of resources to people like me and other advisers trying to work around rules that are not enabling.
Enterprising public-benefit organizations know how to generate revenue. They are good at trying to sustain their programming. Modernization should be less concerned about whether they have been successful and are making money to support their programs than about the fact that the funds are used for the programs. We want them to generate revenue, but if it is a lot, that shouldn’t be a bad thing. Under the current rules, if you are too successful, there is a concern you might be subject to regulation.
That brings me to my final point in hybrid organizations. The growing fact about hybrid organizations, which are for-profit entities with social purpose asset locks and public benefit ideas, is that this reflects the fact that the reality from when I started to practise law is no longer the case. We used to think of for-profit businesses as one pillar and registered charities and public community organizations as separate; they were distinct. We created, I think, the policies and rules to govern those sectors distinctly from each other.
Today, the public is demanding that corporations take social responsibility seriously and they are similarly demanding that sector organizations be entrepreneurial and businesslike. The silos have broken down, and what we really need is to facilitate a change that allows organizations to work together, for a hybrid organization to be successful as well in the context of all these organizations, while ensuring that we are controlling against any sort of significant private benefit or other concerns. I think this will lead to greater funding opportunities in the sector.
I think the change going forward should consider options for structural change; it should reflect the 21st century economic environment in our communities in Canada; it should ensure transparency and accountability and trust in the charitable sector. I think the collaborative initiative suggested by Mr. Huddart and other witnesses and the notion of either a special office or a special ministry that can help work to promote social finance and social enterprise in the context of these collaborative efforts would be desirable.
I welcome your questions on any of my comments. Thank you for your time.
The Chair: Thank you for an interesting presentation.
Tonya Surman, Chief Executive Officer, Centre for Social Innovation: Thank you for inviting me to speak here today. I am coming to you with a perspective as a serial social entrepreneur and a community organizer. I also want to echo the comments of my fellow folks here.
The promise of social innovation is that we can solve the most pressing issues facing our society while at the same time figuring out a way to revenue generate. Revenue supports our sustainability, saves government money and creates meaningful work for our citizens.
Like you, we want Canadians to have and build community assets that will serve for generations, but the playing field in Canada favours the private sector, with few supports and many barriers to the charitable and non-profit sector. While other countries are accelerating their social economies, Canada’s social entrepreneurs are wading through quicksand, and this has got to change. I am coming here not with a sense of calm but, rather, with a sense of urgency as a social entrepreneur.
I want to tell you my story. About 14 years ago, the Centre for Social Innovation became the first co-working space in Canada and probably the world. We now serve over 1,000 social mission organizations and over 3,000 people every day. Our members are all small. They create solutions to some of the hardest social, environmental and economic challenges that Canadians face. They generate over $250 million collectively a year, employ thousands of people and serve millions more.
We are a not-for-profit social enterprise. We are also seen as a Canadian success story. Yet, at every stage of our growth, we have faced barriers where private companies would have found opportunities. When we needed capital for our first-ever expansion, we were excluded from government enterprise growth programs because we were ineligible as a not-for-profit organization, so everything we wanted to do to be able to grow our social enterprise was automatically unavailable to us.
To buy our first building, we talked to everyone. The only ones that seemed interested in working with us were the venture capitalists who all wanted to buy us outright. They certainly didn’t want to give us a loan because, of course, we were a not-for-profit organization. On the other side, Infrastructure Ontario considered us ineligible for the exact opposite reason: We didn’t receive enough government funding to be considered eligible for their low-interest mortgages. Finally, we could get a mortgage if we went to the different credit unions available but, to source capital for our equity portion, we had to come up with something completely different. Ineligible on both the for-profit and non-profit sides, we were forced to invent something called the community bond, a tool we were able to use, accessing capital from over 223 community-based investors and private foundations. We bought the building through community-based investing.
We’ve developed digital tools to scale our work and, once again, no one will give us the capital we need to invest. SRED and IRAP, both federal funding programs, consider non-profits to be ineligible because apparently we are not innovative. We have a proven track record of innovation and job creation. What is the problem? Why won’t these programs support us? Non-profits aren’t eligible, so we have created a for-profit to house our digital innovation work. In fact, we have had to create and now manage three organizations — a non-profit, a for-profit and a registered charity — to get the most basic of our work done. Do you have any idea how many boards I have to manage?
These barriers have slowed us down and wasted incredible energy. Despite all of this, we have grown from a $572 surplus in our first quarter to now $10 million in revenue and $30 million in real estate, four locations, 70 staff and 180 volunteers. We employ five people full-time who are considered marginalized, and we have done everything we absolutely can to build community assets for our community, by our community. Just think what we could have done had we had fewer barriers and more support.
Our members face the same challenges, and a fresh generation of Canada do-gooders feel forced into for-profit organizations. As I said, I have the privilege of working with thousands of young start-ups and social enterprises in our spaces. Almost all of them are heading straight into the for-profit sector; almost none of them can we entice into the non-profit and charitable sector. Think of the brain drain happening in the voluntary sector.
The problem is for-profits can’t solve the problems that matter most. A private profit motive can’t solve poverty. Assets that should be in the public and common good are left vulnerable to being bought and stripped.
Building on the recommendations of the Social Innovation and Social Finance Co-Creation Group — which are motherhood issues; there is not a controversial one amongst them — I want to echo and be harder and tougher on this.
First, as a social enterprise, please create a level playing field for social mission organizations. We should have equal access to the government supports that for-profits use. Our regulatory regime should unlock and enable, not create fear and trepidation.
Second, the CRA absolutely needs to be modernized. It needed to be modernized 50 years ago. That said, please adopt a destination of funds test. Don’t try to determine how we can and cannot make money. You have no idea, and we have no idea, where that money might occur. Focus on whether the money will serve our mission. Australia has done it, and so can Canada.
Third, support social enterprise and social innovation the way you would support any sector you want to see grow in Canada. Countless millions go into sophisticated for-profit innovation strategies. Imagine what we could do for our country and our communities with a bit of help for public benefit.
Finally — some people told me to take this out of my comments, but here you go — please stop treating us as if we are breaking the law. The 2 million people who work in this sector across the country are smart, handle multiple bottom lines and sacrifice so much to serve our communities and our country. Please treat our sector with the respect that we have earned as professionals.
Thank you again for inviting me.
The Chair: I, for one, am very glad you left that in your presentation. Thank you very much for that.
I do want to comment, though, that not many people earn putting this word in their title, the Centre for Social Innovation. I think everything you have talked about has been innovative, and you have had to be that. That is a side comment.
Senator Omidvar: Thank you for those wonderful presentations. I want to thank all of you for the work that you do for our country and for our communities. It is wonderful. I have a question for each of the three, and I will start with Mr. Huddart.
For full disclosure, I have worked on social innovation with Stephen quite diligently over the last few years. The Standing Senate Committee on Social Affairs, Science and Technology undertook a study on social finance at my behest and came to the same conclusion you did. However, there is a lot of language around social innovation. You talked about the What Works Centres, the investigative sandbox, innovation and entrepreneurship. Could you tell us a story about where social innovation could really ramp us up on the way to sustainable solutions toward some of our most urgent problems?
Mr. Huddart: Thank you for the opportunity. I’d be very happy to.
Let me take an example from the North End of Winnipeg, arguably Canada’s poorest urban neighbourhood, 50 per cent Indigenous, where close to 20 per cent of all children born are apprehended by the state before they are five years old. Just think about that. It’s an appalling statistic.
Over the past four years, we have been working in collaboration with the Government of Manitoba and the community to run a social solutions lab, a collaborative process that engages parents, elders, researchers, heads of social agencies and the steering committee that we sit on with United Way and other local leaders to explore alternatives to the status quo. Now, keep in mind that the cost of putting one child into state care is between $50,000 and $100,000 per year. It is an expensive and very dysfunctional situation.
This initiative, which is called Winnipeg Boldness, created a series of testable hypotheses for improving outcomes for children and families. I’ll just mention one, which is the creation of a profession of Indigenous doulas, women who accompany vulnerable mothers through their pregnancy, birth and following on to make sure they are connected to community supports and have an opportunity to feel supported through a difficult or challenging time in their lives. The doulas, in the early work, were actually going with community members to the hospital when those mothers were having their babies and saying to the social worker who was there with an order to seize that child, “You do not have to do this; we are here supporting this mother.”
The province is ready to take this to scale with a social impact bond, we hope, to test this working model at a scale that can be measured and that can make a difference. We are now talking about new jobs in the social economy, the opportunity to create social enterprises and to generate better outcomes at an affordable cost for a very vulnerable section of our society. That is a practical example, if I may.
Senator Omidvar: Thank you. That paints a wonderful picture of what is possible.
What changes to the Income Tax Act are required to help foundations and charities play more in the sandbox?
Mr. Huddart: I wonder if I could turn that question to my colleague, who specializes in this area.
Ms. Manwaring: I think that the main one that we’ve talked about or wanted to work on in the past is there is a current inability, if you’re talking about a registered charity, to grant or fund non-registered charities, generally. It’s actually qualified donors, a little bit broader. Often, when you are doing the kind of work that Stephen is talking about, there are a number of different community organizations that may not all be registered charities, so the charity, which may be a foundation or actually doing charity on the ground doing the work, is restricted, because if it is giving its funds or benefiting non-charities, CRA, the Charities Directorate may take issue with it.
If a non-profit is running the social enterprise, if there is an activity that generates revenue, we have these tax-exempt organizations that are intended to be organizations whose primary purpose is not to make people rich but to do something for our community. They are not necessarily a registered charity, but they are like hockey leagues or community organizations. The idea is they generate revenue but you shouldn’t tax it because ultimately there is a community or public benefit. Those organizations are subject to a rule that has been so strictly interpreted as to say, if you make an extra dollar above your expenses, you may be outside and all of a sudden taxable. They end up being restricted in how they feel they can generate revenue. Those are the non-charities.
The foundations like McConnell who want to invest in these initiatives have to either invest as if it is a prudent investment like you might make in the stock market or be worried that they will be considered to be making a grant to a non-charity.
Those rules could easily be opened up. There could be accountability that says, if you make money, like Tonya said, and the destination of that fund is back to the public purpose, it’s okay to have a surplus. Why should we be concerned if we are generating revenue that can help solve some of these problems? If you are dealing with an investment, why does it have to be at the market rate if it is going for a public purpose and the foundation can demonstrate that that is what it is supporting.
Those are the kinds of rules that I think the modernized framework would open up and allow organizations to account for the benefit of what they are doing but not by having to deal with artificial prohibitions that currently exist.
Senator Omidvar: Thank you. That was helpful.
Tonya, that was a fascinating telling of your story. I hope it finds a box in our report. I want you to tell us about the export of this Canadian idea to New York City, and also I would like you to tell us — I almost did this and I don’t remember why I didn’t follow through — your initiative that enables Canadians to invest in your organization through RRSPs.
Ms. Surman: That got taken away, too, thanks very much.
Let me tell you about the community bonds, because they are highly replicable. We met up with interesting interpretations by the banks of Canadian law.
First, let’s go back and tell the quick story. We had a successful business. We were about $500,000 a year. We had a whole $50,000 saved up, which seemed like a lot of money at the time. I thought that should be enough to buy a building. We found an incredible building. I know nothing about finance, just so we know where I’m coming from. We had $50,000 and found this incredible building, and I went to the banks and said, “Can you give me a mortgage?” They hung up on me within five minutes.
I then went to the City of Toronto, my friend Mike Williams who is the head of economic development at the city, and I said, “Will you give me a loan guarantee so I can then go to the bank and get a mortgage?” He said, “Do we do that?” I said, “Yes, you do, Mike.” So sure enough, the city stepped up with a loan guarantee. I was able to take that to a credit union and get a mortgage, but then I was confronted with having to raise an additional $2 million of our own money in order to cover the equity portion of that purchase. And I was like, what does one do?
At the time, I looked to the only asset that I had, which was my community, my relationships and the people who loved what we did. What we did is, with the help of a business adviser and our lawyer, we found an exemption in the Ontario Securities Act that said that charities and — this is where it gets a little muddy — charities and what did they call it? It was something arcane like from the Knights Templar. Anyway, it did not say non-profits explicitly, but we figured we would interpret it as non-profit. We ran a Mack truck through it.
What happened was we created a community bond, which was a loan that a non-profit can issue to a member of the community,and it was backed by the security of the building. But I had to raise $2 million, and I had to do it fast, and nobody had ever done this before. I remembered that my brother had been flipping his houses inside RRSPs. I said, why can’t we offer an RRSP vehicle to let everyday Canadians invest in this initiative? Sure enough, at that time, we could. There were 60 investors for that building purchase, and 20 of us were able to invest through our RRSP, enabling us to make a larger contribution or loan to CSI, Centre for Social Innovation, which then issued at that time a 5 per cent return to that RRSP. So I am actually a holder. I have an RRSP in my own organization, and it’s all going to help support me in my retirement.
What happened on that one was a doozy. The Canadian law is quite clear; you can hold mortgages inside your RRSP. The banks don’t like it, though. They don’t make a lot of money on those transactions, and it was facilitating inter-generational mortgages and they were being thrown out of the business. For whatever reason — and honestly, after two years of research, I couldn’t figure it out. I can tell you I have had way more success changing laws in Canada than changing bank policy. So that was a very interesting story.
We were not able to replicate the community bond when we purchased our second building downtown. What we had to do is we were forced to reduce our minimum investment from $10,000 down to $1,000, which meant it was a lot harder work for us to be able to raise the capital. Now, the good news is by that time the foundation community had come forward and started to step up. But then we had the problem of a PRI. Are we a program-related investment if we are not a registered charity? Depends on who you ask. With all the murkiness, it makes investors and people who want to support this work extremely trepidatious, and it’s only the bold and courageous that move forward.
To answer your second question, our business model has been sought after globally. We open sourced it in 2008, and in 2010-11 we were invited to open up a location in New York City. We have been invited to open up locations in over 200 communities around the world. This is a truly a Canadian export. How does one capitalize an expansion strategy, especially in the digital space, for a non-profit sector? So while we did open up an extraordinary location in Manhattan, and it’s a thriving and dynamic space supporting incredible social entrepreneurs in that country, we have found ourselves confronted once again with ridiculous barriers, unable to find a way to capitalize non-profit organizations. I’m being literally forced to pursue a for-profit model. What is infuriating is I forfeited all personal gain. Maybe I’m crazy. Maybe I should go and become a for-profit entrepreneur, but I made a life choice to have my work and my energy going into creating community assets, but absolutely everything I confront in how I deal with government programming prevents me from being able to serve my country.
The Chair: Thank you very much. I commented at the beginning about the name of your organization having “innovation” in there. The word “innovation” appears in pretty well everybody’s presentation from your side, except for one other organization who appeared before the committee and that’s the CRA. It seems to me that at the end of this, we are going to recommend some innovation at the CRA because the world is changing.
Mr. Huddart, your foundation has been in existence for many years. Have you been able to monitor and somehow codify the changes that have taken place in this digital world?
Mr. Huddart: Well, the lack of data about our sector is another problem. We lost that capacity when changes were made at Statistics Canada, and we are hopeful it is being restored now. We have information from the Responsible Investment Association, for example, showing that in Canada there is about $10 billion invested in impact funds, and we have about 150 of them, many of them very small. I think the evidence that we hear and we see in cases like Tonya’s of innovation being applied in a social context, or indeed in the doula story that I told, it’s really there that we see how social innovation and social finance unlock community assets and creativity and enable us to finance inclusive growth. That’s the connection we need to make. We aren’t talking about a sector that looks after the vulnerable people over there and the private sector is over here making all the wealth. This is a new world we are living in, in which we need to unleash human creativity and aspiration in ways that are not just about one bottom line but about how we work together to create a better society.
The Chair: It’s a fascinating time in the evolution of the sector because of the dynamics.
Senator Duffy: Thank you for coming. It’s fascinating and intriguing to look back over the number of witnesses we have had this week and previously at how you have in some ways synthesized the various messages we have been receiving. A couple of quick questions.
I have a project for you on Prince Edward Island, Tonya, that I would like to speak with you about after this meeting.
We have been told that one of the problems in the old model is boomers getting older, religiosity dropping, the number of donors dropping, and the young people on the block, how do we corral them? It sounds to me like Tonya is presenting that new generation with ideas and opportunities that we could use to get this new generation of people involved in different ways than we have traditionally done in the past.
Hearing all of this and having heard last spring, do we need a minister, an advocate, somebody to go, one, in the government, and two, across the country to make the kind of presentations we’ve seen from Tonya today that says to that younger generation, this is a great country because our forebearers made it that way and we need you to help make it even better, rather than standing idly on the sidelines? Do we need an advocate, someone with stature, to go coast to coast to coast to beat the drum and work inside government to take down those barriers?
Ms. Manwaring: Thank you. I think that’s a suggestion that is worthy, that we find a place to situate this movement as it goes forward that is different than where it is today. It takes me back to Senator Mercer’s comment about innovation at CRA. I don’t want us to forget that we need the innovation at the Department of Finance as well, because the Department of Finance is actually the body responsible for the rules. I want to tie it back to this comment because I think the fact that all of this is embedded in whether it is a tax expenditure, in that context of the charity space, it creates this sort of more restrictive and conservative approach. If there was an office or ministry that had a focus on making it enabling and that Finance work with, that would be helpful.
The Chair: We had a witness yesterday, Andrea McManus from Calgary, who served on the ad hoc committee advising the CRA a number of years ago. She tells stories of innovation at CRA within the tight restrictions they have. I was critical of the CRA, so I want to get on the record that I know they —
Ms. Manwaring: They try.
The Chair: I know they can be innovative, and we need to have the political will to direct them to be innovative.
Ms. Surman: It would be wonderful to have a champion who could go and speak the gospel, but I think it’s already happening. I think the real problem is a lack of clarity of the rules. You can’t attract new, young, incredibly energetic talent and then tell them all the things they can’t do. That’s not what social change looks like.
Right now, CRA has got a non-profit risk. They identified that in their review, a whopping 40 per cent of the not-for-profit was considered offside of the non-profit law. Now, that message comes back to our young entrepreneurial start-ups and they want to make change and do good in their communities and build local infrastructure and local wealth, and then they are told 17 reasons why and how they can’t proceed. So what happens is we simply lose the talent.
I really caution getting excited without changing the fundamental, underlying challenges. I know that this is a 10-year project, maybe 20. I’m begging you, as somebody who will probably never have the benefit of all of the changes you will recommend. Our future generations need more clarity. My son wants to be in this field and grow this work and do this thing, but we are not creating an easy pathway. The charitable and not-for-profit sector are not all old organizations. There is this incredible lifeblood of talent. I feel like we have the opportunity to build the most caring country in the world, and this is an essential step for us.
Senator Duffy: Mr. Huddart, you mentioned in your presentation that you’re interested, the McConnell Foundation, which has a connection to newspapers, or did have, in this idea of not-for-profit newspapers. How do we reassure ourselves that putting money into these dated institutions will not drain money away from innovative, worthy causes? Is there not a conflict there? Mission creep.
Mr. Huddart: I would love to have a longer conversation with you about this, senator, but I think we are at a moment of tremendous transition, of upheaval and changing of the landscape around public interest journalism. If we think that journalism is the oxygen of our democracy, and I think we have some serious questions to ask about the health of public interest journalism, the loss of capacity there is astounding.
We support social enterprise efforts to fill that space. We fund them. We want to see that space grow, but I think we also have to be talking to the business owners, the journalists, the schools and the training journalists about how to come up with a collaborative solution to this problem. It’s not just the tiny new start-ups, valuable though they are, that will solve this for us; they need to be in the conversation.
To go back to your previous point, if I may, rather than a minister, or in addition to the minister and the regulatory change, we need a space to be able to continue and host this kind of conversation. A social innovation council made up of leaders from all sectors ought to be able to set an agenda to deal with questions like this one, to look at how to move from where we are to creating a more generative and inclusive economy.
The Chair: Thank you.
Senator Dasko: Thank you to all of you for appearing today and for your comments, which I found very enlightening.
As somebody who has observed and been part of the charitable sector in terms of being on boards, I’ve always considered the charitable sector in this country to be successful. That’s my perception of it. I’ve never seen it as a failing sector but as a successful one, but I believe you are all calling for what I might interpret as sort of radical change to the status quo. It’s hard for me to look to the future and envision a radical change. I would see incremental change.
That being said, is there any country that has gone through what I would call the radical change that I think you are proposing? Is there a regime in any country that you think we really should adopt, or if not an entire regime, any aspects of their regulation? What is the ideal? Has any country achieved what you would like to see achieved here and why?
Ms. Manwaring: I think the answer is no, there is no one example to point you to. Stephen actually talked about the opportunity for Canada to be a leader. Having said that, I think there are rules in England, in the U.K., where they have opened up the ability to do more social finance and social investing. Certainly in New Zealand and Australia, they have done some work around allowing organizations to be greater advocates and allowing more open systems. There are examples.
But I’m not sure that what we need to do is as radical as perhaps you are hearing. I was trying to get across the point that our sector is successful and does such amazing work and has been innovative for years. One of the things I resist is this idea that innovation is new. I don’t think it is, but I think we are at a tipping point of the breakdown among the for-profit, the charity and the non-profit trying altogether to be committed to social problems. That’s the radical change.
That systems kind of approach to trying to help people who are in need may be radical, but although we want it to be modernized, I’m not sure we should lose some of the basics we have. I think with the examples from the U.K., Australia and New Zealand, plus the work that’s being done and the task force that Stephen spoke about and other work, I think we can make changes that will allow it to behave radically but not lose what is in the system.
Mr. Huddart: As you spoke, I was thinking about the United Way movement in Canada, which has been part of our community fabric for 50 years or more. It is a wonderful, tremendous organization that I think, more than any other part of our sector, has built and sustained a bridge between community and the private sector.
Today, United Ways are struggling to engage new, young donors because the workplace campaigns of yesteryear are no longer as fun, attractive or interesting to employers, so they are looking at digital strategies. Canada actually hosts one of the category killers, a company that is slicing through that whole space and creating a global approach to online employee engagement. It’s a private company, and it’s putting the United Ways on alert that they need a new business model.
In Vancouver, for example, that United Way is proposing to enter the social enterprise space to support new companies coming into being that will address social purposes. They are taking a big risk, but under the conditions they face, they see it’s necessary. In Montreal, we are part of a consortium of foundations that have contributed a pool of funds with which communities can determine their own priorities, set those and are funded out of the community fund. They are doing business model experimentation or business model innovation to try and address the generational shift that’s taking place and the need to continue bringing private sector energy, capability and talent into the social sector.
Ms. Surman: I want to answer your question. It may not be as radical, but it is urgent. The threat here is the privatization of our community assets. This is another whole conversation to talk about what is happening and how private companies are buying out different parts of our health care system. I have a whole list of examples that I can share. I think one of the questions is, why are we losing all of the assets that our communities have built to private hands? Take a look at the churches across Canada. How many churches have you seen converted into a condo? That community asset is lost forever. So the question for you is what is our imperative to be able to help protect communities and to be able to ensure community wealth grows in our country instead of being decimated?
The Chair: We will have one more questioner because we’re running out of time.
Before we do, Mr. Huddart, I remember when I was the spokesperson for a large charity in Toronto that was a member of the United Way. The ongoing struggle of payroll deductions going to the United Way was at the point where it was starting to shift. It is a very difficult story to tell on behalf of the United Way because you are not telling one story; you are telling 20 or 30 stories, depending on how many organizations are members of the local United Way. That is also the good story. The good story is that there is one organization that is servicing all of these usually smaller organizations. I happened to work for a large charity at the time in Toronto, and it was fascinating when you got to tell the story to employees in various companies, how the lights went on, and it’s access to telling the story which is something the United Way facilitates.
Senator Omidvar: I want to further explore the solutions to the moving parts of the profit, not-for-profit and business arena that you have all so eloquently pointed out. It is our job not only to understand the problems but also to propose some reasonable solutions and recommendations. I would like to get your input into dual purpose legislation that would cover the moving parts of these three worlds. As you all know, B.C. has legislation. Ontario decided to pass on it because of fear of abuse. Do you think that is something that we should recommend?
Mr. Huddart: I think this is a really important area. You mentioned B.C. There is also a similar model in Nova Scotia, a hybrid corporation with a lock on the capital that exists for a social purpose. I think this is the kind of example of a blended approach that’s important. Let’s not forget that in Quebec, we have one of the largest and most successful social economies in North America. Almost 9 per cent of our GDP is in cooperatives, mutuals, credit unions and so on, and it’s very successful. It is generating lots of jobs and opportunities. It puts capital to work where it is most needed. I think we have some models to build on, but it’s important to be able to point to those and to develop the narrative, back to Senator Mercer’s point, that we are actually a country that does this well and can do it much better with appropriate support.
Ms. Manwaring: The hybrid corporation is a corporate model, so it’s corporate law that you could recommend be adopted at the federal level. The provinces of B.C. and Nova Scotia have adopted it. It hasn’t been widely used because it doesn’t have tax benefits attached to it. The idea is that assets are embedded for a social purpose. There can be private investment, but there is still a limit on the returns the private investor can get.
I think the experience is that without an incentive — and this is played out as well in the U.K. — like a flow-through tax share tax credit which they use in the mining and exploration and development area to incent people to invest in this kind of hybrid, there doesn’t seem to be as much interest. They are taxable entities. As the system works forward to try to permit organizations to work together and collaborate more, consideration might be given not only to the corporate legislation but also to changes on the tax side that would incent the use of those organizations.
Ms. Surman: We have seen these different processes, of which I have participated in more than one, fiddle on the for-profit side and substantively not do anything to fix what is wrong on the non-profit or charitable side. It is time to do the hard work to solve issues on the charitable and non-profit side.
I want to see an improved destination of funds clarification. That is number one for me. If we can adopt what Australia has already done, that is a great place to start. Let’s look at the difference between public benefit and member benefit non-profits and differentiate between those two. Let’s also seriously consider an asset lock, so that when a community group decides to put something into service of community, that that is a permanent asset lock. Those are my three recommendations.
The Chair: Thank you very much. To all of you, as you can see, we have gone over our time. The committee will chastise me at some point, but I will remind them that it is their questions that put us over. I want to thank all three of you. It has been very helpful.
With us next is our colleague the Honourable Senator Frances Lankin, P.C. Also appearing are Ian D. Clark, Co-Chair, Independent Blue Ribbon Panel on Grant and Contribution Programs, and Patrick Johnston, Principal, Borealis Advisors and Former Co-Chair, Voluntary Sector Initiative.
I want to thank you all for being here. I would remind everyone that you have a time limit in your presentation. When we get to questions and answers, we would like you to keep your answers short and concise. My colleagues will ask the questions in a concise manner.
I want to tell you in advance that at 10 to 12 I will be leaving the chair and Senator Omidvar will be taking the chair as I rush off to another meeting that I am chairing as well, but I will return for this afternoon’s session. That is the trouble with wearing a number of hats here. We will start with Senator Lankin.
Hon. Frances Lankin, P.C., Senator, as an individual: Thank you very much, chair. I thank the committee members for the opportunity to present. I appreciate Mr. Clark and my being asked to come and talk about the blue ribbon panel. I think it is important that you hear about the Voluntary Sector Initiative at the same time. Both of these, in historical context, were initiatives undertaken between the sector and government to get at better results at the end of the day, to understand how the sector worked and the benefit that it brings to the Canadian economy, the people and the public interest and to find ways to support and enable that to take place.
I will talk for a few minutes and then hand it over to Ian about the blue ribbon report.
In 2006, Minister Baird, who was then Chair of Treasury Board, called individuals. There were three of us to begin, and Mark Tellier needed to drop out during the process because of other issues that had arisen that were time-consuming for his corporation. We started with three and set the course of our work. Then Ian and I concluded it when Mark had to step aside for the last part of our work.
This may not sound like it is an exciting topic, namely, the administration of grants and contributions, but we learned a lot as we went through it. With the short time available, I will not go into detail because I don’t think it is the detail you require. We looked at $27 billion of grants and contributions across some 50 different departments and programs and the variety of rules, checks and balances. What we found was a lack of coherence, to say the least. We came to some important conclusions.
You must remember that this is being done in the time of the government coming in on a commitment to greater accountability, efficiency and transparency. Those themes of the early days of Prime Minister Harper’s government were focused on those themes across all departments. When Minister Baird called, he was personally influenced with his relationship with the charitable sector from his time as a minister in Ontario and as a minister federally and the problems they had in dealing with administration and working with the public services at both levels. That is what launched this work.
I won’t speak for Ian because, as a former deputy head of Treasury Board, he had a different perspective than I brought from the charitable sector, but I was amazed at the sectors affected, namely, the small business community, the Indigenous community, academic research communities, social services and health. It was a broad range of investments being made across these portfolios. Over time, a whole lot had been built up on a piecemeal program basis of how recipients — which is the word we used in this report — were treated, what they were asked for or what threshold of risk was acceptable. There was no coherence.
We came to a couple of important conclusions. We needed to shift this to be viewed from the viewpoint of the recipient and that government look at the recipient as a whole. Normally we talk about government as a whole but, in this case, we have recipients who were having some information posited with one program in one department, another program in that same program and a third and fourth program in other departments. All of the information was duplicative. It wasn’t always exactly the same; the forms weren’t always the same. It was administratively heavy.
The kind of accounting that was done did not at all take into consideration the ability and capacity of the organization. For example, was it a small soccer league and a grant through Canadian Heritage or was it a major health charity focusing on cancer? There were different capacities in terms of what they can do from an accounting perspective and from a performance measurement perspective.
There was no key assessment of risk. In fact, it was completely risk intolerant in that any risk was followed tightly because the consequences were not just programmatic and results consequences; there were political consequences in the “gotcha” mentality of opposition politics. No one party is clean of this; everyone participates at different times. There was “gotcha” politics and a “gotcha” media approach that led to stories like the billion-dollar boondoggle which, at the end of the day, turned out to be no boondoggle at all, but I think that Jane Stewart felt that that phrase followed her throughout the rest of her political career and into retirement.
Our focus was focus on the recipient, make it recipient-friendly and streamlined and get government to figure out the sharing of information. I will say from my chat with some deputies of late that that has not been done. Treasury Board rules still create a barrier in sharing of information that would make these kinds of applications for grants and programs more efficient.
Lastly, we made some serious recommendations about ongoing leadership and support. There needs to be support from the centre. This has to be done in departments, and there are always dicey negotiations to take place in terms of Treasury Board and the centre’s role and what the department’s role is. There needed to be coordination and support from the centre. There needed to be rules changes at Treasury Board and an investment in consolidation or similar technologies to allow for a streamlining. We looked to other jurisdictions where this has been done. It is possible.
We set out a number of conclusions. Our conclusions go down to a minute detail operational level, which will not be of as much concern to the committee but I ask you to look at the broad themes of what we were recommending. I think that while progress has been made, there is still a long way to go. Essentially, this fell into a project that was taken on with enthusiasm by some, not so much by others, and over time it just lost its inertia.
The Chair: Thank you.
Ian D. Clark, Co-Chair, Independent Blue Ribbon Panel on Grants and Contributions, as an individual: It is a pleasure to get together after 12 years of working with Senator Lankin on this project. Unlike Senator Lankin, who printed out her copy, I have an original bound copy that I would commend to you and the researchers on the project.
As Senator Lankin mentioned, a lot of work was done beforehand, and this report tried to bring together all of the work from the voluntary initiative. There was a house committee looking at it and special committees. Ms. Echenberg was involved in many of these, so you are well placed to know the history of it, and this brings it together well, I think.
Senator Lankin mentioned that she wonders whether the recommendations are still holding today. We had 32 recommendations. I was impressed with the seriousness with which the senior public service took those recommendations. There were deputy ministers committees set up, a centre of excellence set up and so on. I had a chance to see this in action, spending eight years after that on two audit committees — one in Indigenous and Northern Affairs and one in Health Canada. On the audit committee, there were regular reports on progress on implementing. But it is a very difficult challenge, as we laid out in the report and as Senator Lankin mentioned.
I have tabled a brief, which provides some further thoughts on where we stand now. One of the things I thought might be helpful is to pick up on what we did in the blue ribbon panel, which was engaging the community of scholars who think about these dilemmas. That is basically the public administration and public policy scholars across the country. You have heard from several of them in your earlier witnesses at the committee. I commend the committee for the excellent list of witnesses that you have invited. Reading over the testimony, the website your committee has will produce a very valuable resource as people think about this in years to come.
To try and engage that community and provide particular support for Ms. Echenberg as she helps think through how you will report on this, I have tried to produce a Web page on the Atlas of Public Management, which sets out a case, using this as a live case. Here is your committee. You have three months left to go before you have to produce your report. You have a massive amount of wonderful data. What will you recommend that will move the ball forward and how will you do that? This website I have created distills the best techniques that public policy scholars have used to distill problems and make recommendations on public policy matters.
I have also produced a page called Denman Island Charities, which is about a community I now live in of 1,100 people in British Columbia. It has a vibrant voluntary sector. It is amazing to see these differences of perspective for me as someone who has lived in urban settings and been a public servant. Now I am in a community. Seeing the voluntary activities of the community, I ask the question: What could this committee do to affect life on Denman Island, British Columbia? It is a fascinating question. I will leave that with the committee. Some of these scholars have already commented on it and will use this case or term. If there is any wisdom developed in the public policy schools, you will be able to find it on the website.
The Chair: Thank you very much, Mr. Clark. I can assure you our analysts have access to all of the documents you referred to. They will become part of this record.
I will move now to Mr. Johnston. It’s good to see you again. Welcome to the committee.
Patrick Johnston, Principal, Borealis Advisors and Former Co-Chair, Voluntary Sector Initiative, as an individual: It’s good to see you too, senator, and I thank you and your colleagues for the invitation to be here today.
I will build on the comments of Senator Lankin and Mr. Clark and talk about an even earlier exercise in our history that engaged in an intensive way the federal government and the members of the voluntary sector. That exercise was the Voluntary Sector Initiative that took place between 2000 and 2005.
I have submitted a written presentation where I have provided much more detail on the background of the voluntary sector, so I will not go into that in any great detail at all, except to speak to the issue in particular that you are interested in today, which has to do with government funding.
To make a long story short, the Voluntary Sector Initiative used a unique approach — unique at that time, at least — that we referred to as the joint tables that brought together an equal number of senior federal civil servants with senior representatives of the voluntary sector to pursue a variety of initiatives and issues that were of concern at the time to both the voluntary sector and the federal government with respect to their relationship. That initiative pursued and looked at a variety of areas — everything from the use of information management, to technology, to volunteerism, to strengthening the capacity of the sector, to some of the challenges in terms of the regulatory reform.
I was a co-chair representing the voluntary sector of what was called the joint coordinating committee, which was the oversight body for the VSI. My federal co-chair was Kathy O’Hara, who at the time was Deputy Secretary to the Cabinet. That was a model that was followed at each of the joint tables; there was a voluntary sector lead and a federal government lead.
Interestingly enough, we did not specifically address the issue of funding. We did, however, through the Voluntary Sector Initiative, undertake several related activities that resulted in two particular reports I want to draw to your attention today that bear on the issue of government funding of voluntary sector organizations.
The first one was what was called an accord. Like Mr. Clark, I dusted out my archive and brought a copy of an accord between the Government of Canada and the voluntary sector, signed in December 2001. It is user-friendly and in both official languages. The accord built on the experiences of other countries, particularly the United Kingdom, which had recently developed something called a compact. It was specifically focused on the relationship between government and the voluntary sector. The accord’s purpose was both simple and complex at the same time. It was simple in that it was intended to improve the operation of both the voluntary sector and the federal government relationship for the benefit of Canadians — a simple statement but a complicated objective. The accord identified a series of values, principles and commitments that both the federal and voluntary sector officials jointly agreed were important in terms of underpinning the relationship.
One of the specific outcomes of the accord was the creation of two codes of best practice. One was with respect to policy dialogue, that is, how the federal government and the voluntary sector organizations engage in good, constructive policy discussions. The second, of more particular relevance to your work, was a code of good practice on fundraising. This was never intended to speak to the specific issues that may pertain to an individual ministry or a subset of voluntary organizations; rather, it was intended as a framework that could be used by all voluntary sector organizations and all federal departments to guide their relationship. It also identified a set of values and principles that should guide that relationship. Particularly interesting — and I used some examples in my written submission — it presented and articulated specific commitments that each sector made to each other in terms of how it would undertake the relationship.
The value of that process of bringing people together jointly is that it afforded the opportunity for the federal government officials to sit down with their voluntary sector colleagues who may have been proposing something that was completely out of the realm of the possible. The federal government folks could say, “You know what? We are saying that it simply will not fly.” It was a way of proof-testing. By the same token, voluntary sector folks could tell the federal officials who were talking about a specific issue, “You know what? That will just not make any sense on Denman Island or in communities in which I live. That is not the world in which we operate.” It was a way of proof-testing those recommendations.
Although that report is now over 15 years old, I commend it to you because, in many ways, it is as applicable today, or even more. Because the framework was developed with a statement of values and principles, a lot of those values and principles have stood the test of time. Perhaps they need to be updated or tweaked.
I want to touch on a couple of other points, and then I will finish. With respect to the issue of funding from the federal government in particular to voluntary sector organizations, improving those mechanisms is a necessary but insufficient condition for addressing all of the financing challenges that confront charitable and not-for-profit organizations. Let me use two examples.
I would encourage your committee to also consider the possibility of enhanced tax incentives for charitable giving. Let me tell you why this is important. There are a relatively small number of voluntary organizations, particularly charities, that receive funding directly from the federal government. It is a relatively small number of the total pool of charitable organizations. In my submission, I quote a report that identified that, in 2014, I believe, something like $6.8 billion in federal funding was reported by charities in that taxation year. That is a lot of money, and it needs to be taken seriously. But if you look at the total amount that charities reported in terms of charitable donations by individuals — and this comes from a landmark study called 30 Years of Giving in Canada, produced by Imagine Canada for the Rideau Hall Foundation. If you haven’t seen that, I highly recommend you take a look. It reported that the total amount given by individual Canadians in 2014 was $14.3 billion. In terms of magnitude, many more organizations are more interested in what is happening on the charitable tax side than they are in terms of policies with respect to direct funding. That is one point.
Second, I cited a study done a few years ago by David Lasby that was published in The Philanthropist on charity financing. Again, if you are trying to understand this, I highly recommend that short article. He identifies one of the least understood aspects of the charitable sector, which is the proportion of total revenue that comes from earned income. It is reported in terms of the CRA T3010 form, so it’s easy to get that figure. What do we mean by “earned income”? If you have ever purchased a greeting card from UNICEF, that is earned income. If you have gone to an art gallery or museum and bought something from a gift shop, you have contributed to that charity’s earned income. If you have parked at a hospital parking lot and paid a parking fee, that is earned income. The importance of earned income to charities is huge. The estimate I cite in the paper is that between 17 and 19 per cent of total revenue comes from earned income.
The point I am trying to make here, and I want to build on and associate myself with the comments from the previous panel, is that many charitable organizations have been very entrepreneurial, enterprising and innovative for a long time. This is not new. The language and some of the terminology may be new, but the concept is not new. The fact that there is so little understanding of this fact, to some extent, is the result that charities are so prevalent that they are almost invisible and hiding in front of us. I think the importance of earned income will increase in time. Charities have managed to generate that amount of revenue in spite of, not because of, the existing rules and regulations.
I want to close by, again, associating myself with the comments made by the previous panellists and also the recommendations they cited in the recent report of the strategy group on social innovation and social finance. There are a number of solid recommendations there. I don’t view them as radical. I think one of your colleagues identified them as such. I certainly don’t and I don’t think most people in the sector view them as radical. I think most people would say that they are common sense. I want to suggest that you give serious consideration to those recommendations, particularly the recommendation for the establishment of a social finance fund. One of the challenges is that, with so many initiatives that I have been involved with over time, when they come to an end and reports are produced, they may or may not continue. I think with respect to the changes in social innovation and finance, what is needed is some ongoing mechanism that will act as a catalyst to keep the momentum going. A social finance fund is the perfect vehicle.
I will make a suggestion that has been raised by others. One of your colleagues, Senator Eggleton, has talked about a more creative, innovative use of dormant bank accounts that are sitting on the books of the Bank of Canada. At the end of December last year, the Bank of Canada reported $742 million in dormant bank accounts, sitting there, dead money. If we want to be innovative and creative, let’s think about a use for that fund, perhaps to underwrite the social finance fund. This is not a new idea. This has been done in the U.K. Earlier this year, the U.K. government allocated 330 million pounds, that’s about $500 million, from the equivalent of their Bank of Canada in support of a range of charitable activities.
With that I will close, senators, thank you.
The Chair: That’s what happens when the hire the Bank of Canada’s chairman for the Bank of England. This is a very good idea, Mr. Johnston, and thank you very much for that.
Senator Omidvar: I have a number of questions for each of you, or all of you, as the case may be. Thank you, Senator Lankin, for being here, we appreciate your time. We understand how busy we all are.
I was interested in your comment that just as we talk about the whole-of-government approach and the machinery of government, we rarely talk about the whole-of-recipients approach and the machinery surrounding recipients. I wonder if you can comment on the need for either establishing or enhancing whatever national whole-of-recipient table that exists? Is there a table where the sector meets regardless of size or concentration of work?
Senator Lankin: I’m not sure that I have an up-to-date answer on that. Patrick may know more on that. Within the sector itself, it has always been difficult to amass that, but there are attempts. Imagine Canada has a number of tables they have brought together, and it is representative of large, small, et cetera.
The recipient world is broader than the charitable sector. One of the things I think is interesting in this report is to read the comments that are in boxes — you can find them by flipping pages — from recipients and the business community and the problems that they have in terms of small business operations with the lack of efficiency.
I don’t know that there is a current place where the sector comes together. Where I think we all found value in the voluntary sector accord was not just the initiative and the accord and the recommendations, but the relationships that were built and that were maintained on an ongoing basis. As there are changes in the public sector, there are changes in leadership of voluntary sector organizations, and those relationships break down over time because people move to different places.
It is an important thing for you to consider. I think there is much value out of it.
Mr. Johnston: I would agree with Senator Lankin that there is, with respect to the recipient organizations at least, no single vehicle. To be honest with you, senator I’m not sure there can ever be. One of the great strengths of the sector is its incredible diversity, but that can have shortcomings. Many people will associate themselves with a particular organization. I started my career in B.C. in 1975 as executive director of the Richmond Youth Service Agency. At that time, as a small, one-person operation, I had no sense of there being any other universe other than the organizations I worked with in Richmond. I had no idea there were other youth service organizations. I learned in time. I certainly wouldn’t have associated with a broader set of the umbrella of social service agencies, let alone a national organization. That is one of the realities of this sector. Most of the charitable, voluntary organizations are small, community-based, grassroots, and thank goodness for that, but they tend to be focused on their own particular community and cause. That’s just a reality that I think the sector has to deal with, but it’s an ongoing challenge.
Senator Omidvar: Mr. Clark, our first panellist of the day was the Executive Director of the Costing Centre of Expertise, Office of the Comptroller General of Canada, Treasury Board Secretariat, a place you probably know very well. I have to admit he gave us a sense of comfort that progress is being made. It’s incremental. When I read his submission, I felt it was somewhat cautious but there was progress. He talked about the fundamental change your panel recommended about simplifying processes and ensuring that horizontality exists. They had assessment in 2013, they had a repeat assessment in 2017, and they are going through what he calls a policy reset. They instituted risk assessment procedures. From your point of view, as you have been inside the belly of the beast, so to speak, do you think the government can do more or would you, from your assessment, say this is good progress?
Mr. Clark: Thank you for the question, senator.
I would say I haven’t followed, I haven’t seen, I haven’t read the studies, but I’m looking forward to reading the testimony from this morning. My sense is there has been progress, and I could see that, as I mentioned, from my perch on the audit committees, but it’s the nature of bureaucracies, the nature of government, that over time there is a tendency in a risk-averse environment to put more rules in, micromanage things and make more uniform requirements. Every once in a while, you really do need to get leadership from the top to try to clear that away and get a broader view.
I think this committee’s work is very timely, and I think that the committee, but probably the government, could initiate the kind of thing we did in the blue ribbon panel, which is to get a systematic view — you can do this in an online survey relatively quickly — and get the voluntary sector to estimate what proportion of their time is spent doing administrative things, filling out forms, making applications. Then you can do the same thing for government administrators, not the people who are responsible for setting the rules but the people who are actually having to administer the programs.
What we found in our report was a shocking number to me, as a former Treasury Board Secretariat, that 5 per cent of that $27 billion was being spent by the government in administering the programs. That’s $1.5 billion in just administering the programs. Then from the recipient’s point of view, there were shocking numbers of people saying they were spending between 15 per cent and 30 per cent of their time, and I assume this is through the paid time of the executive level people. That’s way too much.
The challenge for the Treasury Board, now, would be to have another — not a whole independent blue ribbon panel, but an objective analysis and see, test it.
The Chair: The issue of compliance is a very costly thing for a whole bunch of charities I have been involved in. As you start to have to fulfill the obligation of comply and reporting compliance, that costs money, and the question then becomes whether the data that government asks for in the compliance is of use to the government. Do they use the information? The answer is sometimes “no,” and it even goes into another subject with my previous hat on: political parties now have to spend a fair amount of money in complying, and that’s what the public demands and that’s what the public gets now, but it is a cost.
Senator Martin: How much of what you previously collected and gathered is still applicable and usable? I feel that when you talk about the accord and these great documents that already exist, perhaps we could use that as the basis and simplify, because I think we need to do this sooner than later. You sort of answered that to say you don’t need to do the whole thing. I would perhaps like to get a sense of what could be done now to update and undertake a process without having to reinvent the wheel and repeat anything that is already collected and usable now, based on what you have experienced.
Senator Lankin: Without going into all the recommendations, we did group them thematically and in the short, medium and long terms, and an assessment of those recommendations against what has been accomplished wouldn’t take a long time to do, and there might be a helpful place. In the discussion around the onerous nature of reporting, in particular, we found there have been some improvements. People in the sector will tell you that there was marked progress, and then things sort of began to fall off.
Where I think we didn’t get to was in getting the government in all departments to completely rethink the classification of their grants, contributions and repayable contributions, et cetera. We think there are cases where if you match the reporting requirements to the goals that you want to achieve to the capacity of the organization, to accomplishing reporting against those goals and to the nature of the work to be done, sometimes it is a matter of core funding and support to a capacity in a community that has an impact on a whole lot of other pieces coming together because it’s capacity. That doesn’t need to be monitored the same way as against a project outcome and what the methodology was. I think there was not a lot done on that.
There was some progress made on some departments working together in a particular way with Indigenous communities, which I think is a step forward, again, not across all departments but some employment, social development, health, et cetera, work has been accomplished.
One of the things I believe should be checked, as I understand, is there are still huge barriers to the sharing of recipients’ information that they put forward in their applications across departments because of Treasury Board rules. In finding out what is really required, we really believed that there is a way to not centralize everything but to develop one form where all of your tombstone data, et cetera, information is there while another form gets more program-specific. I don’t think you should move away from program-specific, but if you can do most of it through a single portal and report it to numerous funders, that saves a tonne of work just there. There are some things like that they started down the road but didn’t go far enough, and those recommendations are still quite valid.
Senator Martin: Just to comment on the social finance fund, I like that idea, and I’m curious how it was actually established in the U.K. What took place? Was there legislation? I’m curious about that and if there are other examples in other jurisdictions. This idea came up in a way yesterday from one of panellists who is the chair of a foundation run by volunteers, and he said if there were some sort of an incubator fund where groups like them could get a step up, it would make the difference to help grow their foundation to the next level. The social finance fund is a great idea.
Mr. Johnston: Briefly, senator, and I’m far from expert on this, as I understand it, some of the developments in the U.K. — frankly, if there was any country that I think we should be looking at in terms of guidance of things they have done that have relevance and applicability, it is the United Kingdom. The previous government instituted something called the big society initiative, and it was focused on how to strengthen and improve the relationship between government and the voluntary sector. One of the outcomes of that initiative was legislation that was passed in the U.K. in, I believe, 2008 called the Dormant Bank and Building Society Accounts Act that essentially, as I recall, stipulated that the only use of dormant bank account funds is if it was used for some activity in support of a charitable activity. That’s the only way it could be used, and that’s what gave the framework and allowed the current government earlier this year in the U.K., as I say, to allocate 330 million U.K. pounds.
Senator Duffy: I have a question for Mr. Clark. I thank you and your panel for all of your work. I was watching it as it occurred, and then I kind of wondered where it went.
In his mandate letter of November 2015, the Prime Minister wrote the Minister of Justice and in the letter to her he said he wanted her to:
. . . work with the Ministers of Finance and National Revenue to develop a modernized regulatory and legal framework governing the Charitable and Not-for-Profit sectors.
I gather there are bits and pieces happening, but my question is: From your knowledge of trying to shake things up, would this process be assisted by the appointment of a minister or minister of state, who would have a small secretariat, to be an advocate inside for these kinds of legislative changes you have mentioned and other changes that need to be made?
Mr. Clark: Thank you, senator.
My sense is that creating a ministry of state and a minister of state is a well-known, well-tried and largely successful technique for bringing special priority and attention to any area. It just makes sense that if you’ve got a person dedicated to a task around a table, a cabinet table, around any table, and if that person is energetic and has good staff then that file is likely to be moved forward and done better. I would say that would be a positive step for this particular file. I should also say every single good cause in the country would like to have a minister responsible for their good cause. But it is a sign of the priority of the government. If a government was to assign a particular minister, ministry, special staff or anything to the task, it does put a higher priority on it and gives a better chance of success.
Senator Duffy: What about a special operating agency to look after devolving funds to these groups? We’re talking $6 billion, I think. What we have heard from some of the groups who have been here, especially last spring, was that CRA seems to have an attitude that they are the policemen and these people are generally trying to do something wrong or go over the line. It makes them fearful, and we have heard a little bit of that today. Would it not be better, and this might also apply to Veterans Affairs, if we had a group designed to push money out to these worthy causes rather than to act as a guardian that says, “Oh oh, that looks to us to be close to the line or maybe a little bit over the line”?
Mr. Clark: Again, I think the answer is that any time you make a machinery of government change to put a particular tilt on a policy, it will have an effect. I’m not an expert on tax administration in the charitable sector, but I must say as a citizen that it does seem an odd place for regulatory oversight of a sector to be in the tax department. Tax departments have a whole lot of functions and ethos around them that are probably not conducive to innovation and moving things forward.
Senator Duffy: Same with Finance writing the rules?
Mr. Clark: I won’t make any comment about my former colleagues in the Finance Department, thank you.
Senator Duffy: Treasury Board is used to saying no; right?Thank you.
Mr. Johnston: If I could respond to some of the comments that Senator Duffy made: There has been some experience in other jurisdictions and provincial governments in terms of establishing a separate minister and department responsible, and I have to say you would want to look carefully at that experience because it is mixed. One of the arguments against having a separate minister or a separate department with responsibility for the sector is that it absolves all of the other departments and ministries from paying much attention to those issues, even though many of those departments and ministries engage with the volunteer sector. That would be the downside.
That’s not to suggest there are not better ways of structuring that. During the Voluntary Sector Initiative, those of us on the voluntary sector side were arguing for a special cabinet committee on the sector. The government and our federal counterparts, I think, were nervous about that. However, they established what was called a “reference group of ministers.” It was not a formal cabinet committee, but it was a group of ministers who were charged with the responsibility from the federal government side of overseeing what the federal government was doing with respect to its involvement in the voluntary sector. That’s one perspective, and I’ll leave it at that.
Senator Lankin: In the blue ribbon report process, because this was much more operational, we established a group of deputies. We didn’t go to the political level but to a group of deputies referred to as the “vanguard deputies.” It was a group that was committed to trying to drive appropriate changes through their own departments and working collaboratively, which led to a couple of the pilot projects of multi-department funding facing through one window to the recipients in the Indigenous communities’ set of programs.
I think there are methods. I’m not always convinced that a cabinet committee or a minister responsible will get the results for the very reason that Patrick mentioned, namely that this really is a whole-of-government approach that we need. It may be that we’re better to task a group of deputy heads with the driving of the set of values, recommit to the values identified in the voluntary sector accord and update if necessary, recommit to the work on the blue ribbon panel knowing that some progress has been made, but looking at where we fail to make the breakthroughs and put a concerted effort there.
I’m sure that a group of deputies would love to have an opportunity to put their opinion forward about what Treasury Board should do differently. It seems to be part of the culture of the split-and-divide within public services at all orders of government. I would recommend that you give consideration to the sub-cabinet level coordination of work as well.
Senator Duffy: What about the public advocacy role? We’ve heard how the donor levels have dropped off as people age and that the young people are not as interested at this stage in giving to charities as their parents and grandparents. Would there be a role for some ambassador or team to be out across the country making public appearances and raising public awareness, or is what is there already enough?
Senator Lankin: In my opinion, there is lots there already. Is it harnessed to its fullest? I’m not sure. For example, lieutenant governors in various provinces have taken on these roles to highlight the work of certain sectors broadly writ, and there is the Governor General and his or her work on charities. There are ambassadors out there, and there are organizations. In the last panel, The McConnell Foundation made reference to the network of United Ways. Community foundations are another example of groups who do a lot of raising the profile of the issues within communities. There is a lot of that.
If you want to get at the attitudes and what we teach our children, then you are talking about curriculum and a whole bunch of things that you can make recommendations on, but they rest within provincial jurisdiction.
Senator Ravalia: Thank you to the panel. As a citizen who has lived in a rural community for the last 35 years, I was wondering if the panel has any idea of what percentage of charitable funding goes to rural and remote communities as opposed to more urban structures. Are rural and remote communities disadvantaged because they may not have the same linkages in terms of access to funding?
Senator Lankin: In the appendices, you will see the departments and programs and the amount of money they gave. We didn’t do a compilation based on that kind of a taker on location. I would hazard a guess that there are probably greater dollars than the per capita population would suggest, but I don’t think that’s an effective measure because I believe strongly that you have to look to community assets and deficits and work with communities to build what is important for their communities.
As for the rural-urban, in Toronto, where I spent many years working, does a Jane-Finch require more than rural New Brunswick or rural Newfoundland? It’s apples and oranges. You have to bring it down to what the need, program design and expected outcomes are.
Senator Ratna Omidvar (Deputy Chair) in the chair.
The Deputy Chair: Senator, I have a piece of information that I think we got from an earlier witness. Urban charities receive more government funding than rural entities, so it’s in line with what Senator Lankin has said.
We have only a few minutes left and I’m sensitive about time, but since I have all three of you, I want to ask you the question around non-partisan political activities by charities, the Ontario Superior Court decision that is being appealed by the federal government and the proposals for consultations that are out. Do you believe that Canada is ready for the full monty, which is the Ontario Superior Court judgment, that any activity that a charity does is charitable? Or do you think we should be incremental and somewhat more cautious in our approach? I think all three of you will weigh in on this, and I would love to hear your opinions.
Mr. Johnston: I had a chance to review the draft proposals to legislation that came out last week in terms of giving effect to the changes, and I have to say that I am not concerned at all about us being ready to move to a very different way of thinking about the role that charities play in public policy development. Advocacy has a bit of a negative connotation to it, so it’s a word I don’t want to use because it doesn’t have much meaning. I’m not concerned, and I’m also quite confident that the Department of Finance and CRA will make sure that there are rules in place to complement existing legislation and rules that would prohibit any undue and misuse of charitable funds. As I say, I’m not concerned.
Can I make one other comment on a comment Senator Duffy made that I didn’t want to let pass? I’m not sure that young Canadians are any less generous today than their parents or grandparents in terms of generosity of spirit. It is the case that young people, generally speaking, don’t have the resources that those of us of a certain age do. That’s why people of my generation give a lot more because, frankly, we have it and it has been built up over a period of time.
Also keep in mind — and this is something I think the committee wants to consider as well — there are many ways you can give now that have nothing to do with charities or non-profits necessarily, such as Indiegogo, Kickstarter and GoFundMe. That is a consideration too.
The Deputy Chair: I would like to get a response from Senator Lankin and Mr. Clark to my question around non-partisan political activities, and our time is limited.
Senator Lankin: I am generally in agreement with what Mr. Johnston has said. I believe that much of the work that charities are interested in doing and that donors want to see them do — because donors are more interested in impact and outcomes now — requires a fulsome response that engages governments and policy-makers as much as it empowers individual recipients at a program level.
Are we ready? I think there will be some bumps along the road, but I think we can devise rules around it that enable and empower what is best about the charitable sector’s work with respect to small “P” political activity and to limit what is worst about it, which could be partisan involvement in an inappropriate way.
Mr. Clark: I haven’t studied the particular case in detail, but I would like to leave a general plea on a similar matter to this committee. It is vitally important, for the reasons that have been laid out by several people in the committee beforehand, that Canada do what it can to strengthen the voluntary, non-profit community sector.
I hope the recommendations and the actions taken will be such that they will be seen to be long-lasting. That means they will be seen to be non-partisan. That means they will be supported by this government, the next government and the next government. I worry about the partisan activity part. Reading the testimony among you in the committee, you can see there are areas of tension and interest there, so whatever the committee comes up with, try to look for the long term that will last through changes of government in the future.
The Deputy Chair: Thank you all — Patrick, Senator Lankin and Mr. Clark — for your wisdom and insights. We really appreciate it.
Senator Terry M. Mercer (Chair) in the chair.
The Chair: The committee will now hear, from the Rural Ontario Institute, Mr. Norman Ragetlie, Chief Executive Officer; from the Ontario Council of Agencies Serving Immigrants, Debbie Douglas; from the Canadian Women’s Foundation, Paulette Senior, president and chief executive officer; and from the Northern Council for Global Cooperation, Tracey Wallace, executive director.
Welcome all. Thank you for being here. We will now hear your presentations. I remind you that we want no more than five to seven minutes from each of you. After that, we’ll go to questions from the senators, and I will ask that my colleagues keep the questions short. I’ll also ask the witnesses to keep the answers short so we can get as many questions and answers in as possible.
Tracey Wallace, Executive Director, Northern Council for Global Cooperation: Thank you for inviting me to address your committee today. My name is Tracey Wallace, and I am the executive director of the Northern Council for Global Cooperation, or NCGC. We are a network of individuals, organizations and institutions based in Canada’s three northern territories, Yukon, Northwest Territories and Nunavut.
We are committed to achieving sustainable global development that is democratic, just, inclusive and respectful of the environment and all cultures. We take a leadership role in engaging northern Canadians around issues relating to global citizenship, global sustainability and social justice.
Through our public engagement work, we strive to give northern Canadians the knowledge, skill and tools necessary to become active global citizens. We receive funding from the Government of Canada through Global Affairs Canada, and we are made up of a network of non-profit and charitable organizations working both locally and globally.
We’re also a part of what’s called the Inter-Council Network, one of eight councils across the country representing over 400 member organizations working in local and global development.
I’m also a board member of the Canadian Council for International Cooperation, or CCIC, Canada’s national coalition of non-profit and charitable organizations working globally to achieve sustainable human development. With over 80 members, including many of Canada’s leading development and humanitarian organizations, CCIC convenes and coordinates the international co-operation sector in Canada and offers independent research and analysis on Canadian and global agendas and trends.
I’d like to provide a few comments and recommendations. First is that Canada’s competitive advantage includes the strength of its charitable sector, which I’m sure you have heard before. Canada’s charities employ approximately 2 million Canadians and represents $135 billion, or 8.1 per cent of the GDP. Moreover, they represent a core element of Canada’s national identity. When Canadian not-for-profit organizations are empowered to do their best possible work, it benefits Canadian society as well as the Canadian economy.
A precondition of this, however, is a legislative and policy environment that is fully conducive to charities realizing this full potential. We therefore propose two recommendations to substantively improve the regulatory and legislative environment for Canadian charities.
We recommend the need for legislative and regulatory reform by the Canada Revenue Agency to ensure that charities are enabled, in the words of the report, “to fully participate in public policy dialogue and development.” These recommendations are echoed and strengthened in the recent Ontario Supreme Court of Justice ruling in the case of Canada Without Poverty v. Attorney General of Canada. While the prohibition on partisan activities by charities should be maintained, existing guidance is vague and inconsistent and needs to be improved and clarified to ensure that charities can maximize their contribution to Canada’s society and economy.
We recommend that the government develop a process for the charitable sector and government to jointly identify and recommend actions for broader legal and regulatory reform for the charitable sector. Canadian charities are currently governed by common law interpretations of an antiquated statute. The time for thoughtful and comprehensive reform is now. The U.K., Australia, Ireland and New Zealand have recently modernized their frameworks. Canadian charities, including CCIC and NCGC, are eager to work with the government and parliamentarians to develop a vision for a 21st century Canadian regulatory and legislative framework for the charitable sector. This recommendation supports the fourth recommendation of the consultation panel on the political activities of charities and the mandate letters of the ministers of Finance and National Revenue.
Finally, the government announced last August that it would amend the Income Tax Act in its case with Canada Without Poverty to allow charities to pursue non-partisan political activities, but recently it appealed a court decision that struck down restrictions on those activities as a Charter violation. Of course, we have to question why the government is taking this stand.
Thank you.
Paulette Senior, President and Chief Executive Officer, Canadian Women’s Foundation: Thanks to you, Mr. Chair, and the Special Senate Committee on the Charitable Sector for the opportunity to present here today. The Canadian Women’s Foundation welcomes the opportunity to help improve regulations such that charities can more effectively work toward social change and provide funding to those who need it most.
I’ll start with a brief overview of the Canadian Women’s Foundation. We empower women and girls in Canada to move out of violence, out of poverty and into confidence and leadership.
Since 1991, we’ve funded programs in more than 1500 communities across Canada and have become one of the largest women’s foundations in the world. We bring community organizations together to learn from each other, to strengthen capacity and to address the root causes of the most critical issues facing women and girls. After more than 26 years of doing this particular work, we have become a leading organization in Canada’s movement toward gender equality and a leading funder in the women’s sector.
Based on this expertise, there are two key issues I’d like to address for the committee’s consideration today. The first is the legislation that governs charities’ ability to participate in political activities, and second is the regulations that govern eligibility for our granting process.
I’ll start with the legislation that governs charities’ advocacy and political activities. We welcome the government’s commitment to clarifying the rules on political activity and look forward to its next steps toward that particular commitment. The ongoing lack of clarity about what constitutes political activities has left many charities apprehensive about advocacy and fearful of punitive measures. We recommend taking steps to create an environment where charities’ deep understanding of social issues is recognized and where we have a valued role in contributing to policy recommendations that will help build a stronger Canada.
Now I’d like to turn to the second issue, the regulations that govern our granting process. The Canadian Women’s Foundation strives to fund programs that serve women and girls in the communities where the need is greatest, but we’ve run into obstacles because of regulations that govern which organizations can actually receive funding. Our recipients have to be organizations with charitable status or designated as qualified donees by the CRA.
Unfortunately, there are deserving organizations, such as DAWN Canada, which is Disabled Women’s Network which serves women living with disabilities and deaf women, that no longer fall within the specified criteria. This means that DAWN Canada is not eligible for funding directly from us or other foundations and sources of charitable giving bound by the same rules. We can still support DAWN in a limited capacity through its partnership with another organization that has charitable status, but that, you would agree, is not the ideal situation.
The rules governing eligibility are particularly problematic for Indigenous bands that won’t apply for qualified donee status. We’ve heard that bands may disagree with the reporting requirements because the requirements don’t respect principles of Indigenous autonomy and self-governance. The result is that they are required to jump through extra hoops, like having fiscal sponsors. Ultimately, this creates another barrier to secure the support that they need.
The current regulations also prevent the foundation from funding individuals. This means we are not able to support people who are doing in-depth research into issues relevant to our work and who could make valuable contributions to advancing policy or systemic change.
On this issue, the Canadian Women’s Foundation recommends that the committee consider changing the regulations that charities can fund non-profits and Indigenous bands without charitable status as well as individuals who are doing work that is relevant to our causes.
On behalf of the Canadian Women’s Foundation, I’d like to thank the committee for taking these recommendations into consideration. We believe they will strengthen the charitable sector’s ability to address social inequalities, which will ultimately benefit all Canadians.
Debbie Douglas, Executive Director, Ontario Council of Agencies Serving Immigrants: Thank you for the opportunity to speak to you today about the experiences of the immigrant and refugee serving organizations in Ontario.
OCASI, the Ontario Council of Agencies Serving Immigrants is an umbrella organization comprising 234 agencies that work with immigrants, refugees and refugee claimants and with some organizations with migrant workers. While I am here to speak formally on behalf of the council, the issues raised here are shared by our sister umbrella organizations across the country who collectively represent an additional 290 agencies.
The study you have undertaken is critically important to our sector as well as the broader community services sector in Canada, including those organizations that do not have charitable status.
I had planned to touch on three main themes in the five minutes given to me, but our panel before lunch spent quite an extensive time talking about the relationship between government and the voluntary or non-profit charitable sector so I will leave those remarks and will welcome questions at the end of our presentations. I will therefore focus on core funding and charitable status.
There is one document I wanted to bring to your attention, and my apologies that you do not have my remarks in front of you, but it will come under separate cover. I will include copies of the report that was put out last year by OCASI and CISSA-ACSEI, which is a coalition of organizations outside Ontario and Quebec.
Let me start with core funding. I am well aware of the vast gap in how we perceive core funding in the sector and how governments perceive core funding. The sector points out that funding stability is needed to sustain the organization and allow it to be nimble in meeting new and emerging needs and that true costs of our programs and organizational infrastructure are critical to organization sustainability and effectiveness. On the other hand, our friends, the public servants, often respond with scepticism to the notion of core funding of human services, including core funding in the immigrant and refugee serving sector.
Since government first started funding community services for the immigrant and refugee-serving sector here in Canada, and that would be the late 1970s, we have seen report after report from the non-profit sector, from academics and even from government that core funding is essential to help community services and should be resourced.
For example, the federal government’s own 2006 report by the Independent Blue Ribbon Panel on Grant and Contribution Programs agrees that the Treasury Board should identify where core funding is appropriate. The report states:
Not surprisingly, the lack of core funding hasthreatened the stability of several community non-profit organizations whose servicesthe government needs.
You heard earlier, as I said, from Senator Frances Lankin and Professor Ian Clark, members of the blue ribbon panel.
At the time, Vic Toews, who was president of the Treasury Board, promised to implement the recommendations in full, but we are yet to see a plan for full implementation more than a decade later. I know there has been some progress made in various departments. For example, Immigration, Refugees and Citizenship, the federal department that my sector has the most engagement with, moved to multi-year funding about seven or eight years ago, but there are other key pieces and key recommendations that are yet to be realized. Some of these are to encourage the reduction in the number of cost categories in funding agreements and allow recipients greater latitude to shift funds among categories, to identify the circumstances where core funding is cost effective, to supplement project-specific funding and to adopt the principle that funding levels or programs delivered through a third party should reflect the full cost of program delivery. That is probably one of the most difficult issues that we have with government funding. These recommendations are sensible, and they are doable.
We must reach agreement that true cost — and this is where the debate often begins with government — must include all costs associated with moving the mission of an organization forward. A recent article from the Nonprofit Quarterly, a U.S. publication but with relevance to non-profits here in Canada, reminds us that all resources we need to accomplish our programs are true program costs. These include things like direct expenses which are program specific, expenses which are shared across organizational programs, core mission support such as finance, board governance, HR, core mission support which includes fundraising and funding partnership development.
The lack of core infrastructure support from funders, especially governments, often result in agencies struggling to meet their operational costs and at times find it difficult to adhere to labour standards. This must change, and we’re hoping the relationship and how non-profits and charities are funded will be some of your key recommendations.
Charitable status. OCASI welcomes the Ontario Superior Court ruling overturning the limitations on political activity by charities because it is a violation of charter rights of expression. We welcome the federal government’s promise to repeal the 10 per cent rule later this fall. We are, however, deeply concerned that the government has decided to appeal the ruling. While we hope the courts will turn down the appeal, we fear that a win will open the door for future governments to re-establish the limitations or make them even more onerous. We strongly urge to you recommend that the federal government drop the 10 per cent rule as well as the appeal.
I also want to spend some time pointing out that obtaining charitable status continues to be very difficult, especially for smaller ethno-specific and racialized communities organizations. CRA decisions on whether the objectives and activities meet their definition continue to be opaque, seemingly arbitrary and inconsistent. Many small ethno-specific organizations of racialized communities don’t even bother to apply anymore because the application process consumes time and resources that they cannot afford and because of the well-founded perception that the application will be denied. We recommend that CRA find ways to make their decision-making more transparent, fair and consistent and find ways to make the charitable status application process less onerous.
For those organizations, however, who are able to obtain charitable status, they are competing with larger, better-networked organizations. They often lack the capacity of their board to fundraise, including within their own ethno-racial communities. We are suggesting that we explore a targeted tax policy whereby donors who give to charities with budgets under a certain threshold receive a larger tax break, and it’s something that we’re hoping that you will set up.
I like Tracey’s suggestion that we convene a sector government panel to look at some of these issues and to move some of these ideas forward. Having said that, however, I believe strongly that the best way to support small- and medium-sized organizations, charities and non-profits is through direct funding from government.
Thank you. I look forward to our conversation.
Norman Ragetlie, Chief Executive Officer, Rural Ontario Institute: Thank you, Mr. Chair, and thank you to the special committee for the opportunity to provide information today. I’m speaking from the perspective of the Rural Ontario Institute. There are five points I want to make today.
The first is really informational. It’s about the demographic and contextual differences between urban and rural Ontario that have an impact on the charitable sector. I think these are probably extensible across Canada. About 20 per cent of the population in Ontario live in rural communities and small towns. In many ways, rural Ontario communities and small towns are no different than larger centres. The quality of life depends not just on local wealth and sustainable livelihoods but also is made possible by people working together through charitable and non-profit organizations to provide a variety of services and activities.
Broadly speaking, what sets rural communities apart is that people live further apart and often have to drive to distant services in larger centres. Also, by and large, rural Ontario communities have an older demographic than urban Ontario because of out-migration of youth, generally for post-secondary education, and a lack of any substantive incoming international immigration. As a result, rural places are generally ahead of the curve of where Canadian society is headed from an aging perspective. Thus, issues like services for an aging population, business succession and attracting newcomers show up high in our recent surveys of rural municipal councillor community priorities.
Not surprisingly, a preliminary analysis of 211 service calls in Ontario suggests that per capita calls for help in finding services are higher in rural areas. What is not clear is whether this reflects a higher need or, rather, gaps in service availability. However, we do know that charitable organizations are fewer and farther between in rural areas and service delivery is challenged by distance. For example, the proportion of rural residents reporting informally volunteering outside the formal volunteer sector helping non-family members in their home outside of structured organizations is somewhat higher than in urban areas.
Recently, the Rural Ontario Institute collaborated on a project-building awareness of inter-generational wealth transfer with Community Foundations of Canada. Because of persistent demographic out-migration of youth from rural areas, the forthcoming huge inter-generational wealth transfer from the baby-boom generation will also likely see a significant flow of wealth from rural areas to urban areas. Not all rural communities have a local community foundation or hospitals that could retain some of these assets. Mechanisms such as community funds operated by regional foundations offer some opportunities that could be significantly expanded through help from government awareness programs and organizational development resources.
That brings me to the next issue I want to talk about, which is governance and succession challenges, particularly the recruitment board members. We hear again and again of difficulties organizations have in recruiting people to sit on boards and committees. Data shows that people in rural areas have a higher likelihood of volunteering for more than one organization. The reality is there are only so many leaders available and these can be spread thin. The data also show that the way people are volunteering is changing. It’s becoming more event focused or funding-campaign oriented and less oriented at the board and committee level. Governance is a challenge, especially when we talk about accountability in this new hybridized environment of social enterprise and so on.
Given the rural age demographics in this context, we believe it is very important to invest in emerging leaders and to engage youth to build their capacity for leadership. These types of activities need more sustainable funding, and incentivizing the onboarding of youth and subsidizing their training and personal development costs so the charitable sector can continue to have good governance and accountability is one strategy to consider.
The third point I’m going to make is about administrative burden. It’s come up in a couple of other sessions today. I think there are some opportunities to harmonize information collection. Non-profits and charities must often annually file similar paperwork with CRA and/or with provincial ministries. The information collected is often the same but the forms and the processes are not. The Senate committee should explore mechanisms through which federal and provincial governments could work together to simplify this and either share information provided to them or use standard forms. We heard about the proportion of time spent on administrative functions earlier today.
The fourth point I’m going to make is about the desirability of enabling data and information at a granular, regional level. Sample sizes in the General Social Survey are not sufficient to create the granular regional analysis that many Social Planning Councils and United Ways we work with would prefer. Similarly, a current project that we’re doing with the Canadian Index of Wellbeing group at the University of Waterloo is aimed at reporting proxy measures for regional geographies that can substitute for measures that are otherwise available for big cities and provinces from the General Social Survey. This project is funded by the provincial Ministry of Municipal Affairs and Housing as a workaround for the insufficient granularity of the General Social Survey data. We think Statistics Canada should be resourced appropriately to enable robust data collection such that this kind of regional analysis is available.
Last, I want to talk about funding challenges and overhead in grant and contribution agreements. We heard this already, but speaking from our own organization’s experience, where we’ve received funding through many different sources and programs, federal and provincial, some transfer agreements provide for overhead and others do not. This inconsistency should be resolved.
For example, the current Canadian agricultural partnership funding stream, which is fed-prov, does not provide for any project-related oversight or other overhead costs by the applicant. Overhead costs are not amenable to sponsorship or donor appeals and yet are real requirements for charitable organizations’ success and impact. The Senate committee should be encouraging all federal granting activity to incorporate a reasonable maximum overhead cost for projects so charities can focus on outcomes and impact.
In closing, we appreciate the opportunity to provide our insights into these matters for the benefit of the committee. Thank you, and good luck with your important work.
The Chair: Thank you all for very informative presentations. I will go to my colleagues in a moment. You talked about the recruitment of board members being an issue. I live in a very small rural community in Nova Scotia, and recruitment is always an issue for both small groups and the municipal council. It’s difficult to find enough people to fill those spots.
Has directors’ liability become an issue? By way of background, I happen to be the president of a very small residents association for the people who live around the lake I live on. We have to maintain a private road year-round, so we have fees that we collect, et cetera. As I was reviewing our report last week at our annual meeting, I remembered that one of our most significant expenditures every year is directors’ liability insurance. Is this an issue that the small groups you represent deal with as well?
Mr. Ragetlie: Yes. The smaller an organization gets, the higher proportion of their budgets some of these costs take. It gets disproportionate to their activities to some extent. That poses a challenge, for sure. At a certain scale, liability insurance — there are lots of products available for organizations to use, and I think it becomes much less of an issue. It’s a scale issue.
There are some places in rural Ontario where there are essentially collaborative organization relationships evolving so that the smaller organizations actually don’t have to incorporate, get the charitable status and/or seek their own liability insurance. The host backbone organization, if you want to call it that, does all that hard work. One example is the Haliburton County Community Co-operative. There are some 14 organizations that work under that umbrella, and they hold the insurance. They’re trying to innovate and find solutions to some of these governance challenges.
The Chair: The other issue that everybody continues to talk about is the limitations on political activity and the government appealing the decision. I, too, think that they’ve gone too far in trying to limit political activity, but nobody has defined “political activity.” From my perspective, the only political activity that should be limited is the ability of the organization to say vote for this person and not vote for that person. Advocacy is part of what charities do — advocating on behalf of communities, issues, groups — but is there a limit that is acceptable on political activity?
Ms. Douglas: I absolutely agree with you. I would argue that for-public-benefit organizations have an obligation to engage with public policy, to advocate on behalf of the communities that they’re wanting to see better themselves, to give advice or to advocate strongly to government in terms of making social change. Other than big-P politics where an organization is engaged with a political party or where they are directing folks in terms of how to vote, I really do not believe there have to be any restrictions, within reason. We still expect there to be compliance issues and to ensure that people can report out on their activities. But removing any sort of cap on advocacy, which is what the government often means by “political activities,” is the right direction. We are very concerned that the government, although it had indicated that it would want to open up the ability of charities and non-profits to engage in public discourse, is now appealing the decision.
The Chair: Really, it’s change in terminology: Stop talking about political activity and start talking about advocacy. Advocacy is an acceptable thing, but if you could narrowly define “political activity” as “vote for this person or don’t vote for that person,” then we shouldn’t have a problem here.
Ms. Douglas: I agree.
The Chair: Are there any other comments?
Ms. Wallace: I took this paragraph out from my notes, thinking that I didn’t have enough time. Can I just read what I said?
I wanted to say that we need to clarify the rules governing political activity with an understanding that charities make an important contribution to public debate and public policy. Non-profit leaders have long been told that they shouldn’t have a role in the political space, but the fact is that real social change often requires policy change, and there’s a lot that non-profit leaders can do to advocate for the social change they seek. So we need the time and attention of policy-makers and relationships with them to together move our respective missions forward. Essentially, what we need is to be able to spend time with the government of the day to address these policies and issues, which may look like political activity.
The Chair: It’s curious, because I’m a Liberal, which is well known to everybody around here. Over the years, I’ve had to work with Conservative governments provincially and federally, and with New Democrat governments. It’s never been an issue about whether I’m telling people not to vote for them. I will express my opinion in a political campaign. But with respect to getting something done for the community or for an organization that I’m involved in, that’s a common-good issue.
Ms. Wallace: Absolutely.
The Chair: And we forget to talk about the common good too often. We have to be cognizant of the fact that we put bureaucrats in a tough position of making decisions on these things, but they also are getting directions from their political masters that may change from time to time. We need to find a way to define this so that doesn’t happen in the future.
Senator Omidvar: I have a number of questions, but I’m cognizant of time, so let me ask my first question, which is about grants and contributions. You all are recipients, or, in your case, Paulette, you have donee grantees who are recipients of grants and contributions. We heard earlier today from members of the Voluntary Sector Initiative and the blue ribbon task force, and even earlier, we heard from a public official from the Treasury Board of Canada Secretariat. He outlined for us the progress that has been made and the recommendations that have been adopted. I’ll just give you an overview of what he said. They talked about single agreements; simplified funding agreements; centralized websites; digital information; a tell-us-once approach as opposed to a tell-us-many-times approach; the reduction of on-site audits; and risk assessments that are varied by size of organization or funding required. They recognized that they had a ways yet to go. I’d like to hear especially from the three of you — Debbie, Norman and Tracey — because everything we’ve heard so far tells us that size matters. How have these changes been experienced by your communities in your organizations?
Ms. Douglas: It’s been a mixed bag for our sector. Yes, we have seen some collapsing of budget lines, for example. We no longer have to put in proposals on an annual basis for a multi-year program; now, funding is every three years, both at the provincial level and the federal level. However, some of the changes that Treasury Board has signalled have not yet been rolled out.
For smaller and even some of the medium-size organizations, reporting continues to be an administrative burden. If you have funds for three programs, for example, you must report out on all three programs, and this is on top of entering data on a monthly basis based on number of clients. The number one complaint I hear from our service member organizations is the level of reporting and not being clear about what that information is used for. Is it used for program revision and changes? Is it just to show that there’s due diligence being done? The frustration for organizations is: Ask us questions that, with the answer, you can then use to enhance programming, or you can then use to enhance how it is that funding is undertaken.
Some of my member agencies deal with the Department of Heritage, multiculturalism program, for example. So even between departments, you see that there’s a real disconnect. So while one department may be further along in terms of implementing some of these changes that Treasury Board has signalled, others haven’t even begun the conversation with their funded organizations.
Senator Omidvar: Can I ask a supplementary to that? Mr. Clark previously recommended that, as the next step going forward, we should engage in some kind of fact-finding mission that reaches out to recipient organizations and to the government to see how far they have gone in reducing this administrative burden.
Ms. Douglas: Absolutely. And using the Code of Good Practice on Funding from 2001 as well as the blue ribbon panel as foundational documents so that we’re measuring against something.
Mr. Ragetlie: From our perspective, the level of reporting and monitoring activities hasn’t fundamentally changed much. I can’t say that it has diminished. It changes. The shape and form of the expectations change, but the level of it hasn’t fundamentally changed. I would say there’s quite a difference in the application side of different programs. Almost every time you have to put in all your objects and produce the information on who your board of directors are. There’s a whole bunch of standard tombstone information pieces that every part of government asks for again. By now, it’s all PDF files and we can send it all electronically. It just has to be done again and again and again. I do think there are probably new ways to create a repository of that kind of information that would take that part of the equation out. It’s connected to our accountability anyway. It’s not something that will be difficult for our organization to do, but if we can only do it once, that would be great.
Senator Omidvar: I’m going to change tracks a little and talk about what we’ve heard in the last two days, and that is the almost unanimous calls to increase the incentives to increase charitable giving. There’s history to this. The changes made earlier, I believe 2014 or 2013 or even earlier — I’m not sure about the date — enabled the donation of publicly held securities to charities. A huge amount of money was released into the charitable sector. But I am concerned again about where this goes. The evidence tells us that most of the money goes to elite institutions.
I want to know from you: Would you support increasing charitable incentives? The proposals are relating to the sale of real estate and to the donation of privately held securities. Will that make a difference to your bottom line?
Ms. Senior: Perhaps I can start. As an organization that’s squarely focused on the achievement of gender equality in Canada, I would have to say an emphatic no, because we don’t find those are the kinds of funds we necessarily attract in terms of the work we’re doing across the country. We don’t see that that would make a big difference to us. We are a fundamental support to women’s organizations that we fund across the country. Even though we’re fairly large in comparison to similar organizations around the world, we still struggle to be able to attract the kinds of funds we need, particularly from major donors, to be able to impact and fund highly needed organizations, grassroots organizations across the country. So, no, that would not make a significant difference to us.
Ms. Douglas: I would have to agree. For the majority of the agencies that work with immigrants and refugees, those dollars don’t trickle down. Those dollars tend to go to the hospitals and universities and not to community-based organizations.
Senator Omidvar: What about rural organizations?
Mr. Ragetlie: I do think it might make a difference. There are considerable assets in rural communities that we know are going to be considered as part of estate planning and so on, and if the rules incentivized charitable giving, we would probably see more of that coming into the sector. The data shows that income does correlate with the size of gifts and that, as people age and they’re wealthier, they give more.
When we think about the engagement of youth in the charitable sector, which has come up in a variety of levels, there may also be a need to recognize the volunteer time that youth can contribute at a time when they don’t necessarily have the dollars to give and in some way incentivize that. I don’t know if that can be connected to tax rules, and perhaps it’s a limited form of their volunteer time if they’re formally on a board, but that might deserve some exploration. Maybe there’s a table or sub-table where the details of that could be looked at. That’s an element of the giving that isn’t recognized currently in the tax system.
Ms. Douglas: When I looked across Ontario at my member agencies, I think out of the 234, there’s probably one organization that would benefit from capital gains tax increases. For the rest of the organizations, even organizations that are considered to be large settlement organizations in Canada, they don’t attract those donations.
Senator Omidvar: I’m going to ask my final question in a very tight manner because we have other senators. I’d like to shift gears to talk about governance. You have brought this up, Mr. Ragetlie, and others have a point of view on this as well. I would like to know whether or not Canada’s diversity is appropriately reflected in the governance bodies of our not-for-profit and charitable organizations and whether you think it is time to gather that information through the T3010 using employment equity definitions.
Ms. Douglas: I think that we have made great strides. There are many communities and many larger non-profit organizations, like hospitals, which have been paying attention to ensuring that their governance structure reflects the folks who are using the services.
Having said that, I think there is still so much to be done. I come from Toronto. When I look at the hospitals in Toronto, for example, a hospital like Women’s College, which has a particular value system, they are proactive in reaching out. I am not sure that is true of all of the larger hospitals across the city or across the province.
I am big on collecting disaggregated data. I think it drives us forward in terms of positive changes. I would absolutely encourage that, and that kind of data in terms of the governance structure, who is in these kinds of institutions, can only help. We need to get into the practice of collecting this kind of data to taking a look at issues of gender and ethnicity and race and ability and those identifiers. I think it’s important for us to pay attention to the governance piece.
I know this isn’t your question, senator, but I think we also need to look at the need for governance training for some of the smaller ethno-specific organizations. If they are ever going to be able to compete, we have to strengthen their governance capacity.
Ms. Senior: I would agree with what Debbie has said. I would add that I think it depends on who is leading and the decision makers around the table. I think the intention is there. The results are not necessarily robust. There needs to be some sort of accountability measure that organizations need to embrace and probably report into in order to reach a particular mix or diversity mix on their boards, because I think without that it really comes and goes and ebbs and flows.
Senator Duffy: I have a quick follow-up on the question of advocacy. Would you have any limits on advocacy?
Ms. Douglas: This has been coming up in the last couple of weeks in particular. I work and live in immigrant and refugee communities, and we know there are growing sentiments, an anti-immigrant sentiment, anti-Muslim sentiment. As a society — paying attention to free speech because I keep getting that every time I talk about this — we will need to pay attention to the kinds of activities and figure out other ways other than a cap on charities being able to engage in the public space.
Senator Duffy: Would you allow charities to directly give money to political parties?
Ms. Douglas: No.
Ms. Senior: No. For me, the limitation that needs to be considered is to ensure that the advocacy is related to the mission of the organization. There has to be a purpose for it, and it has to link back directly to the work they’re doing that serves the clients they’re serving.
Senator Duffy: Super. That’s very helpful.
Ms. Wallace: We come back to the definition of “political activity” and how the work you’re doing is driving the mission of the organization and not a political agenda.
The Chair: I believe that the definition is extremely important because what I think we need to do is codify the definition of “political activity,” not just to make it clear to charities and participants in charities but to protect the public servants who are responsible for supervising this. Because if you don’t define it, then someone is going to say, “This is a political activity,” when it may not be. We need to codify it so public servants can go about their business of supervising and doing their job as public servants, not having to make decisions that may be influenced by their political masters. Those political masters, as we know, change from time to time, as do the attitudes of the political masters.
Senator Duffy: My only other question related to a document I keep referring to. I don’t know if you have heard of this, or whether it’s in play. I certainly hope it is. It is the mandate letter from Prime Minister Trudeau to the Minister of Justice, Jody Wilson-Raybould, written November 15, 2015. In one of the paragraphs, he’s calling on the minister to work with the ministers of Finance and National Revenue to develop a modernized regulatory and legal framework governing the charitable and non-profit sectors. It seems to me this is a signal from the very top of the Government of Canada that they want to see change, and I hope that in your communications with the people who are involved in regulation that that message has gotten through to them.
Ms. Wallace: We could also add that we jointly develop this regulatory framework, that we’re involved in that development.
Senator Duffy: Have you heard about this?
Ms. Wallace: We’ve heard about the mandate, of course.
Senator Duffy: Oh, good. Have you seen any sign of it being picked up other than what we saw last Friday?
Ms. Senior: Other than the court decision, nothing.
Senator Duffy: Well, we’ll inspire them onwards and upwards.
Senator Dasko: As a survey researcher, I’m delighted to hear the call for greater sample sizes on the GSS. I never thought I’d hear that here. Wonderful.
I have one question for Debbie. You talked about how hard it is to get charitable status. Do you think we should move in the direction of being more explicit with the criteria? Should we expand the criteria? Or is the issue really the burden of applying? What should we be doing? I think you were suggesting certain kinds of organizations are not even applying for it. What should be done here? What’s the real issue here?
Ms. Douglas: I think it’s both things. The system is so opaque, and I’ll give you an example. From time to time, OCASI incubates small, emerging organizations. After both organizations applied for charitable status on their own, they were both refused, so we had to find them legal support. One is an organization that’s looking at the historical landing of immigrants in Toronto, the Ward Museum. The other is a small organization who works with children coming out of war and/or refugee experiences. The Ward Museum was successful. The refugee children wasn’t and had to apply for a third time. Both had really good legal support. No explanation other than that they were turned down. Their objects are clearly about public education. In the case of the refugee children, it was an art play program. The system is too opaque. It feels as if there’s great discretion for whomever has the application in front of them, and there is no explanation.
I am not sure that more information is the issue. We need to simplify the system. We need CRA to report out on why some folks get turned down and others don’t, transparency.
Senator Dasko: Why they’re turned down and what are the criteria.
Ms. Douglas: Yes.
Ms. Wallace: I would just add to that, not only applying for CRA but also applying for grants and to the government, and when an organization is turned down, a really great response back on why or why not they were successful. If a smaller organization, especially, puts a great deal of effort and time into developing these proposals for agreements and for grants, when you’re turned down, it’s just dispiriting.
Senator Duffy: A small charity in P.E.I. contacted me last week. He said, “What are the magic words?” Because they had been rejected.
Ms. Douglas: One of the things we’ve been encouraging government funders to do whenever there’s a call for proposals is to have a series of conversations with potential grantees so that everyone is getting the same information. When we ask these questions, these are the kinds of answers we’re looking for in terms of the magic words. You’re right. People are paying limited resources to someone to complete a proposal and then having it turned down without knowing why it was turned down.
The Chair: Thank you to all of you. This has been very informative and helpful. It’s very important for the committee to make sure we’re not talking just to large organizations, that we’re talking to small organizations, some struggling to make their way in this world. It’s important that we hear your message and that we ask that question of everyone: Are there acceptable limits on political activity? Because that will be a very important message to send to government. Yes, we understand that we’re not to be campaigning for candidate X or candidate Y. As I continue to say — maybe it’s because I’m the son of a public servant — we need to protect the public servants and say, “Hey, here are the guidelines,” so they don’t get into a position where they’re making decisions and are not being influenced by their political masters, rightly or wrongly.
Honourable colleagues, we will now hear from our next witnesses. From Employment and Social Development Canada, we have Catherine Scott, Director General, Community Development and Homelessness Partnerships Directorate; from KPMG, Tania Carnegie, Chief Impact Officer, Leader, Impact Ventures and Former Member, Social Innovation and Social Finance Steering Group; from RBC Wealth Management, Ms. Susan McIsaac, Managing Director, Strategic Philanthropy; and Mr. Wayne Chiu, Co-Founder of the Trico Foundation.
Thank you for accepting our invitation to appear. As you may have noticed before, we will go to questions after presentations. We ask that you keep your answers short, and my colleagues will keep their questions short. That way, we can get in as many questions as possible. Mr. Chiu, I think we’re starting with you.
Wayne Chiu, Co-Founder, Trico Foundation: Thank you, Mr. Chair.
I am the CEO of a company called the Trico Group in Calgary. We as a company have a unique culture called “doing well by doing good.” That was in the business world. My wife and I created a public foundation about 10 years ago. We tried to bring the idea to the social sector, and at the same time, we tried to promote the idea of social justice as well. As a result, the Trico Foundation focused on social entrepreneurship, which to us is just a fancy label for what I call “doing well by doing good.” By doing well by doing good, not-for-profits can solve social problems while generating sustainable market revenue. We suggest that they can be better at solving social problems because they are generating sustainable market revenue.
Not only has this opened up the possibility of more sustainable non-profits, but it opened up the possibility of scaling those organizations or their solutions. In turn, scale opens up the possibility of system change. Any system change opens up the possibility of solving our social problem once and for all.
The Trico Foundation believes that fully understanding and tapping into the power of doing well by doing good is one of the most promising ideas of our time. That is why we are dedicated to making that promise a reality. We’ve always maintained that doing well by doing good is just one tool in the toolbox for solving social problems.
I would like to describe some of the programs funded by our foundation. We have engaged in a wide array of funding initiatives to support the capacity building of social entrepreneurship in Canada. For an event, we brought the Social Enterprise World Forum to Canada in 2013. We have supported the Social Finance Forum in Toronto for many years. We have also supported the Map the System — Canada final in the last two years and the Canadian Community Economic Development Network national gathering as well in 2017.
We support infrastructure. We recently helped fund Trico Changemakers Studio at Mount Royal University in our hometown of Calgary. They focus on teaching social enterprise, social innovation as well as social entrepreneurship.
We support social finance. In addition to supporting the Social Finance Forum, we were an early supporter and funder for the New Market Funds in Vancouver.
We support organizations that support social enterprise. We have provided multi-year funding Futurepreneur and Jane Goodall’s Root & Shoots program in Toronto.
Regarding social enterprises, we have directly funded some of the leading examples of social entrepreneurs, including some in Toronto, includingJump Math, Fogo Island Inn, Furniture Bank, EMBERS Staffing Solutions, TurnAround Couriers, Mission Possible and Potluck in Vancouver.
We support research. We helped fund the first provincial surveys of social enterprise, albeit with a not-for-profit bonus, in Alberta. We supported the first non-profit social enterprise survey in Canada, and we have commissioned case studies on nine of Canada’s leading social enterprises.
All told, these efforts amount to millions of dollars in funding over the last 10 years from us.
I have also been asked to comment on the progress we have made in closing the gaps in society. It is a crucial question and one that has been very much top of our for me, my staff and our board for many years. We do know that the categories I just listed are important to any field, and we have looked into organizations we have funded, it is clear that they are doing well by doing good.
One good example is in Vancouver, an organization called EMBERS Staffing Solutions. In 2015, we learned that in working with people with a number of employment barriers, EMBERS has, since 2008, employed 2,200 people in a day labour service. Of the 2,200, 1,100 have gone on to full-time employment. As well, EMBERS is a not-for-profit, increasing their revenue by over $2 million in a 12-month period.
So we have done some good here and there and have helped some lives. While that is important and must be appreciated, we will not have closed the widespread gaps in society that the world needs until we truly shift the power of the market for good, pushing towards the transformation of capitalism to make the change. We advocate our government to allow not-for-profits to generate revenue themselves, not to hinge so much on the charity law.
Our foundation decided and continues to work on trying to push the government to allow the not-for-profit, based on good governance practices, to continue to make money to help the organization, to help the underemployed at the same time as helping to generate revenue for the organization. At the same time, I believe, in a business sense, that this is able to increase employment in Canada as well.
We are now in the process of developing a curriculum so that we are able to share what we have learned over the last 10 years from the perspective of helping social enterprise close the gaps in society. We are also hopeful it may just help to push the transformation of capitalism that we need.
Thank you.
Catherine Scott, Director General, Community Development and Homelessness Partnerships Directorate, Employment and Social Development Canada: Thank you Mr. Chair and honourable members of the Senate, for inviting to us appear here today.
My name is Catherine Scott. I’m the Director General of the Community Development and Homelessness Partnerships Directorate at Employment and Social Development Canada. My directorate is supporting the joint mandate commitment of the Honourable Jean-Yves Duclos, Minister of Families, Children and Social Development, and the Honourable Patty Hajdu, Minister of Employment, Workforce Development and Labour, to develop a social innovation and social finance strategy for Canada.
I am here today in my capacity as the co-chair of the former social innovation and social finance co-creation steering group, and I am joined by Tania Carnegie, Chief Impact Officer, Leader, Impact Ventures and Former Member, Social Innovation and Social Finance Steering Group, KPMG.
[Translation]
In June 2017, the 17-member Social Innovation and Social Finance Strategy Co-Creation Steering Group was appointed by Ministers Duclos and Hajdu with a one-year mandate. The group was responsible for guiding the development of recommendations for a Social Innovation and Social Finance Strategy for Canada, and for examining federal laws, regulations, and policies that have an impact on the ability of community organizations to participate in social innovation and social finance initiatives, among other issues.
[English]
Throughout our extensive consultations over the past year, we heard from a number of social purpose organizations that are creating social and economic value in their communities.
For example, Atira Property Management is a social enterprise in Vancouver that provides property management services to developers, building owners, investors and other not-for-profit and co-op housing providers. Through Atira Property Management, hundreds of women and men facing significant barriers to employment are able to find jobs.
By supporting and enabling the work of social purpose organizations, we can advance social and environmental objectives to create stronger and healthier communities for Canadians.
As you’re aware, in August 2018, the report of the steering group was publicly released by Employment and Social Development Canada. It includes 12 recommendations that propose the ways in which social innovation and social finance could be incorporated into a comprehensive federal strategy to build more inclusive and prosperous communities and, in doing so, improve the lives of vulnerable Canadians.
Designed to be acted upon together, the recommendations would deliver new tools, resources and approaches to enable communities to tackle persistent and complex social challenges.
The government is currently reviewing the steering group’s report to inform the development of a federal strategy on social innovation and social finance.
Tania Carnegie, Chief Impact Officer, Leader, Impact Ventures and Former Member, Social Innovation and Social Finance Steering Group, KPMG: Throughout our consultations, we heard about a number of barriers preventing community organizations from reaching their full potential. Those which we thought might be of particular interest to the committee were barriers related to funding, capital and public sector procurement.
Regarding federal funding, we heard a great deal about how government granting practices could go a long way toward stimulating social innovation in communities. In particular, we heard that charities and non-profits want to spend more time testing out new ideas to meet their missions than on burdensome applications and reporting processes, and they want longer-term funding arrangements that recognize the time and resources required for innovation to occur and its benefits to be realized. The report includes innovative funding criteria that we recommend the Treasury Board Secretariat incorporate into their work to renew the policy on transfer payments.
Organizations also asked the government to use its purchasing power to support charities and non-profits by ensuring that procurement opportunities are open to the sector. The steering group recommended that the government incorporate social procurement guidelines, tools and training opportunities into its focus on procurement modernization, building on existing pilots and supplier diversity initiatives.
During our consultations, organizations encouraged government to accelerate growth of existing and emerging social finance investment funds. Therefore, the steering group recommended that government create and invest in a social finance fund. By making long-term, strategic investments and by incentivizing and leveraging public, private and philanthropic capital, we heard that government could improve access to capital, such as loans for social purpose organizations working to address persistent social or environmental challenges.
The steering group heard that social purpose organizations need to have access to the same type of innovation supports that other sectors benefit from and that government rethink its approach tackling social challenges and to work to mainstream social innovation and social finance into the way it does business.
The steering group recommended that access to federal innovation, business development and skills training programs be improved.
The steering group expressed strong interest in the government pursuing innovative approaches to address persistent social challenges, calling for a federal strategy that does four things: First, it should focus on improving outcomes and quality of life for people in vulnerable circumstances; second, it should align and reinforce other federal programs and initiatives; third, it should improve the capacity of government and practitioners to deliver existing programs better and to enable innovation and collaboration with diverse partners; and finally, it should help create a coherent ecosystem, including access to business supports, capital, markets and knowledge and enabling legislative and regulatory environment.
In closing, the recommendations of the steering group’s report reflect social innovation and social finance activity that is already happening across Canada, and it is already being supported by governments around the world, in the form of a made-in-Canada approach. The recommendations serve to level the playing field and forge new relationships between the federal government, charities and non-profits, and to present an important opportunity to unlock innovative approaches to improve the well-being of Canadians and to demonstrate Canada’s leadership.
We would be pleased to answer your questions. Thank you for having us.
Susan McIsaac, Managing Director, Strategic Philanthropy, RBC Wealth Management: I thought I had only three minutes so I’m going to speak slowly.
Mr. Chair and honourable members of the committee, I want to thank you for the opportunity to appear before you today. I am an employee of Royal Bank but have spent well over two decades of my career in the charitable sector, and it is that experience and passion that I bring to you today.
The United Nations has set 17 sustainable development goals to address the most intractable problems of our world. In my view, some of the most creative and impactful efforts to meet the challenge of those goals are happening in charitable and not-for-profit organizations. It is a sector of talented and committed individuals, but it is plagued by scarcity of resources, human and financial.
Funding from government and the private sector is often tied to programs, with little available for operational improvement, innovation, research and development or scaling of new ideas. There is almost no risk capital available to most charities. Additionally, there is growing appetite among funders for proof of outcomes and impact, work that we know is labour intensive and sometimes manufactured.
The work of fixing decades-long issues is slow and requires complex solutions and collaboration. To be fully effective, the sector needs government as a collaborator, supporter and ally in policy, in programming and in practice. Specifically, there is need for enhanced funding opportunities and new approaches to enable this important work.
There are three specific recommendations that I’ll make to you today. The sector needs access to funds such as are available to the private sector, including debt financing, loan guarantees, venture capital, equity investments, insurance products, start-up funding for social enterprises, early stage support for research and testing of new and creative approaches. These alternative revenue channels allow innovation and scaling up, where appropriate. Moreover, there is an investor population that will respond to such opportunities and many traditional philanthropists are increasingly interested in supplementing their charitable giving with these mechanisms. I am also witnessing a wave of next generation philanthropists and activists that will approach their commitment to community with this investor lens. I encourage the federal government to support the creation of a marketplace for these kinds of financial opportunities and facilitate the collaboration of all three sectors in operationalizing it.
My second recommendation is focused on a different area of available capital, and that is the immense aggregate of capital residing in charitable foundations across the country, both private and public endowments. The current disbursement quota of 3.5 per cent is, at best, modest. I urge government, either by policy or by incentive, to encourage the optimization of this capital, putting it to work in communities on issues of housing, environment, mental health, health and youth, to name just a few.
My third recommendation is that government support the capacity building of the not-for-profit sector to partake in these revenue channels. The sector is often unable to lift up from their daily operations to identify mid- and long-term opportunities. Most will need process and people that will help them to leverage new tools. Innovation hubs, such are available to start-ups in the private sector, would be embraced by many of the clever leaders in the charitable sector.
As an addendum to this recommendation, I must add my strong view that both application for funding and reporting requirements should be streamlined, freeing up time and thinking capacity on both sides of the funding relationship.
I encourage government to use your policy levers, financial resources, data and immense public influence to create new financial instruments, free up and optimize large stagnant capital, support the not-for-profit sector to become more financially literate and agile in their work, and to incite and mobilize Canadians to invest in our future.
Thank you for your time and consideration.
The Chair: Thank you very much. You have presented some very interesting arguments.
You talked about procurement opportunities and about making sure that they are open to members of the sector. I’m trying to do the linkage about what that means. With procurement, of course, you are purchasing something, and most of the people we are talking about in the charitable sector are in a not-for-profit mode. Are there examples that you used when you made that statement?
Ms. Carnegie: Most certainly. There are a number of social enterprises across Canada that are in a position to be providing the government with goods and services, so the recommendation is really about opening up the opportunity so that all social enterprises have the opportunity to participate in that fairly.
The Chair: I had an idea of what you were going to say. I wanted to get it on the record so that the people watching could see it, because there are charities providing services to people who have certain challenges and who produce things like buttons and bags and stuff like that. They are not mainstream producers but are producing quality products. I wanted to get that on the record.
Senator Omidvar: Thank you to all of you for being here and for the work you do for us and for all communities.
I want to start with you, Mr. Chiu because I realize you are under some time pressure. I am somewhat familiar with the work that you do. I wonder if you could give us your response to the recommendations put forward by your co-panellists on the creation of a social finance marketplace such that your funded social entrepreneurs would be able to access the financial instruments that Ms. McIsaac talked about and take their work to scale.
Mr. Chiu: I always have difficulty because we always try to look at a market solution from a business perspective.
Again, if we are able to help to scale the funds and then get the government involved as part of the solution, that would be great, and we would be able to get a fund a lot bigger in order for us to fund more social innovation or to scale the social enterprise.
I believe there is a lot of education out there for the business sector. When anybody is talking about social, they are always concerned if this is a not-for-profit, but right now, when we look at the impact of investing funds and whatnot, there basically is a lot of potential to make not just only profit; it’s also the social profit as well. Basically, there is a lot of education that we have to teach the business sector about how to look at this as a bigger solution. It’s not just for not-for-profit; it’s also for the profit sector as well.
Senator Omidvar: Building on that answer, Ms. Scott and Tania, could you comment on the need for — as Mr. Chiu said — educating business, but also the need to, I think, educate social entrepreneurs and agents of change who are working in charities and not-for-profits to avail themselves appropriately of the instruments that Ms. McIsaac talked about, insurance policies, venture capital funding, loan guarantees, et cetera. Has that been part of your deliberation?
Ms. Scott: I would say that throughout the consultations, the most prevalent message we heard was the need for capacity and skills development in the sector. I think that’s why you see there are several recommendations that try to address that, but certainly in terms of building the ability of the social purpose organizations to be ready and willing to take on debt, to take on loans.
It would be the ability to develop social research and development skills, the ability to have that capacity to bring in expertise when they need it. That was a message that we heard loud and clear throughout the consultations and is front and centre, and it is something that we learned in looking at international models. If we look at what the U.K. has done, for example, with big society capital, I think one of the lessons learned was there was a need to really focus on that capacity building, first of all.
Senator Omidvar: To build a foundation.
Ms. Scott: Yes.
Senator Omidvar: The Senate Social Affairs Committee completed a study on social finance, and its recommendations were closely aligned with your report. Here is one senator who is raring to go; I don’t need to be convinced anymore. Can you share with me whether you proposed timelines to the government for carrying out this work?
Ms. Carnegie: Our recommendations were not specific on timelines, but we would certainly like to see something happen within the very near term.
Senator Omidvar: In the next budget?
Ms. Carnegie: Yes, please.
The Chair: No pressure.
Senator Omidvar: Susan, I was really interested in what you were saying. You talked about the readiness of philanthropists and people with money to participate in doing well by doing good, as Mr. Chiu has suggested. Can you confirm that your customers, your clients, are ready, willing and able to participate in a social finance marketplace?
Ms. McIsaac: What I would say to you, senator, is that, yes, I have spoken to clients who are quite interested in alternative models, not exclusive of their traditional charitable giving, I would say, but in addition to.
In my earlier days in United Way, we saw a number of donors who were interested in alternative opportunities. I don’t know that I could say to you that I have a long lineup of those who would be involved exclusively in that, but I would say, yes, I am hearing increasingly an appetite for, in a select group of donors, that willingness to try different kinds of models. I don’t think the financial payback is the driver; I do believe it is social good. I think it’s just a way of trying to bring to the equation the other expertise that some of these donors bring, which is around these kinds of instruments.
As I look at some of the next-generation wealth that are taking on some of the family responsibilities in foundations, I am increasingly hearing a desire to add to what their parents have done through these large family foundations a model of funding differently, not to abandon the traditional charitable model, but to add to it the opportunity to engage in these kinds of instruments.
Senator Lankin: I wanted to follow up on a couple of questions around a social enterprise fund and the kinds of investments that can be made. I recognize there are different expertises here, and it’s a chance to tap into some cross-panel thinking and some advice in terms of how your thinking has evolved on this.
One of the things that I have seen over the years where there have been attempts through funding social purpose enterprise has been a push-back from the small business community. I think of government procurement, for example, and I think of something like Eva’s Phoenix in Toronto with a social enterprise printing business and attempting to compete for contracts. Some members of the private sector would say there’s special financing, there are special opportunities that they are provided and it’s not an even playing field with respect to the cost for them to compete. I’m interested in how you looked at that issue of competition. There are other examples that deal with government procurement as well, but is it to look to a percentage of operations or of money to be invested in these kinds of operations? How can the private sector be compensated for taking away what might be an even playing field in terms of competition? I think this is something where we have to get all the players on-side.
When it comes to policy making, government is always going to break down at some point in time in terms of taking that step, and I think we’ve seen examples of that. I’ll give you another quick example. In the province of Ontario, the previous government made a policy decision about funding subsidies to grow the not-for-profit child care world, not through a social finance model but through a restriction to the not-for-profit world. The current government has reversed that and will fund the private sector again in response to that push that it’s not an even playing field.
It’s a powerful argument, and I wonder how you’ve thought about it and dealt with that.
Mr. Chiu: I believe at the end of the day, there’s still a market there. You still have overhead to pay and certain expenses to pay, no matter where your money comes from. You still have to have certain, what I call gen A, to pay. The key thing about this social procurement is I always have a strong advocacy that, no matter what, it has to be fair. You cannot say that I’m supporting this, I’m social, and then you should give me the job or the government should give me the purchase of that.
I also believe that I’m seeing a lot of social purpose business. They are not in the same playing field. They are not comparable at all. If they are saying they are not-for-profit so we should give them the job, this is not fair at all. No matter what, the market would look after itself. If a social purpose organization has goods to sell and those goods are not up to the standard, is not the fair amount of money, they won’t get the job. We have to be using the market to determine, whether social or non-social. They have to be on the same playing field for that.
Senator Lankin: If I may probe that, because I think there’s always the tendency for us to conflate different types of organizations. A social purpose investment perhaps has a double bottom line. A social purpose enterprise run by a not-for-profit doing something else often looks for some cross-subsidy to the business model. There isn’t a pure business case to be made. That’s where the competition issues come in. I know countless conversations with Bill Young about his various efforts in attempting to build business models that are competitive and that work and that make money in order for them to be sustainable, because supports will come and go from governments, depending on policies, priorities and all sorts of things. Are there two different kinds of investments we’re talking about that we need to keep our eye on and keep separate in addressing this issue?
Mr. Chiu: To me, business is business. It doesn’t matter if you’re a social business or a regular business. For instance, there is an organization in Vancouver called Potluck Café. If it’s not doing a good job in catering, not doing a good job in serving the customers, do you think customers will go there? I believe that, at the end of the day, the market will dictate the products. If the product delivery is good, if the servicing is good, the product is able to sell. That’s why, no matter what, the government should look at that, not because they are social and give them preferential treatment of buying goods from them. We have to be on the same platform, the same playing field, in order for us to justify each to the other. As a for-profit business, if you are able to deliver a good job, good services, you’ll get the same playing field. It doesn’t matter if your not-for-profit competitor would come in at all.
The Chair: I know you have to go, Mr.Chiu. On behalf of my colleagues, I want to thank you. Your contribution has been significant and we do appreciate it. Thank you.
Senator Duffy: Thank you all for coming.
Ms. McIsaac, you travel in distinguished company. Charlie Coffey was a great representative of the charitable sector and your financial institution, and he’s remembered fondly by people for so much that he gave and continues to give to the community. We heard yesterday, I believe it was — it’s starting to blur, we’ve got so many meetings — about financial planners. One of our witnesses said many Canadians don’t realize that they actually do have wealth, including, for example, a cottage in a rural property area. It may not be anything lavish, but there is value there.
This witness was suggesting that if we can encourage people, when they’re dealing with their banker, to have the banker raise the question: Have you thought about this? Have you thought about maybe willing that cottage — this ties back again into capital gains on land and buildings. But if we were to move some of those obstacles out of the way, then how do you market that to people who don’t think about those things? The Royal Bank has been very strong in this sector, in investor-advised charitable funds and so on. Is there any expectation that the financial institutions of Canada would make that one of the check marks when they speak to their customers, that we move it from the back of the website more towards the front?
Ms. McIsaac: What I would say to you is in my bank, there are 1,200 investment advisers, and that has now been pushed to the forefront. They are now getting education in it. There’s a new staff person whose sole responsibility it is to serve those investment advisers and be present for them when they meet with clients to talk about philanthropy. Her role is philanthropy with a broad swath of clients in that area of the bank.
My own area is the ultra-high-net-worth group, and I have been retained specifically for the purpose of guiding those clients into this space. I think there is great optimism that we will be able to drive this quite assertively. Part of my role — and I’m newly in it — is education, so I am meeting with different groups of both staff and clients over the coming months to talk about philanthropy, opportunities to give and different ways of giving.
My reason for coming into this role specifically was my desire to move the needle and get people thinking about this. I was, frankly, quite delighted that the Royal Bank saw the value as a financial institution to serve their clients better by having that expertise on board.
Senator Duffy: I have a supplementary question on high-net-worth individuals. One of the things I’ve heard here in the nation’s capital is that people who have made a lot of money in high tech don’t have the same culture of giving as some of the wealthy old families that go back generations and for whom giving back to the community was just part of what they did. One high-tech person said, “I don’t give to charity. I create jobs, and my employees can give to the charities of their choice.”How do we reach these newly wealthy people to encourage them to take a larger role?
Ms. McIsaac: My experience is different from that. My response to you is going to be a bit anecdotal in that I have worked with and met with many individuals who, in fact, are quite generous. If you look at the Gates and Buffett Giving Pledge, a huge number of those who have signed the pledge have come out of Silicon Valley, so I don’t think you can take the entire sector and say that they are not giving. In fact, I think there’s significant giving.
I think that notion of “if I create jobs, then I’ve done my part” is not held exclusively in that sector either. I have heard that comment from other business owners. Frankly, as a person whose business is now philanthropy, I don’t share their view. I think there is a lot that each of us can do.
But I think we have a responsibility, those of us in business, government and others, to continually educate, create incentive and move people to think beyond just creating jobs, because that’s not philanthropy; that is building a business.
Senator Duffy: I wasn’t meaning to single out high tech solely, but various charities with which I’ve been involved here in the nation’s capital tell me that they have a hard time getting the younger entrepreneurs and the younger successful people to come on boards and to provide their expertise and so on. They just seem too busy for that. So let’s hope the message gets out.
Ms. McIsaac: If I can do one quick add-on comment, I do think that in that sector and others, young people who are I’ll say in their thirties perhaps — at this point, I’m old enough to say also in their forties — I think there’s a lot that gets in the way of philanthropy. I think if you’re starting a business or a young family, with lots of priorities competing for your time, that will sometimes also get in the way. That’s not an excuse by any stretch. I think the more we can do to engage smart young people in our mandates and missions — I’m also on the board of charities — I think the better we are all served. I think the cognitive diversity that they bring to a board is invaluable, but I think part of the responsibility is ours to engage them, in addition to identifying them as being in any way a laggard. I do think there is lots of value they can bring to an organization.
Senator Omidvar: Susan, I have a question for you and a question for you, Tania, if the time allows.
I’d like to explore what people have done with the corporatization of philanthropy. More and more, it is the financial institutions that are dealing with clients such as yours. It’s not just the Royal Bank; it’s the Bank of Nova Scotia. In the United States, it’s Fidelity, and in Canada, it’s Mackenzie. You yourself have said you have 1,200 investment advisers. I actually have an investment adviser as well, not that I’m in that league, but I know enough to know that my investment adviser makes money when there’s money in my account. Their fees and their commissions are based on the value of your account, so is there not an inherent conflict of interest in having investment advisers provide philanthropic advice? Or is this the reverse, which is the philanthropization of the corporate sector? I’m making up language here as I go.
Ms. McIsaac: It’s good language. I’m into philanthropizing the bank.
I think my role at Royal Bank came about through client demand, which I think is a great thing. I also think that there is inherent value to any financial institution to assist their clients to meet their personal goals. If those personal goals include investing in their community, activating their wealth to make a difference, to drive an impact, then that’s just good for the organization that provides them with the tools to do it effectively.
Longer term, I think if you look at the big picture, those dollars that get taken from the bank to be invested in the community are a drop in the bucket compared to the customer satisfaction that leads them to continue investing in the bank. That would be my personal perspective.
Senator Omidvar: You’ve given me some comfort.
My question to Tania is around it’s getting a lot of Twitter traffic. Susan Manwaring was here earlier, and she urged us that, as we look to make updates, overhauls and tweaks in the charitable and not-for-profit sector, we must not jeopardize the best part of our policies on charities and not-for-profits. It is important for us to be cautious but eager. On the social finance front, should we be cautiously eager or eagerly cautious?
Ms. Carnegie: Well, let’s be both. One of the recommendations that we’ve included in our report is the creation of a regulatory sandbox so that we can create those safe spaces to figure out how to make this work in a way that is equitable, achieving objectives and not creating unintended consequences that we will then later need to deal with in another fashion.
Senator Omidvar: Ms. Scott, do you have a response to that? We must always be cautious, I think.
Ms. Scott: Yes. I think as we worked through this process of developing the steering group’s report, we engaged a number of federal departments throughout the process and had our colleagues from the Department of Finance and CRA at the table with us as we developed these recommendations. As Tania pointed out, the regulatory sandbox is a way to test approaches without throwing out the framework that’s in place.
The Chair: We’ve had a number of people comment on the process of getting charitable status and how difficult it is. I’ve been through the process myself, and it’s a minefield. I spent my career before I came here as a professional fundraiser, so I’ve worked for a lot of charities and not-for-profits across the country, so I understand the process. But when I went through this process about 10 years ago now, I looked at the process myself and said, “Well, I can do this.” I very quickly realized that I couldn’t do it, and even though I was experienced, I needed legal help. I and my colleagues who were forming this organization had to go and hire a lawyer. How simple should we make it? Should we exclude the need to have legal advice in the registration of charities?
Ms. Carnegie: That’s an interesting question. I’m not sure. That didn’t explicitly come up in our consultations. What did come up in discussions were ways to streamline the process such that it wasn’t putting an undue burden on organizations who were looking to be recognized with a particular status.
Senator Duffy: I just wanted to go back to Ms. McIsaac for one second. My colleague picked up on it. Not everyone has an investment adviser. I’m just thinking of the wonderful people in the branches who deal with you about your mortgage or a car loan or whatever. One of the buttons on their screen or one of the questions they ask could be: Have you made plans for when you move on? Have you got a will? Have you got a plan to give to charity? That sort of thing. When people are setting up RRSPs, we’ve been told about vehicles that are possible to save money through that and have it go to charity and so on. Those are options, without having to have a “broker” per se, which I think a lot of people find intimidating, and a lot of people who do stocks are going to the online method. That’s, to me, another point of contact for all of our financial institutions, if they were to take this up as an industry thing to try to help.
Ms. McIsaac: I will take that back to my colleagues. I don’t know what the current process is in all of the banks in terms of prompting people to think about philanthropy, but it’s a very good suggestion you make and I will share that with my colleagues. Thank you.
Senator Duffy: Thank you.
The Chair: I want to thank the witnesses for being here. You’ve stimulated an awful lot of discussion and thought. I know that, as we go through this process, you’ll probably be watching us or monitoring what we’re doing. If, as you do that, you see something that we’ve missed or something that perhaps you forgot to tell us or wanted to tell us and didn’t, don’t hesitate to send us something via the clerk, and the clerk will then get it to us. You’re part of this process, and we want to benefit from your knowledge and your recommendations.
(The committee adjourned.)