Proceedings of the Special Senate Committee on the
Charitable Sector
Issue No. 7 - Evidence - September 24, 2018
OTTAWA, Monday, September 24, 2018
The Special Senate Committee on the Charitable Sector met this day at 6:33 p.m. to examine the impact of federal and provincial laws and policies governing charities, non-profit 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 welcome you to this meeting of the Special Senate Committee on the Charitable Sector. I’m Senator Terry Mercer from Nova Scotia, chair of the committee, and I’d like to start by asking senators to introduce themselves, starting with the deputy chair of the Agriculture Committee, who happens to be here this evening.
[Translation]
Senator Maltais: Ghislain Maltais from Quebec.
Senator Martin: Yonah Martin from British Columbia.
[English]
Senator Seidman: Good evening. Judith Seidman from Montreal, Quebec.
Senator Omidvar: Ratna Omidvar from Ontario.
[Translation]
Senator Miville-Dechêne: Julie Miville-Dechêne from Quebec.
[English]
The Chair: Thank you all.
Today, the committee will continue its study to examine the impact of federal and provincial laws and policies governing charities and non-profit organizations, foundations and other similar groups, and to examine the impact of the voluntary sector in Canada. For this meeting, we will focus on volunteers in charities and non-profit organizations.
For our witnesses, we welcome Dr. Ray Madoff, a professor at Boston College; and from the Rideau Hall Foundation, Ms. Teresa Marques, President and Chief Executive Officer.
Thank you for accepting our invitation to appear. I’d like to invite the witnesses to make their presentations. I would also like to remind them and my colleagues that the witnesses have about five to seven minutes for their presentations and then we’ll go to a round of questions and answers. I’d ask that people keep their questions short, and I’d ask the witnesses to try to do the same with the answers, so we get in as many questions as possible.
We will begin with Professor Madoff.
Ray Madoff, Professor, Law School, Boston College, as an individual: Good evening, senators, and thank you for the invitation to provide testimony today. I’ve been following the work of this committee with great interest and admiration, and it’s an honour for me to be here to participate in this undertaking.
My name is Ray Madoff and I’m appearing in my individual capacity. I’m a professor from Boston College Law School in the United States and Co-Founder and Director of the Forum on Philanthropy and the Public Good, a non-profit think tank that focuses on issues of philanthropy and tax policy.
I bring a cautionary tale from the United States, with the hopes that Canada will take steps to adopt rules to protect Canadian charities and the beneficiaries they serve as well as protect government resources from imprudent tax expenditures.
There are many similarities between our countries. Both countries seek to promote a robust charitable sector and both use the tax system to incentivize charitable giving. We also face similar trends: an overall decline in charitable giving in the population at large and more concentration of giving by the wealthy. Because the wealthy are more likely to structure their giving in tax-advantaged ways, it is particularly important that the tax rules be regularly examined to ensure that they are incentivizing the right thing.
My comments today will focus on two areas where I believe we need to be particularly mindful of the details in fashioning incentives: donor-advised funds and extending capital gains tax relief to contributions of private company shares and real estate. I begin my comments by focusing on donor-advised funds.
Donor-advised funds have become a dominant force in charitable giving in both Canada and the United States. The growth has been particularly staggering in the United States, where Fidelity Charitable is the most popular charity by far, surpassing all other charities by more than 20 per cent, and where six of the top ten fundraising charities are donor-advised fund sponsors.
The reason for the popularity of donor-advised funds is that they provide donors with the double benefit of effective ongoing control over the donated funds combined with maximum tax benefits. Donor-advised funds are particularly advantageous from a tax perspective because they facilitate gifts of appreciated property, which saves both income and capital gains taxes.
Donor-advised funds can be confusing to talk about, and frankly to understand, because there is a disconnect between their legal structure and how they operate in practice. Legally, a transfer to a donor-advised fund is structured the same as any outright transfer to any registered charity. The donor legally gives up all control over the donated property, including the ability to direct charitable transfers from the fund. This is what enables donors to get current tax benefits for their transfer.
But despite these legal agreements, the reason people create donor-advised funds is because the charity, in a non-legally binding way, gives the donor effective ongoing control over the charitable disposition, and sometimes investment, of the donated assets. This is why a recent Canadian journal described donor-advised funds as “similar to creating your own private foundation, but simpler,” and why other people describe donor-advised funds as “charitable chequing accounts.”
In this way, donor-advised funds sit in a nether region between private foundations and outright gifts to charities. They feel like private foundations to the donors but are not subject to payout, disclosure and oversight rules otherwise applicable to private foundations. They provide the tax benefits of outright gifts to charities, but no charity is given true control over the donated funds, and the donor is under no obligation and no incentive to ever make charitable distributions from his donor-advised fund. This failure to require payout means that donor-advised funds have effectively severed the ties between charitable tax benefits and benefits to charities.
In order to protect charities going forward, the legislature should establish rules to either require or incentivize distributions from donor-advised funds to charities. This could be done by either imposing a reasonable payout term, for example, 10 years, or by delaying some of the incentives of charitable giving until the funds are distributed from the donor-advised fund to the charity. For example, you could give capital gains relief for money going into the fund but defer the other tax benefits until the funds come out.
The second issue I’d like to discuss is the proposal to extend capital gains tax relief to contributions of private company shares and real estate. I understand that under current Canadian law, this benefit is limited to publicly traded stock, but the hope of proponents of this extension is that this expansion will bring additional charitable resources to the sector.
From what we have seen in the United States, I suspect that this will be the case, not just because owners of real estate and private business interests are likely in a position to make large charitable gifts but also because, in the United States, the donor-advised fund industry has focused on these types of assets to grow their funds. If you Google the term “complex assets,” you’ll get many stories about this.
I suspect that if Canadian law were to provide this expansion, Canadian donor-advised fund sponsors would follow suit, and you would see a similar explosion in both donor-advised funds and contributions of real estate and private company shares.
However, if you choose to adopt this extension, I urge the legislature to learn from our mistakes, for while this rule has encouraged donations of assets that otherwise would not be contributed to charity, it has come at a significant cost to the government because under U.S. law, taxpayers are entitled to charitable tax benefits based on the appraised value of the donated property at the time of contribution. Since these assets have no easily identified market value, and often no market, everyone is dependent on the donors’ hired appraisers to determine that value and it is virtually impossible for the government to provide sufficient oversight on their work.
More troubling is the fact that, in the United States, donors’ tax benefits are based on the value at the time of contribution, even though a significant portion of that contribution may go to brokerage fees and other expenses of converting the property to cash. Depending on the time it takes to sell the property and the costs associated with the sale, the tax benefits of contribution for the donor can far outweigh the benefits to the public from the charitable gift.
If Canada chooses to extend this benefit, I urge you not to rely on appraisals but instead to base any tax benefits on the amount of cash that ultimately is made available to the charity.
I hope that my comments are helpful to you in adopting rules to ensure that charitable benefits provide maximum benefits, not just to donors but to Canadian society as a whole, and if you do so, you’ll provide valuable leadership beyond Canada, to the United States and the world at large.
I look forward to your questions.
Teresa Marques, President and Chief Executive Officer, Rideau Hall Foundation: Thank you very much for the invitation to be with you today to join this important dialogue examining the impact of the voluntary and charitable sector in Canada. I’m the President and Chief Executive Officer of the Rideau Hall Foundation, an independent and non-partisan national charity established by the Right Honourable David Johnston in 2012. The RHF works towards a better Canada for all Canadians, with an aim to reinforce the value of our public institutions, including the Office of the Governor General, as a source for social cohesion in Canada.
Our ongoing efforts include a focus on four key priorities for the country. The first is the equity of learning opportunities, as well as excellence of those opportunities. The second is fostering Canada’s culture of innovation. Third is the promotion of civic leadership. Lastly, and most pertinent for our purposes today, is our fourth priority on widening the circle of giving and volunteering by reinforcing giving as a fundamental Canadian value.
Last year we commissioned a series of research reports to provide new sources of evidence and a deeper fact base to help those working in the charitable sector to work smarter. In April we released a report, in partnership with Imagine Canada, entitled 30 Years of Giving: The Giving Behaviour of Canadians. The study maps charitable donations and giving patterns from 1985 to 2014, drawing on data reported to Canada Revenue Agency and Statistics Canada. We believe it is the most detailed and comprehensive overview of its kind, and I’m pleased to share a few data points that may be of interest.
We estimate that individual Canadians gave approximately $14.3 billion in receipted and unreceipted donations to registered charities in 2014. Claimed donations have increased 150 per cent in real terms since 1985.
Despite that number, however, donation rates are dropping across all age groups. The decline is particularly acute among younger Canadians. The pool of older Canadians, on whom the sector depends for revenue growth, is also shrinking, which means charities and non-profits are chasing an ever-decreasing pool of aging, affluent donors. Total donations have continued to rise only because those who give are giving more.
On the positive side, women now represent a larger portion of the donor pool and a greater proportion of the money donated than they did in the 1980s. Between 1985 and 2014, the absolute value of donations claimed by women roughly tripled, from $1.1 billion to $3.5 billion.
The report also dispels any notion that new Canadians are less generous. In fact, the average annual donation by new Canadians is $672, compared to $509 for those born in Canada.
According to the report, motivations for giving among young Canadians are strong: compassion for those in need, personal commitment to a cause and the desire to contribute to community. However, they are more likely to say they are not being asked to give more and do not know where to give.
While 30 Years of Giving undertook an unprecedented analysis of tax filer data and public surveys, there is still much that remains unknown due in part to the limitations of the data. We believe that when it comes to younger Canadians in particular, we may be underestimating giving that is happening that is not tracked by charitable tax receipts and that a broader understanding of giving may be required.
Delivering social good and helping people are not just within the purview of the charitable sector anymore. More and more, companies are presenting themselves as doing good to give their brand a sense of purpose while growing their customer base. The rise of social enterprise, with an explicit social as well as commercial purpose, also steps in to what had previously been a space occupied by the charitable sector, and new online platforms such as GoFundMe make it much easier for people to have a giving experience with the feeling of immediate impact and connection without a charity receiving the funds, without a tax receipt and without quantifiable social impact. These forces reflect a new reality that without question is disrupting the charitable sector and will require new policy responses.
It is clear to us that greater innovation is needed in how charities operate, but also in how they seek to reach new donors and that lessons may be learned from other sectors and disciplines. To that end, the RHF is currently working on a next research report in partnership with the Behavioural Insights Team, which originated from the U.K.’s Nudge Unit, and with the collaboration of the MS Society of Canada. It will help explain how and why small tweaks in fundraising approaches, informed by behavioural science, can make a significant difference in the giving patterns of Canadians. From this work, PCO has gone on to partner with the Heart and Stroke Foundation to similarly undertake and evaluate a series of trials to encourage giving.
If we are serious about evidence-baseddecision-making, we need to ensure we have better evidence. We think these research studies are a good beginning and a promising start, but the scale of our challenge is such that no one organization can do it alone. Rather, we believe that all those interested in fostering a greater culture of giving in Canada need to work together to share insights and build partnerships that could help us think creatively about how to effect change.
I worry as well that we may not have placed enough value on the central role of trust. As we’ve learned from Edelman’s Annual Trust Barometer, trust in our governments, public institutions, elected leaders and in media, as well as in NGOs and charitable sector leaders, in Canada has declined. Greater transparency to earn higher levels of trust and build long-term donor loyalty is required.
In conclusion, strong charities are everyone’s business. Without effective action to increase donation rates, many charities and non-profits will, over time, find it impossible to fulfill their missions. Any diminishment of the sector’s capacity to serve impoverishes us all. The growing pressure before us, however, to collaborate across sectors and innovate should be considered a positive development. It will drive change, force innovation and resilience and ultimately, hopefully, create a better, smarter and more caring Canada.
The Chair: Thank you both. We’ll now go to questions from my colleagues.
Senator Omidvar: I have a set of questions for Ms. Madoff and Ms. Marques. I’ll ask Ms. Madoff first.
Ms. Madoff, thank you very much for making the long, arduous journey from Boston. We have had very bad weather in this town, which has made travelling very difficult. Welcome.
I want to thank you for your testimony because last week we heard from many witnesses calling on the Senate and this particular committee to further incentivize philanthropy through donor-advised funds, through the donation of real estate, through the donation of private securities, et cetera. You’ve given us another lens on this.
My question around donor-advised funds is specifically this: The Canada Revenue Agency does not currently ask charities to list or to disclose their donor-advised funds in their annual Form T3010. Should we require the CRA to do so? Should we require charities to also tell us in their annual reporting the disbursement on every particular fund as opposed to an aggregate amount, and how does the United States deal with this? That’s important. That’s my first set of questions to you.
Ms. Madoff: This is a really important issue. The United States did not require it until 2006. This was a problem because what they found was that there were lots of opportunities for abuse. Remember, a donor-advised fund is a transfer to a charity, and all that it looks like is an outright transfer to the charity. They found that people were doing things like directing their donor-advised funds to the university but it was actually paying a tuition, and there were ways that the donor was actually able to benefit from this. That’s why, in 2006, in the United States, we enacted a range of rules designed to both curb some of the abuses in donor-advised funds and also to start tracking the growth of donor-advised funds.
We found that the growth of donor-advised funds has been astronomical and far greater than one ever would have imagined. The donor-advised funds were showing up not just in the community foundations and the commercial donor-advised funds, but traditional charities were also creating their own donor-advised funds, because there’s a kind of a race to the bottom. Donor-advised funds are so attractive that everybody needs to offer them in order to get it.
In order to get a sense of the problem, you’d want to track the donor-advised fund. You could have individual tracking of the reporting, but frankly, I think it’s particularly important to have the regulation. If you think the money should come out, adopt the rule that the money should come out.
Senator Omidvar: Just following on that, do you think we should have a regulation in Canada that enforces a 3.5 per cent disbursement rate, at least?
Ms. Madoff: Definitely not, no. You should have a 10-year set term. When the money comes in, you name the charity that’s going to receive the funds in 10 years — a real charity that will receive it outright. The donor has 10 years to decide where they want to give it, but then it’s going to a charity. I’d make that a condition of the deduction so that the donor is given a limited time but not longer.
Senator Omidvar: You made a very interesting point about appraisals and the donation of real estate. We live in a country of cottagers, and it could be a very popular idea to donate your cottage to a charity. You’re suggesting the truth will not lie in the eye of the appraiser but something else. What should that something else be?
Ms. Madoff: I’m suggesting that the actual deduction should be tied to when the property is converted to cash. There are two separate situations. One is where the real estate is being used for a charitable mission. If somebody gives a building that’s being used for a battered woman’s shelter, that’s fine. You’re not going to have a conversion. But with most of these gifts that are happening in the United States, their assets are being transferred to provide tax benefits. They are then sold to provide cash. Basically, the deduction should be tied to the amount of cash made available to the charity. You could either do it by saying you’ll get the deduction when it’s sold by the charity, or you can have your appraisal, but when it’s sold, you’re going to get a recapture of tax if there’s a disconnect between what gets to the charity.
Senator Omidvar: Do you have a point of view on the donation of privately held securities?
Ms. Madoff: You could have the same rule for the privately held securities too, but there you have an additional problem with privately held securities in that, often, they’re not marketable at all, there’s no market and there are several years. You have to be careful about it. On the other hand, in this world we are living in now, it is a very valuable asset that people are willing to give to charity. They have a business interest. It’s something around which one could provide tax benefits. You would get money coming out. But I would again tie the tax benefits to the amount of cash that goes to the charity.
Senator Omidvar: Ms. Marques, I’ll switch over to you. I have great admiration for your foundation and the good work you do.
Given the fact that the satellite account, covering charities, not-for-profits, volunteerism was suspended, I believe, in 2010, and given the fact that the National Household Survey was not mandatory for X number of years, would you agree that there are gaps in your data? You say you have a new research project. How will you fix these gaps in data at a time, specifically, when there was so much technological and demographic change? I wonder if we can ever get that back.
Ms. Marques: It’s an excellent point. When we began this research and when we first sought to really shine a brighter light on what was happening in giving patterns, we thought the answers would be out there. We hadn’t realized the data was in such a state as it is. We worked with Imagine Canada to really define what a doable scope of research could be that could really provide a long-term picture to the best of our abilities, looking at individual giving trends. But certainly the data isn’t complete.
Our next research project is less focused on the actual data, working with the CRA, and more focused on how we can help to encourage giving behaviour. So instead of looking at historical trends, we’re working with partners in government and in the charitable sector to open their doors and to try to encourage giving behaviour through a series of randomized trials. It’s a very different type of research that will be coming next.
[Translation]
Senator Miville-Dechêne: Thank you very much for being here. This is a very interesting debate.
[English]
I will ask you a direct question, considering the topic. Should the federal government introduce a tax credit to motivate Canadians to volunteer? There has been a bill to that effect in the House of Commons. It didn’t go through. Do you think it could be a solution? If not, what other path should be taken to promote volunteerism in Canada?
Ms. Marques: It would certainly be one valuable element. I’m not sure it’s the only approach, but anything that would bring together a multi-sectoral approach to encourage giving, as well as volunteerism — really understanding giving to be time, talent and treasure — would be of benefit.
Senator Miville-Dechêne: Would it be possible for a foundation to deal with it? People are saying it’s complicated when you go into tax credit.
Ms. Marques: Yes. From our sense, the range of capacity within the charitable sector is vast. I’m sure you would have seen this through the deliberations to date. But I feel that it is very much a key issue in terms of how charities are equipped to really encourage different, more innovative kinds of giving and volunteering, and recognize them as such. It’s very significant for the sector.
Senator Miville-Dechêne: Are there such things in the U.S. as a tax deduction for volunteerism?
Ms. Madoff: I don’t think there are.
Senator Miville-Dechêne: Me neither.
Ms. Madoff: There might be something for expenditures incurred in volunteering, but to be honest —
Senator Miville-Dechêne: And do you think, in theory, it’s an idea that flies?
Ms. Madoff: Not particularly, no. There have been a lot of studies. Sometimes when you reward something, you don’t get the thing as well as you would if you didn’t reward it. I wonder whether volunteerism is something people would be more inclined to do without a financial award than with one.
Senator Martin: Thank you for your presentations.
My first question is for Professor Madoff. It’s interesting to hear your presentation today, a week after hearing from witnesses who spoke about donor-advised funds and expanding the capital gains tax relief. Thank you for the insights you provided this evening.
You mentioned there are lots of opportunities for abuse. When we talk about the charitable sector, we don’t necessarily think right away about those opportunities for abuse, but, as you say, unless we are very careful as legislators, governments and entities to have clear regulations and parameters, that could happen. You have talked about some of the examples of abuse, but I was wondering if you could expand a little bit on other examples.
Ms. Madoff: The things that make donor-advised funds particularly pernicious is that they really operate outside of the law. Legally, it looks like one thing, but then there’s this understanding of the parties, and the law kind of ignores that understanding of the parties as if it doesn’t exist. This is where trouble can brew, because people don’t exactly understand what it is, and lots of things can happen.
One of the problems we have in the United States is, for example, over who controls the investment of donor-advised funds. You might have read stories about the Silicon Valley Community Foundation. It turns out they had something like $16 billion of assets, and huge amounts of it was held in bitcoin. You would never have that with a traditional charity because charities are under obligations to invest their assets in ways that are consistent with the financial mission, but when you give donors the capacity to manage their assets, which is what we have in the United States, not legally but functionally, then you have this type of thing. They need to be reigned in because right now there are a lot of people who profit from donor-advised funds, and it’s not necessarily the charities and government.
Senator Martin: Of those opportunities for abuse, would you also include potential abuse with partisan politics?
Ms. Madoff: In the United States, charitable dollars can’t be used for politics.
Senator Martin: So there is no chance for that kind of a pushback?
Ms. Madoff: Well, there has been a push by our current president to lift that rule. That would be a huge problem if that happened. Right now it’s not a problem.
Senator Martin: Thank you.
Ms. Marques, when you mentioned that new Canadians are giving more, I was curious as to how you gather the data from new Canadians whose English, or even French, wouldn’t be their first language. Would your data then be reflective of this very diverse group of individuals?
Ms. Marques: We believe that the data is as accurate as possible given the limitations of the data that’s available. But the research was being commissioned by Imagine Canada, who is really the research bench strength that undertook the data analysis, so I’d be happy to come back to you with thoughts on that.
Senator Martin: Yes, I’d be curious. In terms of certain ethnic communities, for instance, giving online is something that I have witnessed a lot of people be wary about. I’d be curious to know how accurate the data is and what some of those barriers are to giving among that population.
Ms. Marques: I can come back to you on that question. There is so much that remains unknown to us about online giving. Online giving to charities is but one piece of that puzzle when you think about new sources or online platforms for giving. I mentioned GoFundMe as one example, but these are new, technologically very sophisticated intermediaries that are, in some ways, serving as the front line to someone interested in making a gift, quote-unquote, or interested in having that feeling of direct one-to-one personal impact regardless, sometimes, of where that funding tends to be going.
Senator Martin: On a personal note, former Governor General David Johnston was a visionary and leader. I’m really happy to know you are part of his legacy.
Ms. Marques: Thank you. It is a true honour and privilege to work with him so closely every day. He remains actively involved as chair of the foundation board. The Rideau Hall Foundation serves as a platform for outgoing governors general to serve as chair of the board for a five-year period during the period of the following governor general’s office. Some of that is unknown, but that’s the structure.
Senator Martin: Thank you.
Senator Seidman: Thank you both for your presentations.
Professor Madoff, my understanding from you is that a contribution to a DAF is not really a contribution to a charitable organization, necessarily. It goes into an account that can be distributed somewhere down the line, but it’s not immediate.
Ms. Madoff: A DAF sponsor is an entity that is recognized as a charity. In the United States, they are a public charity. Here, they might be public foundations. The organization is legally a charity. Fidelity Charitable is a charity. That’s why donors get all the tax benefits when the money goes in. It’s the same as if they gave to the Red Cross.
Senator Seidman: It is a provider, in a sense, because it’s a bank that is housing your money as a way station, if that’s correct.
Ms. Madoff: Functionally, right. The way the donor experiences it is I have a charitable chequing account that I control. I can decide when disbursements come out. That’s the way they operate in practice. There’s a disconnect there. They strike a legal agreement to give all the tax benefits upfront, but they have an understanding that gives the donor ongoing control.
Senator Seidman: For this organization that houses your money, there is an incentive for them to keep your money as long as they possibly can.
Ms. Madoff: Yes, there is a huge incentive because they are getting management fees for keeping it. They have a lot of policies that support that. For example, Fidelity Charitable say, “Oh, no, we encourage disbursements.” Well, this is what their rule is: If within seven years you haven’t done anything, they claim they ask you, although I’m not even sure they do, to make a distribution of $50. You could have a billion dollars in your account, and they will ask you to make a distribution of $50, so they have no incentive for money to come out.
The bigger problem in the United States is that the financial services industry has gotten involved in donor-advised funds because what they have realized is that they get the financial service. If you are a personal financial adviser of someone, Fidelity Charitable pays you a management fee. They have created an army of people marketing these to their clients. Because if you give to the Red Cross, you are not going to get a management fee, but if you give to a donor-advised funds, you, as a financial adviser, get a management fee.
There was a case in the United States that I was involved in where a financial adviser convinced someone who had never made any charitable bequests to give $100 million to a donor-advised fund. These people were in their nineties, and they were very wealthy, and there was a lawsuit about it because the financial adviser wanted to have ongoing control.
Senator Seidman: It’s my understanding that there is not a lot of transparency with these accounts in the sense that only aggregate numbers are reported as opposed to account-specific numbers.
Ms. Madoff: Yes. That is a problem. That is a midway problem. If you just had transparency, I feel like you would only be getting it halfway. If you think that payout matters, you should require payout.
Senator Seidman: Within a defined period of time?
Ms. Madoff: Within a defined period of time.
Senator Seidman: It is interesting to see how the industry has ballooned over time. The number of DAFs in the U.S. doubled between 2010 and 2015.
Ms. Madoff: The growth is extraordinary. If you look at the last six years, overall charitable giving, including donor-advised funds, grew 36 per cent. Fidelity Charitable contributions grew 400 per cent. They are vacuuming up all charitable donations. It’s a huge problem.
Senator Seidman: I’m looking at a chart right now, the Chronicle of Philanthropy, and it shows the donor-advised fund provider per cent change on the year earlier, and the other non-profit per cent change on the year earlier, and the other non-profits all have minuses and the donor-advised fund providers have enormous jumps.
Ms. Madoff: That’s right. You hear lots of proponents talking about how the donor-advised funds pay out so much more than endowments, but that’s not the appropriate benchmark. The appropriate benchmark is money going directly to non-profits because they are the ones who are suffering.
[Translation]
Senator Maltais: If I understand correctly, Ms. Madoff, you collect donations and redistribute them. Is that the system you operate in? You talked about your benefactors losing control. There appears to be a loss of control in terms of their donations.
Ms. Madoff, what is the situation on a human level? In the United States, are forensic audits or police checks performed in the recruitment of volunteers? How does that work? You take care of the money, but your donors must worry about the way organizations recruit volunteers. Are those volunteers subject to forensic audits? Does the organization ensure that those individuals are qualified to do the work?
[English]
Ms. Madoff: When it comes to donor-advised funds, although the donor gives up legal control over the money when they make their contribution, the donor-advised funds sponsor actually lets the donor have ongoing control. So it’s basically like a situation where they are marketed like charitable chequing accounts. The donor makes a transfer of property or stock or real estate and they create an account, and then the way everybody acts is as if it’s the donor’s money. They let the donor decide how to invest it and make charitable distributions from it. The problems are not a lack of donor control; the problems are more the fact that we are giving a lot of tax benefits and there is a lack of money getting to the charities.
You also asked about volunteers and problems with bad charities, which is another huge problem in the United States that is insufficiently regulated. We had a series of cases from our supreme court that basically tied the hands of regulators and said you can’t require solicitors of charitable dollars to disclose that they are crooks. That’s been a big problem in the United States as well.
[Translation]
Senator Maltais: Thank you.
Welcome, Ms. Marques.
Ms. Marques: Thank you.
Senator Maltais: I will go back in time a bit, to when the natural disaster occurred in Haiti. You know that many people in Canada gave money, and the government matched their donations. Many donors were surprised to see that their donations didn’t make much of a difference in the end. That is no one’s fault. We understand the context Haiti found itself in at the time. Those kinds of actions will recur.
I remember that, some time after, a disaster occurred in Japan — an earthquake — and no organization could collect donations. I sent a donation to the Canadian embassy in Japan. I feel that the money went to the right place. I received a thank you letter. The government assumed the responsibility for those thousands of people, but I thought it was unfair that the Japanese found themselves in that situation. There was no advertising campaign in Canada to help the Japanese. For Haiti, there was a major advertising campaign from Halifax to Victoria. Canadians were very generous, but they were also very disappointed.
I find — and this is not something I am blaming you for — that the big picture leads Canadians to sometimes be careful before they donate to charities. Would there be a way to change that perception going forward?
Ms. Marques: I understand the question.
[English]
I think that those situations will always arise in the sense that when there is an emergency or an urgent crisis that compels people to give, we will see that kind of mass immediate, urgent coming together of funding. It’s incredible on the one hand but worrying on the other given the capacity of the sector sometimes to absorb and to distribute the funding. We have seen it in Fort McMurray and more recently with Humboldt. So this will certainly continue. It’s challenging to say what causes some tragedies or disasters to really take on the attention of Canadians, but I think overall it speaks to the generosity of spirit and of desire of Canadians to give immediately to fellow humans in time of need.
[Translation]
Senator Maltais: Many Canadians turned to hospital foundations for their donations. I am one of them and I am not alone in Quebec or in Canada. Why? Because we feel that our donation will help move certain things forward in science and research, and for the well-being of seniors in nursing homes. Some foundations take care of that.
Perhaps this goes unnoticed in your statistics, but a good number of individuals are turning to those foundations because they were a bit disappointed — not to discredit the Red Cross — about the humanitarian failure in Haiti. No one took care of the Japanese. Many people are disappointed. Could that be remedied over time or are those people doing a good deed by giving to hospital foundations or senior centres? What do you think?
[English]
Ms. Marques: I would say it’s a wonderful thing that Canadians give to what causes or compels them to give, whether it’s in the hospital sector, international relief, education, social services or the arts. I wouldn’t suggest there is one particular subsector of the charitable sector that is better equipped to handle or process donations. My own experience is within the hospital fundraising world, and it is probably not a generalization to suggest that the larger institutions, hospitals or universities in particular, are very well equipped to recruit new donations, to inspire giving, to invest in marketing appeals and very sophisticated targeted financial campaigns to encourage new donors that other elements and subgroups within the charitable sector don’t have the capacity to do. It speaks to me, that reality, that there is a great inequality in some ways within the charitable sector in terms of capacity to both encourage donations and to deliver.
[Translation]
Senator Maltais: Ms. Marques, I don’t know whether you live in a region or neighbourhood with many children. I live in a Quebec City neighbourhood with a lot of children. Every week, children go door to door asking for donations for ballet, music, hockey or soccer. All sports are represented. Everyone is asked to be charitable. Those children do not provide a receipt. They do not give one. Canadians in general donate. They are generous. I cannot refuse to help a seven- or eight-year-old girl or to give to school children for their year-end trip. We are sensitive to that, and it’s not recorded anywhere.
My neighbours are generous, and they have donated to volunteer organizations. However, none of that is recorded. I am sure the same thing happens in your neighbourhood. Should we continue to do things this way or should we donate only to authorized organizations?
[English]
Ms. Marques: I think it’s a wonderful point. I think it just clarifies and illustrates the fact that charity and giving most often starts at home, in communities and in our immediate neighbourhood. To have children especially as part of that, those kinds of door-to-door neighbourhood appeals, is a wonderful early learning about giving and volunteerism. I worry, actually, that those lessons are perhaps not being taught and passed through generations, so it’s heartening to hear.
One comment that I made earlier is that I think that a lot of giving is happening that is not tracked by tax receipts. I think we don’t know enough about that. It also tells me that I’m not sure that a tax receipt is necessarily the motivation for a lot of donors, particularly younger donors. That’s a reality that we should be aware of.
Senator Seidman: I didn’t take my opportunity to ask you a question, Ms. Marques. I must say I congratulate you and our former governor general for the good work that you’re doing.
Ms. Marques: Thank you.
Senator Seidman: On your website, under “giving,” it seems that you are exploring how behavioural science can be applied to the act of giving. The science behind giving behaviours is what it says, and you have partnered with Behavioural Insights Team to do some work in this area. Is this ongoing work, or do you already have results? Could you tell us a bit more about the science behind giving behaviours? Because that is fascinating.
Ms. Marques: Thank you very much, and thank you for taking the time to visit the website.
The project and partnership with the Behavioural Insights Team was spurred on by an interest in behavioural sciences and some kind of nudge-based theory. Clearly, many charities are already engaging in testing. Testing is not new in terms of charities who will try many different approaches to encourage donations and to evaluate those results in quite a methodical way. But we thought there might be value not only in running a series of trials, working with the MS Society of Canada, who graciously opened their doors and their data for all to see the results of, but that it would ideally instruct smaller-scale charities as well to understand how they can begin to incorporate the principles of behavioural sciences, which include their use of randomized control testing and rigorous evaluation of results. So we worked with the MS Society on a series of trials related to door-to-door giving, monthly giving, to the walk, to becoming a monthly donor, but the take-away is not necessarily the results of those particular trials but the process. The culmination of the report is a handy, we hope, very accessible document that members of the charitable sectors can use to bring into their own shops.
What was quite interesting, as we were deciding which organizations to work with, the Behavioural Insights Team rose to the fore. They emanated from the U.K.’s Nudge Unit and began a conversation with the Privy Council Office and behavioural science expertise within the PCO who shared an interest in engaging with the charitable sector and went on to engage in a series of trials with the Heart and Stroke Foundation of Canada.
This is a burgeoning area, I would say. The paper that we are working on is in the very final stages of production and should be available next week. I’ll share it with you. I’ll get that to you as soon as it is available.
The Chair: We look forward to that.
Senator Omidvar: I have two short questions. I’ll start with Ms. Marques.
Senator Maltais’ excellent inquiry into disasters reminded me that I had a question I wanted to pose to someone, and you’re the absolute right person to do so. Canada matches donations that are generated by Canadians to respond to disasters overseas one to one, up to a certain amount. We have disasters in our country, Lac-Mégantic, Fort Mac, Humboldt, and in Ottawa this last weekend. I’m beginning to try to understand why we don’t match those donations in the same way we would match donations encouraging generosity of Canadians overseas and at home.
Ms. Marques: I think that’s a wonderful idea. As a fundraiser, there’s no greater incentive than the provision of a dollar-to-dollar matching opportunity.
Senator Omidvar: So you would welcome some fairness?
Ms. Marques: I would welcome it. I would welcome any endeavour that would further incentivize Canadians to give, at home and abroad.
Senator Omidvar: Sticking with incentivizing, Ms. Madoff, a question to you: I’m going to focus on the donation of real estate and private securities just because our memory is still so strong from those testimonies. I asked a question of the panel last week, and in all fairness I’ll ask you the same question. Do you believe that the donation of real estate and privately held securities will increase the philanthropic pie, or will it simply replace the dollars that you would give in one way and replace them with giving dollars another?
Ms. Madoff: I actually think it will increase the total amount of dollars. The reason is that there are a lot of private business interests that are going public. In the world that we live in, there are so many new businesses. When people cash out for their new business is a time when people would be inclined to be philanthropic. I think if they can get the tax benefits for that type of transfer, they would be likely to do so.
Senator Omidvar: Thank you for that. They couldn’t actually answer that question, so I appreciate your insight.
I have a comment. You talked about the growth of DAFs in the United States and the scandals around the Silicon Valley Community Foundation. I should add that our community foundations in Canada traditionally have to date — no longer — been the holders of the largest number of DAFs. Now they’ve been taken over by the corporate sector. Our community foundations have fairly stringent policies on disbursements. I want to ensure our audience that at this point we know of no scandals around DAFs in this country, but it is a trend that you have pointed out that we must be careful of, and I appreciate that.
Ms. Madoff: I would also say that I would be mindful of the fact that what has happened in the United States is, as they have moved from community foundations to the commercial setting in the United States, the community foundations have increasingly treated more of these as endowment funds. It’s not a problem of bad players; it’s a problem of bad incentives. If you think that money should not be controlled by donors, then it shouldn’t be controlled by donors, whether it’s in a community foundation or a commercial setting.
The Chair: Dr. Madoff and Ms. Marques, thank you very much. It has been very informative. You’ve provoked a lot of questions. I give you the same message I give every witness that we have. If, as you watch the proceedings as we move along, you see there’s something that we’ve missed or something that you would like to add, please feel free to do so via the clerk and send it to him. He will then make it available to all of us.
Turning to our next panel, by video conference from Cape Breton, Nova Scotia — it’s always good to talk to people from home — is Dr. Catherine Leviten-Reid, Associate Professor, Community Economic Development of Cape Breton University; with us here in the room is the Réseau de l’action bénévole du Québec, Ms. Marilyne Fournier, the Director General; and via video conference, from New York, the Co-Founder of WE Charity, Mr. Craig Kielburger.
Thank you for accepting our invitation to appear. I would now like to invite the witnesses to make their presentations. I would also remind them that, as per instructions they have previously been given, their presentations should not exceed five to seven minutes in length. Following the presentations, we’ll have questions from my colleagues. I ask both the senators and the witnesses to keep your questions and answers short so we can get in as many questions as possible.
Catherine Leviten-Reid, Associate Professor, Community Economic Development, Cape Breton University, as an individual: I hate to disappoint you. The fact of the matter is I’m not from Cape Breton originally. I’m from near Guelph, Ontario. But in any case, there you go.
The research you’ve requested to learn about this evening is on different ways of volunteering and what people potentially gain from doing so. The research was supported through a grant from the Social Sciences and Humanities Research Council, and it was a community university research alliance that supported research on the cooperative sector. At this time, I’d like to acknowledge my co-author, Dr. Robert Campbell.
For those of you who may not be familiar with the cooperative model, a co-op is a kind of organization that’s democratically controlled by its members and follows an international set of principles, including cooperation among cooperatives and concern for community. They inherently feature volunteerism since members are involved in governance by serving as directors, and sometimes co-ops have other kinds of volunteers as well. One example is a preschool co-op where parents or guardians may assist with setting up at the beginning of the day.
I analyzed data on non-profit housing co-ops. These co-ops have boards of directors consisting of tenants. That’s one way how people living in these housing co-ops potentially volunteer. There are other ways that tenants may volunteer as well. They might plan events for members or they might write newsletters or help with the maintenance work. The data that I analyzed were collected by CMHC about 16 years ago.
For this paper I’m talking to you about right now, we asked two research questions. The first research question was: What kinds of skills and capabilities and relationships do people develop when they volunteer in a housing co-op, if they develop them at all? Our second question was: Does involvement of different kinds lead to different kinds of benefits? For example, will the person who is volunteering experience more benefits by being on the board of directors, or does it really matter what you do as a volunteer in terms of what you get out of it?
The different kinds of skills and capabilities we looked at included whether or not people reported that they developed financial skills as a result of being involved, whether they developed operational skills, organizational experience, better skills in working with others, and if they developed more self-confidence.
In the study, the most common benefit that was reported through volunteering was making friends, and actually 60 per cent of participants identified this. The second-highest skill was working with others, and about 57 per cent of participants mentioned that. Developing more technical know-how, like financial skills and operational skills, was reported less often, and about 20 per cent of participants identified those particular outcomes. These findings are consistent with the 2010 survey on giving, volunteering and participating, which found that the most common type of benefit reported by volunteers across Canada was developing interpersonal skills.
In terms of whether the kind of volunteer work you do impacts how you benefit, let’s start with skills development and self-confidence. We found that being on a board of directors and organizing social events versus not doing these things increased the odds of reporting that you develop financial skills, operational skills, that you gained organizational experience, that you improved your skills in working with others and you improved your self-confidence. Helping with operational tasks increased the odds of reporting some of those outcomes but not all of them.
Second, being on the board generally had a stronger effect compared to the two other kinds of volunteering. The likelihood of saying that you developed financial skills was greater if you served on the board of directors versus planning social events or helping with operations. The odds of developing self-confidence, improving skills and working with others and gaining organizational experience were also higher through board involvement.
With respect to whether people developed social ties, we found that being on the board and organizing social events both increased the odds of reporting that you made friends and that you strengthened your personal support, but here, helping to organize social events had a stronger effect compared to being involved in governance.
Just so you know, as a final benefit, we also looked at whether people reported that they gained an ability to influence decisions over the housing in which they were living, and all three ways of volunteering increased the odds of reporting that outcome, but serving on the board had the strongest effect.
What were the conclusions from this study? I’m going to repeat a line from the paper and say that the research provides more evidence that people learn, grow and make friends when they lend their time. This is consistent with research done around the world that generally shows that people benefit from volunteering by getting to know people and by developing civic and job-related skills.
It’s just one paper, but it provides some evidence that the kind of activities you do when you volunteer has an impact on what you get out of it. If you’re involved in governance, there’s a greater chance you will develop a range of skills and there’s a greater chance you’ll develop self-confidence. I also think it’s important to note that it’s not just through being involved in governance that people are able to benefit professionally and personally from volunteering, so it can’t be dismissive of other tasks. You can help with social activities or other more discrete tasks and still learn from your involvement.
The Chair: Thank you very much. We appreciate that.
Craig Kielburger, Co-Founder, WE Charity: Mr. Chairman, honourable members of the committee, first, let me add that I’m proudly Canadian. I simply find myself in New York at the moment for the UN General Assembly meetings.
It’s a privilege to have the opportunity to share with you some of my experiences in the social enterprise sector, our work with young Canadians and how a new generation is embarking upon new ways of creating social impact specifically through social entrepreneurship.
We’re supportive and pleased with the recommendations laid out in the report put forward recently by the Social Innovation and Social Finance Strategy Co-creation Steering Group, in partnership with the Government of Canada, and we believe it will actively contribute to shaping the framework for future social enterprises and social innovation in Canada.
Allow me to share what we do as a case study on social enterprise in this country, some of the challenges and some of the learnings.
Our organization has two divisions. The first division is WE Charity, formerly known as Free The Children, which supports and engages more than 4 million young people and their families in service learning. Globally, we reach about 1 million beneficiaries through international development programs.
The second division is a social enterprise called Me to We, which creates products, experiences and services with a mandate to financially support WE Charity. Me to We has found innovative ways to integrate purpose with profit, employing marginalized populations around the world and giving back to the charitable sector.
In total, we have 650 full-time staff in Canada supporting program delivery both in French and English, and I’d like to share a bit of our journey in establishing a social enterprise in this country.
In 2006, in an effort to find stable revenue for the charity, we sought to establish a social enterprise. Our first challenge was the fact that there was no legal definition of a social venture or enterprise in Canada. We were fortunate to have Torys and Miller Thomson law firms guiding us pro bono to create a legal framework in governance. As context, we went through this process to create a system of checks and balances that included submitting the legal structure for review to the public guardian trustee of Ontario, engaging third parties for a further review that included a retired Supreme Court justice and a retired former prime minister with his law firm. We completed these steps in order to ensure the social enterprise would not only meet all legal requirements, but also to meet public assurances. The law firm estimated that this process would have been a six-figure investment had we not received the pro bono support.
Our second challenge was we could not identify a social investment vehicle option in Canada. To that end, we were not successful in securing the funds in Canada but we were able to start up via support we received from a Canadian living with a U.S.-based entity, a Canadian by the name of Jeff Skoll. You might be familiar with his groundbreaking work as the first president of eBay and as the co-founded of the Skoll Centre for Social Entrepreneurship at Oxford University.
I simply show this example to underscore the challenges that need to be overcome for a single social enterprise to establish itself and operate in Canada.
Today we’re proud of the impact: 1,500 women in developing countries are employed full time by Me to We, making artisanal products for our 5,000 volunteers who annually participate in our global service trips. We provide leadership training and programs coast to coast to coast in Canada, including with Indigenous youth populations.
Building off this learning, we’re now dedicating ourselves to establishing what we refer to as the WE Social Entrepreneurship Centre, the first in the country exclusively dedicated to supporting the incubation and acceleration of social enterprises. The centre will enable the next generation of social entrepreneurs from all corners of the country, while ensuring they have access to seed funding and exceptional programming thanks to a secondment program from our partners in business, academia and the non-profit. The program will be 100 per cent free of charge, with 75 per cent of spaces offered to marginalized populations to build their capacity to grow and successfully scale their ventures.
However, there are many more Canadians looking to make a difference in their communities. Having experienced some of the challenges entrepreneurs today still face, I humbly offer a few recommendations to reflect and also underscore the further recommendations put forward by the Social Innovation and Social Finance Strategy Co-creation Steering Group and the Government of Canada.
First, there is a need to modernize our policy and regulatory framework to create the conditions for social innovation, social finance and social purpose to flourish. As non-profits experience increasing pressure to find new revenue sources to become more sustainable without cutting costs, social enterprise models offer an innovative solution. The challenge exists because our current legislative framework categorizes social enterprises based on a tax status instead of looking at the combination of factors that make these businesses or entities such a valuable component of a healthy, sustainable and impactful Canadian social sector. For non-profits to take full advantage of this opportunity, they need to be given far greater freedom to establish a social enterprise. Part of the problem stems from the fact that there is no common agreement on what a social enterprise entails and that the legal hurdles to establishing one can be complex. By standardizing and modernizing the regulatory framework, the federal government can and should lead the way towards enabling the sustainability of the charitable organizations that benefit all Canadians.
Second, there is a need for more capital and funding to scale the social enterprise sector. Social enterprises face barriers in accessing public and private funding opportunities. There are funding opportunities currently at all levels of government; however, they are typically fragmented and often only one-time investments. Although the businesses can prove to be profitable and sustainable, they often encounter barriers to overcome through commercial operations such as securing mortgages for operating spaces. Allow us to humbly support the recommendations, and specifically No. 6, from the Social Innovation and Social Finance Strategy Co-creation Steering Group, which calls for the creation of a social finance fund to increase access to capital.
In conclusion, by creating modern and forward-looking legislation, honourable Senate members, you will have helped to pave the path for all social entrepreneurs to walk upon. The social sector has spent a myriad of funds and grants across all levels of government, which have proved incredible and much-needed relief to the social enterprise sector, but it is not a sustainable solution to the collective problems in the scale of the sector.
We humbly advocate on behalf of the organization, on behalf of those innovative ideas that have not been able to secure funding because their mandate is not solely profit driven or because they do not have the initial capital for social venture or whose ideas have been deemed too risky in the traditional for-profit world and access to capital and legal structures because they’re working with marginalized populations or tackling ambitious social goals. We humbly seek a framework that allows social enterprise the opportunity to innovative, grow, survive and, most importantly, thrive.
Thank you, honourable members, for your time.
The Chair: Thank you, Mr. Kielburger. We do appreciate it.
[Translation]
I now give the floor to Ms. Fournier.
Marilyne Fournier, Director General, Réseau de l’action bénévole du Québec: Thank you for your invitation. We are very honoured to be able to come talk to you about volunteering, but especially about the impact of a few laws or regulations, at a provincial or federal level, on volunteer action.
The Réseau de l’action bénévole du Québec has 26 members. Our members are groups, associations and agencies with a provincial scope, and they consist of more than 6,000 organizations that work with 1.2 million volunteers. Our mission is to coordinate the efforts of volunteer action stakeholders, recognize and value volunteering, and participate in the development of volunteer action in Quebec.
In that sense, our mandate is to play the role of the Quebec government’s primary stakeholder for any issues related to volunteer action. We were assigned to the 2016-22 government strategy on volunteering on the theme of volunteer action as a free and committed movement. Under that strategy, we were able to conduct two surveys including an overview of how Quebecers view volunteering. That overview has unfortunately not been made public yet.
However, a survey whose results we have published concerned overviews of volunteer work and volunteers in Quebec, not only in terms of the numbers, but also in terms of motivation and the impact on surroundings. Unfortunately, with our time being limited, I will not be able to share much of the statistics that came out of that survey. However, if you are interested I could definitely talk to you about that during the question and answer period.
To go straight to the heart of the matter regarding the impacts of legislation or regulations, we will focus on three issues. First is obtaining charitable status. That is a topic you are surely familiar with here in committee. You know that charitable status is very important for organizations that want to collect donations. It is also very important for private sector backers before they donate to an organization. That status is quasi-essential to the development of volunteer organizations. We have run into some problems in that area. The wait time can be fairly long. It takes six months for files to be analyzed.
We have noted that there are many charitable organizations to which it was suggested, either before or after they submitted an application, to change the objectives of their incorporation — letters patent, general rules — in order to be more explicit about the charitable scope of their activities. Of course, those requests for modification require an investment in terms of time, energy and money for those organizations, for the staff, but also for volunteers. We are talking about various costs. There are legal costs, and the cost of amending letters patent and organizing a special member meeting. None of that is cost-free, and the 60-day wait time is not really realistic when a response is received and some of our objectives have to be adapted. In 60 days, organizations do not always have the time to take the steps needed to change the objectives of their incorporation, among other things.
Something happened recently in Quebec with the newspaper La Presse, which you’re surely familiar with, and which became a non-profit organization. At the Réseau de l’action bénévole du Québec, we have two community members in charge of media. They are worried about the fact that La Presse can become a non-profit organization and that, through a powerful lobby, it can manage to get certain rules on obtaining charitable status changed. They are concerned that, in the end, a non-profit organization as well-off as La Presse that is starting out with a major foundation is considered the same as local community media with strong roots in their community that must find funding to continue to operate and provide services.
In that respect, we would like to recommend that the process for granting charitable status be reviewed in order to reduce the wait time. For instance, there could be a faster way for organizations that are already recognized by their provincial government as contributors to the common good and improved quality of life in communities.
Of course, we would like requests for changes to organizations’ objectives to be avoided. The 10 per cent rule related to political activities is often the reason those organizations will have to reword or review the very basis of their mission. We would like focus to be placed on the fact that political activities are ways to achieve charitable goals as was explained, last July, by Judge Ed Morgan of the Ontario Supreme Court in favour of the Canada Without Poverty organization.
The second issue I would like to talk about was touched on briefly in the first part of the meeting. I am talking about criminal record checks for volunteers. A question was asked about this. Criminal record checks for volunteers is one of the 10 screening steps recommended by Volunteer Canada when the volunteer’s task justifies it.
In Quebec, the provincial police force, Sûreté du Québec, maintains a presence throughout the province and serves most of the population. In December 2015, following a restructuring, Sûreté du Québec decided to stop doing criminal record checks for civil purposes. As a result, agencies can no longer use local Sûreté du Québec stations for volunteers’ criminal record checks. They must turn to private companies, and that leads to new costs for organizations.
However, Sûreté du Québec will continue to conduct checks on volunteers who work with vulnerable persons. The idea is not only to fall within the definition of a vulnerable person, but the organization must also show a set of factors that make the person vulnerable at the time of receiving volunteer services. It is not so easy to determine who the volunteers who really work with vulnerable persons are and can therefore be subject to Sûreté du Québec’s criminal record checks.
The reason Sûreté du Québec is continuing to conduct checks on volunteers who work with vulnerable persons is the fact that only a police force can do restriction checks. Of course, there is the criminal record, but there are also all the restrictions that will not necessarily show up when a criminal record check is conducted. That is what is checked when it comes to vulnerable persons. There is a lack of logic here because Sûreté du Québec is the provincial police force in Quebec. The Government of Quebec concludes agreements with organizations that work with volunteers and requires them to conduct criminal record checks on their volunteers. However, if those tasks do not fall within Sûreté du Québec’s definition of work done with vulnerable persons, they cannot be checked by their police force. So that leads to costs to check volunteers’ criminal records, to meet a requirement of a government program, without having financial support to conduct that screening. Obviously, in that case, money is no longer used to serve the public. That is a fairly significant issue in Quebec with respect to volunteer action.
In that sense, we would like either the provincial or federal government to provide a criminal record check service to all organizations that rely on volunteers. If that isn’t possible, why not consider creating a general volunteer fund where organizations could request some form of reimbursement for the cost of conducting criminal record checks.
I want to make one last point. The Quebec government recently began the process of amending the Lobbying Transparency and Ethics Act so that it includes all not-for-profit organizations. Fortunately, this amendment was abandoned at the end of the parliamentary session, but it would have had quite significant repercussions for us. It’s possible to lose sight of the purpose of a not-for-profit organization’s activities, which serve the collective interest rather than a specific economic interest. The administrative process for reporting lobbying activities is also burdensome for organizations that often rely solely on volunteers. Lastly, we’re concerned that the fact that volunteer board members are being grouped with official lobbyists and seen as having the same duties and responsibilities may interfere with the recruitment of new board members to sit on various boards of directors.
On that note, we should refer to the observation made by Nancy Bélanger, the Commissioner of Lobbying of Canada, in a case involving the Canadian Firearms Advisory Committee. She found that only people who are paid to communicate with federal public servants are considered lobbyists. We also recommend that special attention be given to any efforts to amend lobbying legislation or regulations. This would ensure that community organizations, charitable organizations, groups, foundations and not-for-profit coalitions that serve the public through volunteer work are not subject to the same lobbying legislation as private businesses, individuals or other not-for-profit organizations.
Thank you.
The Chair: Thank you, Ms. Fournier.
[English]
Thank you to all three presenters.
Senator Omidvar: Wonderful panellists. Thank you for the work that you all do.
My first question is for Ms. Leviten-Reid. You talked about the knock-on effect of volunteering on interpersonal skills and friendships. Did your research also cover the knock-on effects of volunteering and social networks on gaining employment?
Ms. Leviten-Reid: No, unfortunately I did not. That’s a great research question and it would be a great research project.
Senator Omidvar: Mr. Kielburger, thank you for your work on social enterprise. I know you’ve created a number of organizations. Your presentation makes it sound as if Canada is still in the Dark Ages or in primary school on social enterprise. You had to go to the United States. Do you believe that other jurisdictions are ahead of us? What can we learn from them?
Mr. Kielburger: I certainly wouldn’t characterize us as in the Dark Ages, and my apologies if that message came across.
Senator Omidvar: That’s my language.
Mr. Kielburger: I certainly do feel we can learn from other regions. For example, the U.K. alone has sent me a thousand successful social enterprises.
Part of the challenge is, in Canada, registered charities can only engage in businesses that are related to their mission or they are predominantly volunteer run. For example, a charity mandated to alleviate poverty can run a second-hand clothing store but not a recycling plant or use the profits from that plant to fund its work. Private foundations in Canada cannot carry out core businesses at all.
The Canadian Revenue Agency recently ruled that not-for-profit organizations cannot intentionally generate surplus income and retain their income under the tax act with a not-for-profit system. If they earn revenue in excess of the costs, they’re entitled to have those revenues as tax exempt only if they earn them accidentally or serendipitously.
The challenge inherent in the non-profit world is to build alternative revenue streams and/or to be able to retain earnings through earned income enterprises so that we can build unassigned reserves, the equivalent of capital, to seek loans, for example, from banks to further our mission.
Canada has a vibrant social enterprise sector. There are opportunities for continuous improvement through a legislative framework to evolve and to continue to support this framework.
Senator Omidvar: Thank you.
Ms. Fournier, my French is certainly not good enough to ask you a question, so I’ll ask it in English. What is the current legislation federally that covers lobbying by not-for-profit charities, federations, et cetera? Are they required to register as lobbyists at this point? Some of them may well be paid to do so, like the YMCA, for instance. It has a national office here and they have a government relations individual.
[Translation]
Ms. Fournier: I don’t think so. Unfortunately, I’m not aware of what’s happening at the federal level with respect to the Lobbying Act. I think that, in Canada, this isn’t the case for charities that work with volunteers. That’s my impression. Unfortunately, I don’t know when it comes to Canada.
Senator Miville-Dechêne: I want to thank you three for your presentations. My questions are for Marilyne Fournier. You referred to a general volunteer fund, which would be an idea for the federal government. I’m somewhat intrigued by the issue of costly police checks. Is Quebec the only province where the Sûreté du Québec does not conduct the checks for organizations?
Ms. Fournier: The new directive has been in effect since 2015. The directive is for all Sûreté du Québec police stations.
Senator Miville-Dechêne: Are things different elsewhere?
Ms. Fournier: There’s currently no standard approach to criminal record checks of volunteers across Canada. This observation was made regarding the person or organization that receives the information, the type of information provided and the information disclosed or not disclosed in the person’s file. It’s very inconsistent. To my knowledge, most provincial police forces still conduct checks. A national committee was established with various police force representatives. We’ll see whether criminal record checks for civil purposes will still be conducted by provincial police forces.
Senator Miville-Dechêne: I’ll ask a more general question about trends in Quebec. In Canada, people are doing fewer hours of volunteer work than before. Is the trend the same in Quebec? As an organization, are you thinking of ways or solutions to change the trend?
Ms. Fournier: In 2017, we conducted a survey that showed that 38 per cent of Quebecers volunteer with organizations. This percentage is somewhat higher than the latest Statistics Canada data. It seems that perhaps the volunteerism rate is increasing slightly. How could we better help or encourage people to volunteer? We need to clear up many of the ideas around volunteering. People think that it takes a great deal of time to do volunteer work, even though individuals spend an average of 11 hours a month volunteering for organizations in Quebec. It’s not 11 hours a week. There are many things to clear up.
Organizations could also receive better support from their provincial and federal government. The training provided to workers and people involved with volunteers could be improved to ensure better volunteer retention. We must take into account the recruitment of new volunteers, but we must also know how to keep volunteers interested and motivated within our organizations.
Senator Miville-Dechêne: How can better support be provided at the federal level? We’re in Ottawa. What could the federal government do to better support volunteerism?
Ms. Fournier: We talked about a general fund where organizations could be reimbursed for the criminal record check. Perhaps the same fund could also be used by organizations that want to promote training for workers who are involved with volunteers? The organizations could also be reimbursed for some of the cost of training volunteer supervisors. This could also be an example.
How can the promotion and recognition of volunteer work be better supported? The mission of Volunteer Canada in Canada and the Réseau de l’action bénévole du Québec is to recognize and promote volunteer work. Increased funding for these organizations could help ensure better promotion and recognition of volunteer work.
Senator Miville-Dechêne: Thank you.
[English]
Senator Martin: Thank you to all our presenters.
Mr. Kielburger, I’ve been a fan of the work that you are doing with our youth, so it’s really great to hear from you this evening. I have so many questions about social enterprise because I know people who are doing such good work in Canada. In the United States, does the government support social enterprise with such a fund? Does that exist?
Mr. Kielburger: No, not to my knowledge in the United States. We can turn to Europe for far better examples. Many European countries have various funds that have been established.
The core is to first establish a legislative framework, and then we typically see the funds that follow. What I mean by that is it’s structurally very difficult for not-for-profits to access these funds. It’s structurally difficult in Canada to build up any viable business within a non-profit structure because of how the legislation is in place. As mentioned, a charity cannot generate intentional revenue in excess of the funds for the entity itself. In order to establish the type of funding structure we see in the U.K. or parts of Europe, first the legislation needs to be in place, and then you see systems which follow.
The U.K. has an interesting model that was a public-private partnership. Big Change is an organization that the Branson family, Sir Richard Branson, has been extensively involved with. They have actively worked on a number of interesting U.K. ventures, for example, The Clink, which is an entity that’s established in U.K. prisons. Restaurants are established where inmates serve meals in medium and low-security prisons. The government provided some of the start-up capital for this through a fund that was accessed. The mission was to lower recidivism rates while creating a sustainable revenue stream to support this social mission entity.
Those types of entities currently in Canada would legislatively be difficult to operate, so, in essence, it is a bit of a chicken-and-egg: First the legal structure must come and then the funds would be extremely beneficial in this country.
Senator Martin: Legislation can often take a long time. It depends on the will of the government of the day and the legislators involved. I’m glad you mentioned Richard Branson. He is a very successful businessperson. I was wondering about the role of corporate Canada before legislation, which we can move toward, but the role of corporate Canada in really supporting social enterprise.
Mr. Kielburger: Absolutely. Corporate Canada can support social enterprise within the current structure that exists, which is often a legally separate for-profit entity that is either wholly owned or in a reporting structure up to a non-profit. As an example of that, the Business Council of Canada — we are grateful for their core support, which has the CEOs of some of the largest corporations across the country. We’re grateful for the support of entities like KPMG, which is a leader in Canada, through their social innovation team. They have been actively involved in providing pro bono support for social enterprises in the country.
There’s an extraordinary opportunity in the procurement, corporate secondment and mentorship, or in the organizational structural support that corporate Canada can play. Where you see entities having been successful in this country, it’s because they’ve been able to establish those types of wonderful and mutually beneficial partnerships. In the case of our social enterprise, we provide fee-for-service to a number of Canada’s largest firms, and they provide in-kind pro bono support that exponentially supports the growth of our organization.
Senator Martin: The other thing I’m worried about in all of this is that, as we’re looking at this charitable sector, some of the great organizations and individuals undertaking social enterprise, there are the large successful groups and then the smaller community groups and entities that really need that step up. With the Social Innovation Fund, is there advice or are there recommendations you have to ensure that everyone, including the smaller groups, would benefit? It would be very competitive. You’re very successful in what you’ve done, but we’ve heard of some really hard-working charities and organizations for which, even with program funding that’s in place, it’s really hard to even access these funds. I don’t know if you have any comments about making it accessible to all.
Mr. Kielburger: Absolutely. I appreciate the essence of your question. I feel for it. On an annual basis, hundreds of young people contact us seeking, with their dream, to establish a social enterprise. In the ecosystem necessary, there is a legislative framework necessary, there are funds necessary, but there’s also a continued role for non-profits like us and others to build the capacity of individuals in order to thrive in a social enterprise area.
Here’s a tangible example: We are embarking on a project with Shawn Atleo, the former AFN head, to build the capacity with Indigenous communities to establish windmills to generate energy in Northern communities that generate profit, that protect our environment and that support the wider economic growth by having a stable energy source. This was an initiative of local communities that came to him. It wasn’t as simple as an access to capital that was the inhibitor; it was the human capacity. The humble offering that we’re able to try to make on this, again, is the centre we’re seeking to establish that would provide 75 per cent of the spaces to marginalized populations to provide that support.
So if the government is willing to provide the support within the legislative framework and support within access to capital — and by the way, if I may humbly say, between those two requests, I would say the legislative framework is far more important — but if the government is willing to provide those two aspects, there is the requirement of groups like ours, universities, Indigenous associations and others that must help build the capacity to ensure that historically marginalized populations — new Canadians, Indigenous communities, et cetera — have equal access to these opportunities and the capacity to succeed in this area.
The for-profit area, as we all know, has not created sufficient opportunities in entrepreneurship for job creation for marginalized populations. That’s why there is such a wonderful and untapped opportunity in the social enterprise community to create that more level playing field.
[Translation]
Senator Maltais: I want to thank Ms. Fournier for being here and for sending us her brief. I had the time to read it. It’s very well done and very clear. You were very thorough.
Before starting, I want to make a distinction concerning the remarks of our witness, who confused social economy work and volunteer work. Social economy work is paid and volunteer work is not paid. I believe that sometimes we need to “get down to earth,” as we say back home. We must step down from the university pedestal and see what’s happening in the community. I was a member of Parliament for many years, Ms. Fournier, and I often worked with people in need and with organizations that had no funding. I didn’t see, for example, the women’s shelter in your brief, but you addressed it differently. I come from a remote region, Côte-Nord, and you come from Abitibi. You know what issues I’m referring to.
The Sûreté du Québec refused to conduct criminal record checks of volunteers, which is unacceptable. At this stage of the election campaign, you should share your concerns with the four candidates for the premier position.
Ms. Fournier: The Fédération des centres d’action bénévole du Québec is very actively making demands of the various party leaders. That said, it should be noted that the Réseau d’action bénévole is working with the Ministry of Public Safety to define what constitutes volunteering with vulnerable people. It’s not just about the characteristic of the person. The task itself must be of a vulnerable nature. I said earlier that volunteerism isn’t well known. It isn’t well known at different levels. More work must be done in this area.
Senator Maltais: With everything happening in society, it’s normal that individuals who have authority over people in difficulty should be “clean,” as we say in good Québécois.
Ms. Fournier: The 6,000 member organizations of the Réseau de l’action bénévole du Québec agree with you, Senator Maltais.
Senator Maltais: In your brief, Ms. Fournier, you noted that the current rules prevent many organizations from being approved because their activities are political. Can you elaborate on this issue?
Ms. Fournier: The Canada Revenue Agency, in the charitable organization designation criteria, requires that political activities amount to a maximum of 10 per cent of the activities carried out by the organizations. Therefore, if we show that our political activities take over 10 per cent of our time and resources, we may lose our charitable status or we may not be granted charitable status. We don’t engage in political activities at the community and volunteer organization level for monetary or special interest reasons, but for the community. We were very pleased with the Ontario justice’s decision for Canada Without Poverty. The decision stated that political activities must be considered in terms of their ultimate goal, which is to improve living conditions.
Senator Maltais: I would like to address your survey. People who volunteer have different reasons for doing so.
Ms. Fournier: Yes.
Senator Maltais: You listed a few reasons. In small communities such as small parishes of 400 or 500 people, it’s rather difficult to recruit volunteers. As you know, the volunteers are always the same people. How do you attract new people, especially young people? Young people, if they’re coached properly and given clear objectives, will become top-notch volunteers. Do you have a way to attract them?
Ms. Fournier: I could speak for hours about this topic. Organizations must adapt to the new realities of volunteering. In both small and large communities, volunteers will no longer want to be involved for 15 hours a week. Volunteering from home should be promoted. From now on, volunteer work will focus mainly on causes and interests. It’s no longer a matter of getting around. We must take this factor into account with the advent of new technology. The goal is to ensure that organizations can adapt to the new realities of volunteering.
We have seen that people start volunteering for very intrinsic reasons. They volunteer for pure enjoyment, because they’re interested in a particular cause, or to socialize and develop a sense of belonging. When they’re asked why they want to continue volunteering, they say that they want to contribute to their community and use their skills.
In remote areas, people get involved mainly to socialize and create a network, which isn’t the case in major centres. The survey conducted in Quebec was divided into 17 reports for each administrative region in Quebec. When we look at Abitibi, Saguenay and Côte-Nord, we can see that socialization comes first.
[English]
Senator Seidman: Thank you all for your presentations.
I’d like to ask a more first principles type of question. If I look at the Statistics Canada report 2004 to 2013, which is the most recent one that I found on volunteering, they very clearly differentiate, and we all know there’s a big difference between formal volunteering and informal or direct helping activities. I think that distinction needs to be made and thought about. If you look at direct helping activities or informal volunteering, 82 per cent of Canadians aged 15 or older report helping people directly, even though formal volunteering seems to be diminishing. If you look at young people, they’re more often doing informal volunteering, and they report to the extent — 91 per cent indicate they provide help directly.
So if that is the case, and you might dispute that — and I think I might like to start with Mr. Kielburger because you are quite focused on young people, and it’s an important issue with young people. If it is the case that informal caregiving is really so common, how could we benefit from that? How could we channel the fact that people do engage in informal caregiving? How can we connect that to the more formal sector and enrich it and then help young people to contribute and to have a more lifelong kind of attitude about volunteering? I think that’s the essence. If it’s so rewarding at a young age, how do you then channel it and use it to a more lifelong kind of volunteering? Sorry, it’s a long question.
Mr. Kielburger: I will do my best on that very thoughtful question. I would answer it in two parts, if I may.
I appreciate the thought of your question because I think young people face a unique challenge in formal volunteering. Frankly, most organizations have restrictions based on liability concerns or other factors that limit a young person’s ability to volunteer. For those who don’t, there’s an informal treatment of youth that often treats them as a second-class volunteer. They are doing the proverbial sealing of the envelopes and licking of the stamps.
To answer the heart of your question, the second part about how do we seek that opportunity, allow me to show you something we’ve done in the U.S. This is the non-social enterprise side of our work where we’ve created a partnership with the college board in the U.S. If you’re not familiar with the college board in the U.S., it’s the North American association of all the colleges and universities. They operate, for example, the SATs for entrance into U.S. colleges and the APs, the advance placement courses.
They found that student achievement was best achieved through a framework of service, where they took the fundamental course that every student had to learn in school, these AP courses — actually, they could opt in to learning in school and they chose these AP courses — and they taught the course through a framework of service. They taught computer science, for example, by coding for non-profits. They taught biology by testing water in the community. They taught Spanish by working with a new immigrant in filling out government forms. So how they structured the volunteer opportunity was by leveraging the schools, billions that are spent in the infrastructure of teachers and physical infrastructure — you don’t have to pay or provide additional resources against this — and they leveraged the school curriculum by infusing service-based learning so that students fulfilled their core course objectives but did so in this structured way.
One of the distinguished senators asked a question about jobs. They found that this was recognized on transcripts when students applied magna cum laude or summa cum laude, when they applied to colleges or universities or into the workplace, because this was a recognized designation, verified by the teachers, that the students had done a certain level of service. I believe students need to be structurally rewarded with badges and other workplace designations to celebrate their service and what they do.
To summarize, I think this is such an exciting opportunity and with great humility would be happy to have a conversation offline because this is a personal passion.
The Chair: Thank you. Dr. Leviten-Reid, do you have a comment?
Ms. Leviten-Reid: I can respond to that question as well?
The Chair: Please.
Ms. Leviten-Reid: Thank you. I did want to point out to you that with the data from the survey on volunteering, giving and participating, there are more young people who volunteer than older people. You’re most likely to volunteer if you’re between the ages of, I believe, 15 and 19. It’s just that older volunteers contribute more hours than younger ones.
There’s also something quite compelling with that data. If you look at why people don’t volunteer, and I can’t remember when it’s disaggregated by age, but about 50 per cent of respondents say they don’t volunteer because they’re not asked. So how can we ask more people to volunteer?
I also want to point out that there is a relationship between getting involved younger in life and continuing to volunteer when you’re older. That involvement can actually be the kind of service learning that was previously mentioned. It can also be even the mandatory volunteering that some high school students in Canada have to do. I know some people disagree with that approach, but even with mandatory volunteering, the evidence is mixed on it, but it doesn’t necessarily deter people from volunteering later in life.
[Translation]
Ms. Fournier: We need to take another look at the definition of volunteerism. Informal volunteering has been a major issue for us in recent months because mutual assistance and solidarity are rather broad concepts. Should every act that I do for free without obligation be considered volunteering? That’s the big question. According to the statistics, young people are heavily involved. I’ll refer to my colleague’s example.
When citizen engagement or a community contribution becomes mandatory to obtain a diploma, we’re no longer in the realm of volunteering. We’re slowly losing the sense of volunteerism. Over the long term, we must show that these social engagement obligations will ensure that the people who graduated 10 or 15 years ago are more likely to volunteer. In Quebec, we’ve yet to find any studies on the subject. We would like to focus on this issue here in Quebec in the coming years.
The latest surveys conducted in Quebec of 2,200 young volunteers show that 88 per cent of young people under the age of 35 believe that volunteering enhanced their skills, that 55 per cent of young people under the age of 35 were put in contact with potential employers through their volunteer work — 50 per cent of young volunteers is a lot — and that 38 per cent of young people under the age of 35 found employment through their volunteer work. Therefore, promoting volunteer work as a stepping stone to employment is a real way to attract young people and put into perspective the skills development, volunteer work and potential employment opportunities. This is very worthwhile.
According to our recent survey, 47 per cent of volunteers saw their parents doing volunteer work. If we want our young people to do the same, we must set an example. To give you an idea, 30 per cent of non-volunteers said that they saw their parents doing volunteer work. The “pay it forward” concept comes into play when we see family members volunteering.
The Chair: Thank you.
[English]
Senator Omidvar: My question will be brief. It’s to Mr. Kielburger. Good luck to you and us at the U.N. You’ve been very specific about staging a social enterprise ecosystem. You’ve said, forcefully, regulatory framework. First, I don’t know if you read the Senate’s own study on social finance. I wonder if you would comment on other parts of the ecosystem. What else is required to move the levers from accidental to purposeful and strategic, outside the regulatory framework?
Mr. Kielburger: Thoughtful question. Given we’ve both dedicated our lives, albeit in a much shorter timeframe so talk about with great humility, towards advancing social causes, I certainly would equally defer the question to yourselves, distinguished senators, who are there.
The broader question of the ecosystem comes to the idea that I believe there is a spectrum. There is a need for incubators and accelerators like we see of Mars or CSI or what we’re seeking to do through the social entrepreneurship centre. There’s a need for the actors themselves, the extraordinarily dedicated non-profits or young passionate, change makers who are seeking to create employment for vulnerable populations or bring financial inclusion, tech products, et cetera. There’s a need for the philanthropic community who are deploying the capital for their foundations to look for program-related investments where they can deploy their capital not through traditional investment vehicles but through investing in social enterprise structures. There’s a need for government to build a legislative framework as part of this.
In that broader question, I think that there is no shortage of extraordinary thought leadership that has been dedicated to this area. As you mentioned, the Senate has worked in this. I am referencing one of multiple reports, the Social Innovation and Social Finance Strategy Co-Creation Steering Group report, that most recently came out last week. I don’t believe there’s a dearth of knowledge of what we need to do. I do believe that now we have a wonderful opportunity in front of us, and I look with great respect to your group to lead the way, and we’re honoured to play a small part as our larger ecosystem.
The Chair: Thank you. We do recognize there are a lot of questions. Colleagues, I think you’ll agree tonight has been an excellent panel. I want to thank Dr. Catherine Leviten-Reid, Madam Fournier and Mr. Kielburger for their participation. I would encourage them, as they follow our activities in the committee, if you see something we’ve missed or that you would like to add, if you walk away and say, “I forgot to tell them this,” don’t hesitate to do that via the clerk. Send the clerk the information and he will then get it to the rest of us. We would like to thank all of you for being here. Thank you for your attendance.
Colleagues, I would ask the steering committee to stay for a few moments to review one item.
(The committee adjourned.)