Proceedings of the Special Senate Committee on the
Charitable Sector
Issue No. 12 - Evidence - March 18, 2019 (morning meeting)
OTTAWA, Monday, March 18, 2019
The Special Senate Committee on the Charitable Sector met this day at 9 a.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: Honourable senators, I would like to welcome everyone back and it’s a beautiful day here in Ottawa. It is cold but beautiful.
Today I welcome you to this meeting of the Special Senate Committee on the Charitable Sector. I’m Senator Terry Mercer from Nova Scotia and chair of the committee. Today the committee will continue its study to examine the impact of federal and provincial laws and policies governing charities, not-for-profit organizations, foundations and other similar groups; and to examine the impact of the voluntary sector in Canada.
For our first panel we have Donald J. Bourgeois, Lawyer, Fogler Rubinoff LPP; and from Drache Aptowitzer LLP, we have Karen Cooper, Legal Counsel.
Thank you for accepting our invitation to appear. Mr. Bourgeois will start.
Donald J. Bourgeois, Lawyer, Fogler Rubinoff LLP, as an individual: Thank you for inviting me to appear today. I do appreciate the opportunity and believe the Senate’s examination of this sector is both important and timely as Canadians continue to adapt to changes in our lives; societal, cultural, technological, economic and other changes. It’s important that public policy and the law reflect what is in the public interest in the 21st century, and that involves balancing of interests that should be done in a reasoned and reasonable manner by parliamentarians.
I started working in the charitable and not-for-profit sector soon after graduating from law school in the early 1980s. Some friends and I wanted to start a recreational theatre for youth and adults in our community. Provincial funding constraints meant that high schools in our community were doing fewer productions. We wanted students and adults at those schools to get the benefit of what we received from those productions. Being the recently called to the bar person, I was asked to do the paperwork. And I was also allowed to audition for The Odd Couple, our first production and I have to say, I was a darn good Murray.
It’s a great play. My mother has the review with her.
What I did learn from that paperwork experience was that there was a complexity that I had not fully appreciated as a first year out of the bar lawyer. The law and public policy were difficult to locate much less to understand and apply. The only legal literature at the time was small — and I mean very small parts of O'Brien's Encyclopedia of Forms and similar services.
This prompted me to write that world famous book The Law of Charitable and Not-For-Profit Organizations. I did not know how ordinary citizens could possibly navigate through the law and the policy dealing with charities and not-for-profit.
And the book was, in Canadian terms, a big seller. It prompted up to the fifth edition, with some minor changes in the title and other related texts. Since then, there have been other works brought out in order to assist.
My second lesson was that ordinary citizens and many professionals are scared of what they do not understand. I’m surprised to this day by individuals who did not incorporate, do not apply for registration as a charity or take actions to mitigate risk and to advance what they want to do because they fear what they do not understand. Senator R. Black and I worked on a community group several years ago, and you could see that in our interviews with individuals for the Trillium Foundation. They didn’t understand the process. There were people coming for money and in some cases, people were not incorporated and did not understand the risks involved.
The third lesson I learned — and I say this without disrespect to your colleagues and fellow parliamentarians — the charitable not-for-profit sector is glossed over with lots of kind words but little action. Political bromides rather than concrete action is the norm, not the exception. Political leaders and business leaders speak eloquently about the importance of the sector — and we do as well — and how it contributes to society and so forth and then walk away. Admittedly, I exaggerate this point and oft times, it’s the sector that bears substantial responsibility for the circumstances. But there is a lack of sustainability to governmental efforts. I would not say that there is a disdain for the sector, more lack of sustained interest.
How else to explain Ontario’s failure to implement legislation enacted in 2010 to modernize corporate law for this sector. I could point out other examples across Canada at the federal and provincial levels and elsewhere, but to me this is one of the most egregious. It’s a decade. How long does it take to implement a statute?
Other sectors of the economy have deep and broad relationships with governments at all levels. There are departments, ministries, agencies, Crown corporations and the federal and provincial levels devoted to other sectors. They advance the public interest, improve business and trade opportunities, fund innovation, develop or funding infrastructure and so forth; but for this sector there is little from a sustained and sustainable government interest.
Except when things go wrong. That’s correct and a critical part of this. Something will go wrong. We know that. It always goes wrong, but to be able to deal with those things, to respond in an appropriate fashion, to mitigate the risks, to understand those risks before you enter into things. That’s not the skill set in this sector.
When you think about what you, your family and friends treasure the most in life and rely upon the most, I expect those goods and services are likely provided by charitable or not-for-profit organizations. We are reluctant to see the sector as worthy of investment and nurturing. However, I’m not here to whine and complain. In fact, just the opposite. I recognize fully that the sector is the author of its own situation. It is often self-righteous and disconnected. It is too often more political than charitable. It is too often coming with its hands out and complaining when it does not get what it wants merely by asking for it, not demonstrating the value that investment will bring to the community.
I noted about the timeliness of the Senate’s review of this sector. I truly believe that what this committee is doing could be beneficial to the sector in Canada. What is needed is a new guidance or map of where the sector should go. Not on political, terms but on policy terms — on purpose and structure. The law is confusing and open to both abuse and lack of use. This committee could make recommendations to clarify or redefine the law to meet 21st century Canada.
I don’t mean that the committee should recommend the abandonment of the Statute of Charitable Uses 1601 and the common law which has been developed over 400 years since Elizabeth I sat on the throne. There is value in the common law approach to the development of what a charity is. What is not working is the process by which the law is to develop. It’s a costly process that has yielded few results. CRA attempts to work within the legal context in which it finds itself, but it has limited flexibility.
Speaking of Canada Revenue Agency, I’m not here to castigate it, nor the Department of Finance. Both are working through the statute that Parliament can constitutionally use, which is the Income Tax Act which is, in this area, outdate, convoluted and uncertain on how to address these public policy issues of the 21st century, including the issue of how you prevent problems. The Income Tax Act is the default statutory regime to deal with complex public policy issues; ones that do not have a clear right and wrong answer.
For example, to what extent should social enterprises that need to raise revenue to do public good, be able to compete against businesses that pay taxes? What is fair compensation for directors of not-for-profit organizations who are executives? What activities should benefit from the privilege that accrues to charities and not-for-profits? Are these legitimate public policy issues for the Senate or others? I would mention political activities, but parliament has recently spoken on that issue. Which brings me back to the underlying message: It is important that Parliament seriously consider the issues that face the sector. Parliament, through the House of Commons and the Senate is the place where this balancing of interests should occur, or at least provide the principles and cost-effective and efficient processes by which CRA and others may make reasoned and reasonable decisions which advance the public interest. I hope that this committee’s report articulates recommendations to do so. Thank you for giving me the opportunity to speak.
Karen Cooper, Legal Counsel, Drache Aptowitzer LLP: Thank you for the invitation to share my views and insight on the legal issues related to non-profit organizations, Canada Revenue Agency’s treatment of surpluses, the reporting requirements and various related issues.
I’m a lawyer with Drache Aptowitzer LLP in private practice since 2005. Before that I was a tax litigation lawyer with the Department of Justice and rulings officer for the Canada Revenue Agency. A former partner of mine said in 2005 that I came over from the dark side. I suspect CRA and Justice might say the other way.
I also teach a class on the law of charities and not-for-profit and we titled that class after Mr. Bourgeois’ book The Law of Charitable and Non-Profit Organizations. That’s at the University of Ottawa in the faculty of common law.
Because of the information in the invitation I was sent, I want to focus my remarks specifically on the application of the key sections of the Income Tax Act, in particular paragraph 149(1)(l), because that’s the provision that provides the tax exemption for non-profits. You should understand that this is just one paragraph in a very long section that exempts all kinds of organizations from income tax for various and sundry tax policy reasons. Many of the organizations that Canadians commonly understand to be NPOs are not exempt under paragraph one is 49(1)(l), but other paragraphs. That includes boards of trade, chambers of commerce, all kinds of agricultural organizations and all kinds of municipal organizations. I will focus my remarks on paragraph 149(1)(l), but subsection 149(1) lists all kinds of organizations that are exempt from income tax for all kinds of reasons. One of the first legal issues that we often deal with is exactly which of these baskets the organization fits into, because some of the rules are a little less strict, some of CRA’s applications of the provisions are a little less strict if you can fit yourself under one of these other paragraphs. Just a little bit of information in terms of a technical nature.
I will begin with a nomenclature issue, and in this I’m paraphrasing from Mr. Bourgeois’ book, the terms non-profit and not-for-profit are often used interchangeably and generally refer to organizations whose profits are not passed on to their members. As a lawyer, and as a legal issue, I teach students that at the beginning that they are actually very precise terms. When you use non-profit, you are referring to the organizations that are exempt under 149(1)(l) and have to fit within this set of criteria in order to benefit from the tax exemption. If it’s a not-for-profit, we tend to be referring to the corporate status. They are usually incorporated under a not-for-profit corporation statute. I say this because that highlights the complexity that the sector faces. Charities are not-for-profit corporations, but they are not non-profit organizations from a tax perspective. I can draw Venn diagrams for law students and we could spend a good hour trying to get law students, who have already taken basic tax and corporate law before they understand that distinction. Those terms are used to refer to organizations that have far-reaching influence on citizens’ well-being: social, family, community groups, sports, recreation, arts, culture, all kinds of engagement in various social pursuits.
There are 170,000 or more organizations and that’s one of the big issues, namely, how do you count these organizations and NPOs in Canada? If you take out about 80,000 or 90,000 that are charities — we can count those because they have to register there are still a large number of organizations — the greatest number of those non-profit organizations exist in the form of a voluntary association, meaning they are not incorporated. If they are not incorporated, it’s even less likely that we count them. If they are incorporated there is an obligation to file a tax return as a corporation. We can count them because they have to file their tax return but if they are small and organized as a voluntary association, they are just not on the radar unless they are of a certain size.
Also, many non-profits are established under special legislation. I act for one organization whose constitutional document is a pre-confederation royal statute, a royal charter. There is a lot of variety. Basically, 149(1)(l) provides that the organization can’t be a charity, has to be organized exclusively for social welfare, civic improvement, pleasure, recreation or any other purpose except for profit. That’s a broad type of purpose that the organization can have.
They also have to be operated. You have been organized exclusively for social welfare, civic improvement and any other purpose except profit, but you also have to be operated. It’s that part of the statutory provision that causes the most controversy — I’ll come back to that — and then the organization can’t distribute or otherwise make available for the personal benefit of a member any income unless it’s a specific kind of organization.
You can be incorporated, a non-share capital corporation, trusts — there are all kinds of different forms. The basic advantage of being a non-profit is you don’t pay tax on income or capital gains unless, once again, you are a particular type of organization, namely, an organization whose main purpose is to provide dining, recreation or sporting facilitates. That exception was put there for hunting clubs, golf clubs and that kind of thing. It’s a broader purpose than for “registered charity.” That is, any other purpose but profit. They have a broad space within which they can operate and they also have much more freedom vis-à-vis the tax rules for charities. They are not subject to the same CRA scrutiny as registered charities and, as I alluded to earlier, there is no requirement to register with CRA. Many don’t even file a tax return. That’s one of big advantages for being a non-profit.
The big disadvantage of being a non-profit is that they don’t issue donation tax receipts. Unlike business corporations, a for-profit corporation can’t distribute earnings or pay income to members. Then there is the rule that I understand the committee wanted me to spend some time on — and, I’m happy to take questions about — namely that non-profit organizations can’t carry a substantial surplus on its books from year to year other than a reasonable reserve. On the other hand, charities have big endowments and are able to save for the future. Non-profits have limited room to do that. I’m happy to take questions on those issues.
I also alluded to the reporting requirements. Non-profits all have to file a tax return. If they are corporations, they have to file a T2. It’s a short T2, but they have to file it. If they are not a corporation — and this is a revenue test — and their assets are in excess of $200,000 or they have received more than $10,000 in interest, rentals or royalties, they also have to file an information return. It’s not for the purpose of collecting tax but to provide information to CRA. That’s for assets in excess of $200,000 and revenue in the form of interest, rentals and royalties in excess of $10,000. They have to file an information return under those circumstances.
There is another specific exception that I wanted to allude to in proposed subsection 149(5). It applies to non-profits whose main purpose is to provide dining, recreational or sporting facilities to members. The act says they are generally exempt from income tax. However, with respect to their revenues of a certain type there is an inter vivos trust. That is, they deem the existence of a trust and have to file a tax return for the trust where they pay tax on property income or if they’ve disposed of capital property. That’s to ensure that if they actually sell the club and people have an interest in a share in the club there is some form of tax that’s collected and accounted for, but it’s a very specific and very narrow exception.
That’s my general primer on some of the issues that I was asked to speak about. I welcome any questions that you might have. Thank you again for the invitation.
The Chair: One thing you have confirmed for me is my decision many years ago not to go to law school. Thank you. This can become a complicated discussion. I appreciate you trying to simplify it for us. We will start with Senator Omidvar.
Senator Omidvar: Thank you, Mr. Bourgeois and Ms. Cooper. It’s appropriate that we start on Monday morning with complexity and you have just made it more complex for us. There is also a benefit in having a small committee because we can really dig in-depth and ask you the questions that we need the answers for.
My first question is to Mr. Bourgeois. On page 3 of your submission you pointed out a whole number of questions that we would dearly like answers to, but you’ve just posed them you have not answered the question. This question is perhaps for you, Ms. Cooper, as well. The not-for-profit sector is complex in its own way, as is the charitable sector. At this point, should we be distinguishing between the not-for-profits that provide a public benefit and those that provide a private benefit? There are not-for-profits — Ms. Cooper you have mentioned a few — but there are also not-for-profit associations of people, let’s say. I don’t know if that’s true, I’m just making it up — that is, wholesalers, associations et cetera. Should they get the same benefits as a not-for-profit, let’s say the Workers’ Action Centre? Both are exempt from income tax, both receive exemption from the GST, I believe and various other benefits that are not transparent to Canadians. At this point should we consider taking them apart?
Mr. Bourgeois: Thank you for the question. I think you should consider separating those two apart. My job prior to retirement was as general counsel for a Crown agency in Ontario and I was a policy adviser and legal counsel and drafted legislation and all the rest of it. I say that with the caveat that I still have battle wounds from those discussions about how to categorize, but I think it is important because they serve fundamentally different purposes.
One is the public benefit. The other is — and it is a legitimate purpose — that one of the early cases was the Ottawa Lumbermen’s Association, which was there to allow the Ottawa Lumbermen’s Association to be able to develop private purpose reduced cost for their sector. It is a perfectly legitimate thing to do in an association to advance the private interests of those people. That organization could be exempt from taxation et cetera, but it’s doing it for a private purpose that is an important one, economic development, business development, et cetera.
The other aspect of it is the public benefit. I do agree that is a different kettle of fish. It’s a different category of an organization. It probably should have other benefits over and above those that are for the private benefit.
Senator Omidvar: Thank you. I have looked at the not-for-profit sector. It’s huge. It ranges from the really big guys to the really tiny, often unincorporated, individuals. Would you consider that the Canadian Automobile Association, which is Canada’s largest not-for-profit, is a public benefit or private benefit?
Mr. Bourgeois: That’s where I have the battle scars from, but not from the CAA. I am a member of the CAA.
Senator Omidvar: Me too.
Mr. Bourgeois: It is for my private benefit. Whenever I lock my keys in my car, they come and get them out and those types of things. So it is more of a service I’m purchasing from them. But on the other hand, they would argue credibly that they are also there for a public benefit because they advance the discussion of transportation, including public transportation, highway development and all those other things. It’s a good example as to what is or is not, so defining that public benefit is a critical one.
The Chair: Where do airports fit into that? Canadian airports now are not-for-profits.
Mr. Bourgeois: Correct.
The Chair: But they end up making profit, as we know. The end up spending that money in modernizing and expanding. If you go to any of the major airports in this country, they are permanently under construction because they have made money and there is no direction to them by government.
If you are going to make money, why not want to give benefit to the taxpayers by reducing fares, reducing landing fees et cetera, so that it’s cheaper to fly?
Mr. Bourgeois: And that’s a very good example of the use of not-for-profit corporations that can be more flexible, because all of the airports used to be run by the Department of Transport Canada. And with the decisions, it would take five years to get a decision where a board of directors can make a more focused decision in one year or whatever — obviously, made up numbers — but they have to invest, have a strategic plan, have to invest their surplus revenues into that development of the strategic plan.
Ms. Cooper: I’m just a lawyer and I act for many organizations. I gave some thought to this issue when I was asked to speak. My quandary is: How do you distinguish between private and public? Because there may be the purely private, but the examples that jump to my mind are the many associations within medicine and nursing, the pharmacists and even, dare I say, the lawyers.
I think with the Canadian Pharmacists Association, there is a certain amount of private benefit, self-promotion, that kind of thing. But they also produce the Compendium of Pharmaceuticals and Specialties. That’s the big thick thing that sits on every doctor’s desk and every pharmacy that tells pharmacists and doctors what a safe amount to prescribe is and what the interactions are. That’s produced largely through the volunteer work of members sitting on round tables and discussing.
You have the cement producer’s standards for sustainable aggregate extraction. So perhaps on the surface seem they all seem to be private benefit self-promotion type organizations and they all, in my experience, contribute in some way, if not to the health and safety of Canadians then to better regulation of a particular industry.
In a corporate law perspective we saw the federal government attempt to grapple with that policy issue when, in corporate law, they made the division between soliciting and non-soliciting organizations. Soliciting corporations are those that receive a certain amount of public funding, whether it’s from donors or from government, and those organizations are held to a higher degree, not necessarily of regulation but standard of accountability and transparency. They are required to have audited financial statements once they reach a lower threshold. They have to file those financial statements with Corporations Canada. And I give that as a “for instance.”
In the Canada Not-for-profit Corporations Act, that was the attempt that they draw and it was more on the basis of the source of funds. And if they took in any sort of public money to any large degree, then they were held to a higher degree of accountability and transparency. That’s reflected in the new Ontario legislation. There they didn’t make it on the basis of the source of funds. They just said, “Charities you have a higher degree of accountability and transparency. Non-charities don’t.” I think the distinction in the federal legislation is a little more subtle.
Senator Omidvar: If you could help me clarify my own understanding between the main difference between not-for-profits and charities. So, neither pay income tax, both are exempt from GST. Can I go down my list?
Not-for-profits are not able to carry forward a surplus. Not-for-profits are able to pay their directors. And they are not able to issue charitable receipts. Can you please correct me here if I’m wrong. And also, how much does it cost the federal government to exempt not-for-profits from the GST every year?
Ms. Cooper: HST I could spend, and I say that because that, in fact, in my experience since 2005 is becoming one of the most misunderstood areas of tax within the sector, because for charities the Excise Tax Act is actually quite clear. It is the opposite of every other entity. So charities are exempt from HST. And then there are some exemptions that make them pay tax on certain things.
Not-for-profits are like every other business except they have a longer list of non-taxable supplies. Once again, one of the common misunderstandings is that all non-profits are exempt from HST. They are not. They are first taxable and then they have a list of nontaxable supplies, things that they don’t have to collect and remit HST on. And the Excise Tax Act is even further complicated because it has special rules for hospitals, special rules for municipalities.
If you wanted to innovate and create some clarity, you would look at the Excise Tax Act. Because there are very few folks in this country who truly understand. And I could be a one-person industry just trying to sort out the legal complexities there.
That was one. In terms of paying directors, the statutes from a corporate law perspective, permit paying directors an honorarium for not-for-profits. Charities are only exempt in Ontario from paying directors. Other provinces have different rules. It’s a constitutional issue that I won’t spend time on.
But there is common law in Ontario that established the rule that directors of charities had to serve gratuitously. There is recent regulation in Ontario that has softened that rule because it made it difficult for people who serve as directors to provide direct services to the organization at lower cost. There is a recent regulatory change in Ontario making it a little more like the rest of the provinces.
Senator Omidvar: Thank you.
Senator R. Black: Besides that best seller, The Law of Charitable and Not-for-Profit Organizations, now in its fifth edition, if nothing has really changed — and I got the sense from both of you that nothing has changed — is it easier now than it was in the 1980s, when you first started out? Given that book and other books and skilled individuals, is it easier now for someone to start from scratch?
Mr. Bourgeois: I think very much. It is not just the text that I have done. There are others that Karen has been involved in. Karen indicated the course she teaches. There are other courses at the university and community college levels across Canada. There is a fair bit of development there. Ontario Trillium Foundation and comparable government-based foundations across Canada have invested a lot of time, effort and money in increasing the capacity of the sector.
I have to say Canada Revenue Agency is jumped on by a lot of people — including me, at times — but, on the other hand, you go to their website right now, it is a really good website to understand — from their perspective, admittedly, but relatively neutral, their perspective — what the law is.
Their guidance provides good examples. There are references to the case law to support the points they make. Between the 1980s and now, this is a sector that has become more mature and nuanced in how it deals with things. Imagine Canada is a much more robust organization in part because of funding from an organization that I was involved with years ago called Agora Foundation and some of the others. It’s not night and day, but it is a lot better than it used to be.
Senator R. Black: I want it noted that I do have an earlier version of that book.
The Chair: If we were to go to your website and review your resume, have you given yourself credit for it?
Senator R. Black: No.
The Chair: Thank you, Mr. Bourgeois, for helping Senator Black.
Senator R. Black: Can you give us three specific recommendations that you would like to see included in the final report — which we are coming down to the end of this study — three very specific recommendations that you would love to see in our report just so that we can capture those?
Mr. Bourgeois: Clarity of what Parliament wants from a public policy perspective, and that is a tough thing; we have talked about it. I agree entirely with Karen’s comments about the pharmacists’ associations. It would be helpful to get that clear. I agree entirely with Karen’s comment about you look at section 149 of the Income Tax Act, and I almost gave up law at one point in order to do it. I would not admit to this, but at one point, with the HST, I suggested to a client, “I don’t know what the hell this means. Do this and wait to be audited by Canada Revenue Agency because they are the only people who can bring finality to this. You can’t afford to go to court to get a decision of a court as to right or wrong.” That’s the other part of this. Bringing statutory clarity and creating processes that are less expensive and more user-friendly to people.
The third thing is attitude, because not everyone is a criminal. Some people are, but most people make mistakes because they make an error or they don’t understand. That’s an entirely different thing. That attitude is a difficult one. I don’t know how you can make that adjustment. Quite frankly, CRA has turned the corner on that aspect positively.
Ms. Cooper: Clarity, clarity. My time here is too brief. It takes me 15 lectures of three hours each to teach the law of this, and it’s in part because of the nomenclature and definitional inconsistencies. Funding sustainability, rather than playing with the rules, CRA, I agree with Don, is doing a really good job with digestible information for organizations. If you could see that support across the sector, not just for registered charities, there is much less available for non-profits. Third, as a lawyer, you had before you Mr. Robert Hayhoe — he is a colleague of mine at the Canadian Bar Association — and he spoke about how decisions of Canada Revenue Agency on registration and revocation go to the Federal Court of Appeal. I totally endorse his recommendation that the Tax Court of Canada be given jurisdiction to hear those matters as a matter of first instance. That’s a really access-to-justice issue.
If organizations could more readily challenge some of these decisions in an economically viable way, you would get clarity. I would never speak for CRA, part of the difficulty is the regulator is adding meat to policy in a vacuum. If you had more decisions of a court — I say that with some trepidation — you would have more decisions if the Tax Court of Canada was hearing these matters. If you had more decisions, we might get some clarity.
Senator R. Black: Thank you.
Mr. Bourgeois: I agree entirely with Karen.
Senator Duffy: Thank you for coming. People I talk to in small business in P.E.I. — just picking up on your point about attitude and the lack of clear guidelines in many cases — tell me that sometimes it is a difference between whom you are speaking to at Canada Revenue. That one auditor or person dealing with your file gives one thing and is very aggressive and suggests that what you are up to is nefarious when people are simply trying to find their way in a new business and technology and how things change. Others are quite accommodating and suggest that maybe you should look at this. Yet if person A comes back on the file, they find themselves in a very defensive posture. They feel they might inadvertently say something that ends up with them in court when they are simply trying to understand the law so they can comply. When you say they have turned the corner, is it a long corner?
Mr. Bourgeois: My comment was more at the charities directorate level as well as with the materials that they produce. As a taxpayer, I have had some interesting conversations when I made a mistake on income tax. My mother’s estate T3, and there was a change in 2015, and I talked to people in your province as well, and they were extremely helpful. They waived some of the penalties as a result of me not knowing the Income Tax Act had been changed in 2016.
Senator Duffy: If you had gotten a different person, you might not have had that penalty waived.
Mr. Bourgeois: I don’t know. I don’t think they know who I am from that perspective. I am one of many millions of filers. As an executive in a Crown agency at one time, as an employer, you also have those issues, and you are trying to balance customer service with compliance with the law, especially in this area. It’s a tough row to hoe for an employer such as CRA.
Senator Duffy: We have heard a lot of witnesses during the course of our study. One thing that is running in the background is the new form of charitable giving, traditional charities have seen a decline in the numbers of donors. The age of those who are big donors is rising and they are very concerned about that demographic shift. But crowd funding — the tragedy in Saskatchewan with the hockey team on the bus, we heard that over a short period of time they raised $30 million. Is this the wild west of charities now? Do we need to offer some suggestions in our report about how these instant campaigns need to be regulated or given some parameters? Who knows what happens to the money? I’m sure the people in Saskatchewan are wonderful and putting the money to good use, but it seems to me that this is a growing thing and perhaps it needs some framework around it so we don’t get in trouble down the road.
Ms. Cooper: It’s a balance between, in my view, innovation and accountability. That’s where I think the regulator struggles. I think that’s where the Department of Finance, Corporations Canada struggles, and I would suggest you will be struggling, with how to balance creating an environment that promotes innovation and new ways of doing things while at the same time acknowledging that this is publicly funded activity and there should be a certain degree of accountability and transparency. As a matter of policy we should be ensuring that the people who are giving are protected. I suspect the regulators themselves are quite able to provide more direction. It’s a question of raising the importance. It’s exactly what Mr. Bourgeois said at the outset. These things only get dealt with when there is a scandal or a problem and then there is a mad flurry rather than taking the careful work that the committee is doing, which is looking at it as a whole and coming up with rational recommendations without being driven by a singular event or scandal.
Mr. Bourgeois: In that particular case, I believe the Saskatchewan Court of Queen’s Bench intervened because it is, as lawyers call it, a parens patriae over this. It has jurisdiction to ensure the funds raised for charitable purposes are used for that. There was a court order. I think the ministry of the Attorney General was the one that brought that application in the case. The system responded, but that was because of the profile of it and the tens of millions of dollars involved.
Senator Duffy: Finally, a hobby horse of mine. Do we need a minister responsible for charities, the charitable sector or the voluntary sector to be an external ambassador for the importance of charitable giving and at the same time be an advocate within government to try to build some of these bridges and create a more welcoming relationship between the regulators and those who are regulated?
Mr. Bourgeois: That’s part of my message, whether it is a minister or something else, there needs to be a sustainable government structure for that. We do have Infrastructure Ontario, Canada Infrastructure Bank and a variety of other things that are critically important. We need that sustainability so those issues are discussed and they can advance the interests of the sector, because we are talking about advancing the interests of the sector for the public interest and not for other purposes. It’s in order to advance the public interest, Canada and Canadians.
Ms. Cooper: I would agree with Mr. Bourgeois on that one.
The Chair: Ms. Cooper, you had also spoken about the rise of ecological gifts. How does that play into it?
Ms. Cooper: I’m on the board of what’s called currently the Canadian Land Trust Alliance. I act for a large number of organizations that receive ecological gifts. The constant tension is that a good number of the large philanthropic organizations are advocating for an exemption on capital gains on all real estate gifts. The example I gave at the standing committee on finance, when this issue was raised there — and they sat me beside Mr. Bourgeois and deliberately played us off against each other — is, let’s say I’m an alumnus of a university or perhaps I have a relative who has been impacted by the work of a hospital. Let’s say I own an island, a coastal property or an undeveloped prairie. My inclination is to give it to the hospital or the university because that’s my affinity. But what if that land is important from an environmental perspective? The charity has a fiduciary obligation to maximize value, so they are going to sell it for the highest value and that land won’t be protected. I wear my green heart on my sleeve and that is a shame. I think it’s important for the committee to understand, from a policy perspective, the exemption for capital gains for ecological gifts is not at all based on philanthropy and tax policy to encourage giving. The Ecological Gifts Program comes out of environmental protection policy. It came about as a lever to encourage protection of privately owned land. The government couldn’t go out and keep buying parks. If it wants to protect environmentally important land and that land is in private hands, how do you encourage it to be protected? The obvious example at the time was to provide this added incentive. It’s exactly like the added incentive that’s there for gifts of cultural property. How do you encourage owners of important works of art to give them to national institutions as opposed to selling them to the highest bidder on the open market? You eliminate the tax on capital gains. That was viewed as a sufficient incentive to ensure that those works go to the right place. I really think the committee has to be aware that the tax policy is a little different for ecological gifts.
The Chair: Thank you. The other issue that we haven’t discussed is that they are continuing to say charities cannot make profits. But in good planning in certain charities that they do carry a surplus from year to year to accommodate a plan for, for example, capital expenditure. If a YMCA is going to expand or build a new YMCA, they can’t do that on yearly revenue. They have to plan over the years to rationalize their holdings and put some money in the bank. I don’t have a practical example, but other charities do have examples where the interpretation is different. Again, Senator Duffy said it depends on who answers the phone. Perhaps they are criticized for saving money for that capital expenditure that is going to come up or may come up, because they may not have made the decision but they are starting to prepare financially for a capital expenditure or an improvement to existing services to their constituents.
Ms. Cooper: The source of the rule about accumulating surplus for non-profits is a tax rule.
It’s in the requirement that a non-profit be operated for non-profit purposes. And CRA has interpreted that phrase to mean that you can’t accumulate a surplus, because how do you accumulate a surplus? You must be charging more. You’re not running on a zero-based budget; how do you accumulate? Then you charge a little more than what you required to provide the specific service.
Therefore, if you charge more, you’re not operating on a not-for-profit purpose. And I say respectfully for a number of years, they went down a path that in my view that is just legally wrong. I’ve said that in a number of public fora. David Stevens, another colleague of mine, wrote a great article on this issue where he said in fact if you just return to basic principles, the test in the statute is one of intention. Is the intention to operate for non-profit purposes? And if the intention is to operate for non-profit purpose, if you accumulate, for the example that the senator gave, a capital improvement. Another good example these for me is just before the March break, a PDAC mining conference took place in Toronto. You couldn’t get a hotel room for less than $500 or an airplane ticket into Toronto for anything other than exorbitant prices because it’s the largest conference of its kind in Canada every year.
It is the Prospectors & Developers Association of Canada. They book three years in advance and have to reserve hotels. That means you have to accumulate money because you are paying deposits or you have a legal action fund. It happens all the time, and the focus should be back on what is the intention of the statute operating on a not-for-profit purpose rather than looking at very specific singular activities and doing a revenue or an income test.
If you are earning any kind of income from that specific activity, you must be operating for a non-profit purpose, and I don’t think the statute says that. There is case law that supports that view and I do believe, once again, CRA has turned the corner a little bit and the rules before they went on that little flight were fairly clear and there were a lot of really good rules of thumb. Six months worth of operating revenue was enough to keep in the bank for a rainy day or in case problems occurred, and those rules were all clearly understood.
Mr. Bourgeois: I agree with Ms. Cooper on that point, and it gets to something you raised earlier around the governance issues. Does the organization have a strategic plan that can justify this? Is it a reasonable one? Did they carry out the risk assessment? Ms. Cooper noted the six months. It is irresponsible in the 21st century for an organization that has employees not to have a reserve fund to pay for those employees. Yet many organizations do not because they don’t have the cash flow. If you have the cash and can build up the reserve to do this, that is the responsible thing to do.
The Chair: Thank you both for being here, and you have reconfirmed my decision not to go to law school, but you did help me to understand some of the current laws and I appreciate that.
Our next witness this morning with Juniper Locilento.
Juniper Locilento, Vice-President, Public Affairs, Association of Fundraising Professionals, Greater Toronto Chapter: Chairman Mercer, Deputy Chair Omidvar and committee members, thank you for the opportunity to speak today. My name is Juniper Locilento. I am a senior fundraiser for the YMCA of Greater Toronto. I’m here today in my voluntary capacity as Vice-President, Public Affairs for the Greater Toronto chapter of the Association of Fundraising Professionals.
As a global network of more than 31,000 members, AFP works to advance philanthropy through advocacy, research, education and certification. An ethical fundraising code has been AFP’s cornerstone since its earliest date. We aim to foster a greater understanding of the value of charitable fundraising, and the structures essential for enabling effective, ethical and professional practice.
Others have spoken about changing giving patterns, the looming social deficit, and the importance of an enabling environment. We share the goal of making Canada as vibrant, safe and successful as it can possibly be.
With an estimated $14 billion annually in receipted and unreceipted contributions, philanthropy plays an essential role in the strength of the charitable sector and in strengthening Canadian society.
As former Governor General David Johnston conveyed in his recent book Trust, philanthropy is the key mechanism through which Canadians express their core values. Philanthropy and fundraising go hand in hand, and professional fundraisers are the link between Canadians and the causes they care about.
There is a well-documented connection between asking for and securing charitable contributions. The power of the ask has been demonstrated in experimental studies. Asking not only increases the probability of donating but also the amount that people give.
AFP’s own biennial study What Canadian Donors Want finds that 75 per cent of those specifically asked to give will do so compared to 53 per cent of those who are not asked. That 22 per cent differential represents hundreds of millions of incremental revenues that could enable charities to better address urgent needs.
Realizing this growth may require a change in public perception. In the Muttart Foundation’s Talking About Charities, Canadians acknowledge that fundraising is important, while also illustrating their concerns.
For example, from 2000 to 2013, the percentage of Canadians who believe charities are honest about how they use their donations dropped 14 points, from 84 per cent to 70 per cent. Fifty-two per cent think charities spend too much on fundraising, and 34 per cent expect all funds to go to the cause.
While Canadians’ trust in charities is strong, it is fair to say their trust in charitable fundraising is less so. Even though donors might say they don’t like being asked in a particular way, it is the essential nature of the act of fundraising, rather than its execution, that is at the heart of the issue.
In fact, research suggests a conundrum in that the practice of fundraising is seen, on the one hand, as too professional. By that I mean too slick, costly and ethically questionable. And, on the other, as not professional enough, by which I mean not adequately efficient or effective, reliant on volunteers and lacking formal educational requirements.
Because fundraisers’ ability to secure gifts is influenced by how they are perceived, I suggest it is in the public interest to accept professional fundraising as a legitimate practice.
It is not about educating the public to think differently; it is about changing underlying beliefs and attitudes. We need to ask what it is about fundraising that we value and how we can get other people to value these things too.
The link between effective ethical asking and generous giving is especially relevant in a time of demographic change. As the committee heard, 30 per cent of tax-receipted contributions are being made by those 70 or older. It is estimated that as much as $4 billion annually will leave the sector if donations from younger generations do not increase substantively.
Building relationships with donors and asking for charitable support will become more essential, although our methods must continue to evolve to include new platforms and channels.
In summary, fundraisers have a responsibility to ask for donations on behalf of beneficiaries. Guided by a code of ethics and appropriate regulation, we will always aim to balance our duties to our donors such as respecting their privacy or not asking in ways they don’t like, with our duty to our beneficiaries to ensure their needs can be met.
Having secured support from generous Canadians, we must make sure we put these funds to best use, which means the charities need to be professional and able to utilize the best talent, tools and technologies to effect change.
So what can government do to increase trust in charitable fundraising? First, foster a greater understanding of the value of charitable fundraising by ensuring appropriate representation on the recently announced permanent advisory committee on the charitable sector.
Second, allocate $1 million annually to Statistics Canada to collect comprehensive data that will support evidence-based decision-making about donor behaviours. And finally, establish a home in government to ensure that policy decisions are made in consideration of the sector’s significant economic contribution, including revenue secured through fundraising.
If Canadians can see fundraising as the thoughtful, ethical and effective practice that it is and aims to be, they will be more likely to respond favourably when invited to support the worthy causes in their communities. This will ultimately lead to a stronger sector and to a stronger Canada.
The Chair: I should declare my conflict here. Ms. Locilento and I share a history, although not a recent one. I was the vice-president of finance development at the YMCA of Greater Toronto. I was also one of founding members of the AFP’s chapter in Toronto and the past president of the Ottawa chapter of the AFP. I have my conflicts on the table, so I have done that.
Now we will go to Éric Hébert-Daly, Vice-President, Now and Forever Wild Fund.
Éric Hébert-Daly, Vice-President, Now and Forever Wild Fund: Thank you, Senator Mercer. In fact, you and I also share a bit of history as well having sat on an Elections Canada advisory committee more years ago than I care to admit.
I come to you in light of my experience the non-profit sector, having worked as national director of a federal political party, later as national director of a wilderness conservation charity and having followed a call to the ministry, now working for the United Church of Canada directing francophone ministries. Despite this, however, I’m here with you as a representative of a for-profit organization because this is one of the key reasons why I think that charity laws in this country need to be modernized.
The charitable sector in Canada is growing at a phenomenal rate, as you know. With significant numbers of new charities arriving each day, donors are being solicited regularly and relationships with those donors are deepening across the spectrum. The relationship between charities and donors is an important one and it achieves significant positive results for our country but at the same time, these relationships cannot be the only way that a charity funds its work.
We have all heard of social enterprise as one of the key ways in which we will find new sources of revenue and to use market mechanisms to raise funds that charities need to operate their missions. And it’s my view that social enterprise in Canada is limited by a number of barriers and red tape put in place by government.
Being able to effectively do this has proven to be an interesting challenge for me personally. The Canadian Parks and Wilderness Society, CPAWS, the charity I was national director of until recently, decided to embark on social enterprise by purchasing an office tower in the city of Ottawa as a source of revenue for which it would be able to employ in charitable activities. So it has purchased an asset at 100 Gloucester in Ottawa, has a professional property manager and the proceeds from the building are returned to the charity in the form of charitable donation. This is resulted in the reliable returns of almost ten per cent per annum to the charity on its investment made of almost $6 million.
This is better than most market-based investments and is far more reliable in the long term than stocks and bonds when it comes to investing donor dollars. But achieving this has turned out to be complex. Charities are not permitted to run businesses that are not directly connected to the mission of the charity. A cat rescue charity can’t own or run a hotel and a cancer charity can’t run a restaurant, to give examples.
When it comes to owning real estate, if the charity leases out more than half of the real estate than it owns, it is deemed to be operating outside the boundaries of CRA rules. So the required establishment of a for-profit corporation to take ownership of the building was what CPAWS had to do in order to benefit from that particular investment.
So the for-profit corporation was created, CPAWS became a primary shareholder, and the cost of establishing the infrastructure just to operate the social enterprise itself ended up costing over $100,000 to put it into place. That is not adding the condition that the for-profit business is run at arm’s length of the charity adds complexity. And then add that the for-profit corporation can only give 75 per cent of net profits to charitable sources; it becomes an additional problem. Such red tape is preventing charities from establishing the kind of arrangement that makes something like this possible and then sends them to other forms of simple and safe investments that achieve smaller returns or forces them to consider riskier investments in the stock market in order to achieve better returns.
Imagine instead an economy where charities operate for-profit businesses for which 100 per cent of the proceeds can go directly into the charitable mission rather than simply making a profit for individual and corporate gain. I believe this is a key way that we can transform our economy, with a direct impact on social, environmental and spiritual health of our society.
The rules that currently prevent charities from participating in traditional enterprise are a barrier to creating a better world and a barrier to allowing charities to tap funding sources that they so desperately need. Consider the costs of fundraising for a charity in the context where donor dollars are not unlimited. Now consider the value of a business operating in a traditional economy, owned and professionally operated by a charity, with the appropriate safeguards in place to ensure that charitable revenue is protected from misuse. It is not just social enterprise; it is actually a fundamental transformation of society where profits that would otherwise go to personal gain can serve a greater goal.
I strongly recommend that this committee explore the rules and limitations that prevent charities from operating profit-making businesses and remove as many of those barriers as possible. Given my experience in the political, environmental and religious sectors, I am happy to offer any insights I have in those interesting places. I also want to highlight that the savings to government of not needing to issue tax credits for dollars that are going into charitable activities when they are the products of providing goods and services is tremendous benefit. On that, I will close my comments.
Christina Franc, Executive Director, Canadian Association of Fairs and Exhibitions: Thank you for inviting me to speak. My name is Christina Franc and I am Executive Director of the Canadian Association of Fairs and Exhibitions, or CAFE.
Today, in representing CAFE, I am representing 800 fairs, agricultural societies and exhibitions across the country, from the Canadian National Exhibition in Toronto right down the one-day Havelock Fair in Quebec. In total, our events see 35 million people each year. Fairs are living reflections of the life and times around them. They hold deep cultural, traditional and emotional connections to the people of their local area and they embody a sense of community.
At the same time, these events are economic drivers in their communities and they average an economic impact of about $17.2 million on the local economy per fair overall. Small town fairs average about $750,000 in their own communities, which is a huge boon tore business when you look at the small communities.
There are several examples of fairs and exhibitions out there that are older than Canada. We have the Hants County Exhibition in Nova Scotia, which is 252 years old; the Williamstown Fair in Ontario is 206 years old; Lachute Fair in Quebec is 193 years old. Above, I have cited numbers — 35 million, $17.2 million, impact and so on. These numbers come from an economic impact study commissioned more than 10 years ago. They offer strength to our business case and help us and our stakeholders understand the role we play in Canadian society. It is important to understand how far we have come in these 10 years and whether we are growing and growing the economy, which we at CAFE are confident we are doing.
Therefore, our first recommendation to the committee is Canadian Association of Fairs and Exhibitions would like to see funding provided to Statistics Canada to evaluate the social and economic impact of charities and non-profits, including sub-categories for agricultural societies on a regular and consistent basis. This information can be used by the organizations, but also to help better inform public policy and develop sector priorities.
In 2008, it was reported that our events contribute $1 billion annually to the economy and fair-related jobs and spending support 10,700 jobs. As mentioned above, we are confident these numbers have increased but have no tangible proof at this time. This data collection framework would allow us and other similar organizations to evaluate progress and consider how we can better contribute to Canada’s growth. It will also help the government evaluate the impact of the voluntary sector in Canada.
I would like to reiterate that the majority of our events are run by volunteers who are involved because they are passionate about the events and activities in their community. These volunteers have families, jobs and other ventures, yet they are still taking the time throughout each year to better their communities by participating in their local fair, exhibition or event. We do it because we love it. Unfortunately, the government is making it more difficult to do what we love by either bringing in new regulations or having excessive requirements. I can name two pieces of legislation right now, in various stages, that are putting our events at risk. This is unfortunate when we know the rich culture, history and sense of community these events provide.
Other government restraints include antiquated regulations as it relates to fundraising opportunities such as raffles, 50/50 draws, and so on. There are a lot of grey areas around online rules and cross-provincial opportunities as well. It would be wonderful to see a revision of the fundraising limitations and opportunities for charities and non-profits. We agree that funding provided by the government needs to be monitored and shared responsibility and the grantees need to be organized and held accountable. However, for volunteers to have to go through excessive paper work, particularly before receiving fundraising, is a frustrating and overwhelming process. In fact, it often leads to potential well-deserving applicants not applying for funding at all. Therefore, we also recommend that provisions be made to create a department in the government dedicated to charities and non-profits in order to support them, assist them with government relations and provide additional resources and funding. We would also encourage the government to consider the impact of new regulations on charities and non-profits such as ours in the future.
In reviewing what other organizations have submitted, I have noted a request for revision on capital gains as it relates to real estate, which we at CAFE support as well. For our organizations, land is a valuable asset and I have seen multiple cases of donors wishing to provide land to their local fair or exhibition, but the fair cannot afford the taxes and so have to turn the opportunity down. More land for these events represents more space for agricultural events, festivals or entertainment. More space to be a community hub in growing areas or to help bring growth and be an economic driver in rural communities.
In the same way the government is looking into supporting Canadians through purchasing food at their events, activities and meetings, it would be beneficial for multiple organizations across Canada to extend the mandate to more than just food. For example, our fairs and exhibitions do great work in terms of showcasing agriculture, promoting agritourism and developing public trust. It would be mutually beneficial for the government to consider working with us rather than starting from scratch. It would help the government focus local and support Canadians.
Another example would be educating the public on new legislation and guides. I think of the Canada Food Guide that just came out. A great way to educate people on that would be to come to our fairs. We would be willing to collaborate with the government and educate people on these topics. This was the foundation of fairs and exhibitions, to share knowledge and best practices, and it definitely still has a place in our events today. Charities and non-profits need more support because thriving organizations depend on adapting to the changing landscape before them in order to survive. I commend the committee for taking on this subject and giving it serious consideration. We are a service-based charitable organization, and the above recommendations will allow us and our individual events to grow and expand in a competitive marketplace, the spin-off of which will be to the benefit of all of Canada. Thank you.
The Chair: Thank you. I should tell you that the oldest exhibition that you mentioned was the Hants County Exhibition. I happen to live in Hants County, Nova Scotia. I get to see it every fall and it brings a lot of business to our part of Nova Scotia. Historically, it’s a very important part right down the road from the birthplace of hockey.
Susan Ramsundarsingh, Course Instructor and Research Project Coordinator, Factor-Inwentash Faculty of Social Work, University of Toronto, as an individual: I’d like to thank you for being here. I didn’t think it was real when I got the email. I’m here as an individual, but what I’m sharing comes from 20 years of experience working, studying and volunteering in the sector. What I’m sharing is not just my own thoughts but things I have heard from people who I work with and who have participated in my research.
The practice I’ve been asked to speak about is known in the U.S. as fiscal sponsorship, which is a partnership between a charity and non-qualified donee. I refer to it as a non-charity. This includes non-profits, incorporated grassroots groups and individual citizens. In the U.S. this is a well-established practice, where organizations exist solely for this purpose. Both countries have similar guidelines governing the practice. However, in the U.S., with awareness and support it has grown and flourished. In Canada, the lack of clear guidance and common language have led to a lot of fear, anxiety and hesitancy to engage.
These partnerships are important because they allow us to test innovative ideas and determine their effectiveness before engaging in the charitable registration process. They provide mentorship to groups working toward charitable registration and they allow us to realize cost savings through shared services. These tools also help to increase the capacity, responsiveness and inclusion of our sector. These partnerships allow us to be responsive to the immediate needs without having to consider the six-month wait period for charitable registration. The example I’d like to offer is in Calgary when we had floods. In one of the communities that was most impacted by the flood, the community association was the first on the ground, and the trust and relationships they had with community members allowed them to serve the people very quickly in a way that the city and the Red Cross were unable to. As a funder, being able to invest in them directly allowed us to respond in a timely and effective manner.
The most exciting use of this partnership is to enhance the inclusivity of the sector by partnering with leaders from marginalized groups. The absence of these voices in leadership roles in the sector means we don’t serve these communities very well. It is important to think about it through an equity lens. With the current system, it is difficult for an individual or group which faces language or financial barriers to successfully apply for charitable status and manage all the reporting requirements. Charity/non-charity partnerships create an opportunity for marginalized individuals to lead and design programs that are responsive to the needs of their communities. This diversifies leadership in the sector and increases our understanding and ability to serve those communities. The example I offer was a collective where we were working to address domestic violence in ethnocultural communities. We had a group of about ten different charities and we kept coming up against the same problems of staff, capacity building, the need for translation and our own inability to access the people most in need. As a funder, I disbanded that collective and I took that funding and invested in a partnership with grassroots ethnocultural groups. Having those leaders from ethnocultural communities who had trusting relationships and were able to design culturally responsive strategies allowed us to reach some of the most isolated individuals who would have never accessed support. It allowed us to serve them in meaningful and culturally appropriate ways.
There are a lot of resources in our sector that go into diversity training and cultural competency with the goal of achieving cultural safety. That only happens when we were able to embrace and truly integrate individuals from diverse communities which we are serving into our decision-making structures. I believe this is a tool that can help us do that.
Having said that, these partnerships are not ideal. We have to acknowledge that the reason that the partnerships emerged is because of the structural flaws in the system. Inherent in the charitable structure, particularly in the guidance CG-004 for charities partnering with intermediaries, it is a distinct power imbalance that allows to charitable organizations entering into these partnerships to exploit their partners because the ownership and full decision-making power rests with them. We need to find a balance between full compliance that requires the charity to have full control and collaboration which allows people to work together and bring their own resources to create meaningful change.
The specific recommendations that I have are, first, to promote and support charity and non charity partnerships through education and funding, particularly with the goal of increasing participation of marginalized groups in the charitable sector; second, to invest in capacity building for the sector to ensure that compliance, including increasing the capacity of the Canada Revenue Agency staff to support and guide charities. My specific recommendation would be to include funders, both charities and government, in education efforts because they have a reach that extends to all charities and non-profits and they have a mandate that allows for capacity building.
I also recommend a review of the guidelines for direction and control to increase the specificity while decreasing the administrative burden. I recommend maintaining the requirements for written agreements and financial reporting but reducing the requirements for governance and reporting activities. I would also like to review the guidelines for direction and control to protect against the exploitation of the non charity partners. For example, ensuring the administrative costs are aligned with the fair market value of the cost of the supports being provided by the charity to the partnership.
I would also like to add my voice to the many calls for addressing the structural barriers to participation, particularly the registration process, the creation and updating of charitable objects and the definition of what is charitable.
Finally, I would like to recommend we begin to track diversity and representation data so that we are able to measure our progress in terms of the inclusivity of our sector. Many before me have spoken to the details of compliance, and the changes required to ensure it. I would like to focus on capacity building. With only 1.6 per cent of charitable revocations resulting from an audit, I think this echoes what I see in my work. People want to be compliant. They just need the guidance and the mentorship to allow them to do that. If we invest in capacity building, we will increase compliance, reduce the administrative burden and enable our sector to prosper and be effective.
In closing, I would add that my PhD dissertation is on oppression experienced by service users and charitable organizations. Consistently I’m finding that individuals experiencing oppression — and by “oppression” I mean discrimination, violence, exploitation and marginalization — are individuals with disabilities, youth, immigrants, refugees and Indigenous peoples. The structural inequity that begins with lack of access to charitable status trickles down to the people leading these organizations not being representative. That trickles down to the people that are not represented experiencing oppression when they go to receive help from the very sector that was designed to provide them with help.
Those are my recommendations. Thank you for having me here today.
Senator Omidvar: Thank you to all of you. I have listened to you very carefully. Thank you for the written briefs. It always helps. I have a question for each one of you. Our time is tight and there are other senators, but I would really like to get your expertise. I’ll start with Ms. Locilento.
In your brief, you said you would like to have greater representation on the CRA advisory panel by your association in order to enhance public awareness for the charitable sector. However, my understanding is the permanent advisory council’s work will be focused on regulations of the CRA. Are you may be willing to consider another place in government for awareness of fundraising and charitable giving? We have heard, for instance, from the Mowat Centre of Public Policy that there should be a Senate committee on the third sector, a house committee on the third sector and possibility a joint committee on the third sector.
Ms. Locilento: Yes. The key is to ensure donor interests are represented. We believe professional fundraisers can provide that perspective, so the place in government wherever it makes the most sense to ensure that that representation exists. Within the CRA, if the committee is focused on regulation, obviously there could be a role there. We are talking about fundraising regulation, but absolutely. It’s really about making sure that that voice is represented.
Senator Omidvar: Thank you. I’m going to go off my script a bit, since you are with the Association of Fundraising Professionals. It is a professional association. We have heard in the media some accounts that leave many Canadians disenchanted with charities because executive compensation is at an all-time high for professional fundraisers. We know, for instance, there is a university where I some from where the head of development actually makes more money than the president of the university. What’s your response to that concern of Canadians?
Ms. Locilento: I understand the concern. I think the way to approach it is to think about what people’s motivation is in making charitable gifts. If we assume that the motivation to make charitable gifts is to make a change in the world in whichever sphere that one wants to focus on, we want to do that in the best way possible. Does that mean there are positions that need that level of expertise? I think it is more important to focus on the outcomes and the impacts made through those rules and institutions than getting overly focused on the details of compensation.
Senator Omidvar: I’d follow up on that if I had more time but I must go to Mr. Hébert-Daly now. You spoke about the end use of funds. Basically, allow charities to do what they want to do, including running business, as long as that money is dedicated to charitable purposes. The corporate sector, who is also in the business of running businesses and providing goods and services, may well have an issue with that.
Would you comment on the issue of unfair competition for the corporate sector when charities, with all their benefits, engage in business ventures to that same end?
Mr. Hébert-Daly: First, my intention is never to suggest that the profits made by a charity are not to be taxable. Let me clarify that particular piece.
Right now, charities can invest their monies into all sorts of different things that play up against competition of other players within society. My idea here is not that somehow the charitable sector wants to undercut the profit-making sector but that we find a place where, as a purchaser of goods and services, if I look at two different offers — and they might be the same — and I decide that I might want to support a cooperative, I know that the profits of that particular purchase of goods and services are being used in a particular way. That might be an incentive for me to make that choice. I’ll admit that that might be the place where there is what I might call a perception of unfairness on the part of profit-making corporations. On the other hand, I think that is actually helpful competition in that regard and provides us with a place where more people in the economic sphere within Canada can feel that they are contributing to things.
If you are working in a restaurant and you know that the profits of the restaurant are going to a charitable cause, I imagine that at some level your work in that restaurant isn’t just about serving people a meal. It’s actually about contributing to the greater good. I think all those things will help the sector be more competitive overall and I don’t see a problem with that.
Senator Omidvar: Thank you. Ms. Franc, you are a very big not-for-profit, not a charity.
Ms. Franc: Our members are not-for-profits.
Senator Omidvar: Your members are not-for-profits and all file T1044 forms to the CRA. Would they have any objection to those forms being publicly available on the CRA’s website, as charities’ forms currently are, to level the playing field on transparency and accountability?
Ms. Franc: I don’t think so because the way they are presently structured, the information they share is already public with our AGMs and information, so financials and salaries are already publicly available.
Senator Omidvar: Thank you. Not to cut too much into my colleague’s time, a quick question to Ms. Ramsundarsingh. Whatever you have said in your brief I agree with 100 per cent, in particular to recalibrating the relationship between charities and not-for-profits. I’d like to ask you a question about your diversity disclosure requirements. We have had Dr. Wendy Cukier here who made the same recommendations that in the T1044 forms charities and not-for-profits should be required to disclose diversity information. Are you talking about who is on their board of directors, who is their senior staff? Can you paint that out a little?
Ms. Ramsundarsingh: I’d like to see senior staff and board of directors. I don’t know what’s possible, but I feel the direction of a charity — yes, technically it is the board, but it is not always the board making those day-to-day decisions. They don’t make the day-to-day decisions. It would be important to see both.
Senator Omidvar: Would you use employment equity language to define diversity?
Ms. Ramsundarsingh: I’m not very familiar with how they define it. I feel that if that is what is consistently used, then I think that’s what people would be comfortable with.
Senator R. Black: Thank you. Thank you very much. First a clarification, and then a question for Ms. Franc.
I know some of your members are actually incorporated under provincial statute, which would not require them to complete the forms you speak of, senator, just to be clear.
Do you see differences in charitable issues between rural and urban organizations given that your membership covers both?
Ms. Franc: Absolutely. There is a huge divide. It’s something we struggle with at the national level. It’s inherent in every component of rural versus urban. Urban areas have tighter demographics and more priorities. They are trendier, for lack of a better word. Whereas rural is more behind the times, they are slower to adapt to technology. All of that is reflected in the challenges that we face.
Senator R. Black: What would be a recommendation that would help to level that playing field?
Ms. Franc: Ultimately, to consider the rural perspective in a new setting. When bringing in new technology, consider how the rural charities are going to adapt to that. When you are putting in new regulation there is less population, so they don’t have the manpower to adapt. Just consider the rural perspective, I think.
Senator Duffy: I’m interested in the issue of capital gains on gifts of land and property. In Prince Edward Island we have the Lucy Maud Montgomery Land Trust which buys the development rights to land that is in private hands to preserve it as agricultural land. It’s primarily in the area where Lucy Maud Montgomery grew up and wrote her books. One of the problems we have seen is that some of the nature trusts are constructed — or their constitution or rules do not allow you to buy farm land for the preservation of farm land. You have to buy wild or undeveloped land, forests or whatever. Is there a way to bridge that gap so that the preservation of historically interesting, if not historically important, farm land could be brought under the umbrella?
The second part of my question is what do they tell you at Canada Revenue Agency when you talk about land sales and capital gains tax? I know they say no, but what is their rationale?
Ms. Franc: To bridge that gap. Our members use the land for events and activities. We have flexibility in our mandates so it would take some creative thinking to adapt to nature and wildlife specifics. I don’t have the answer right now, but in terms of working collaboratively on that sort of thing I think there would be potential. Creative thinking is required.
Regarding your second question about what they say at CRA about land sales and capital gains tax. I will look into that. I have heard members come to me and say it doesn’t work. I do not know why it doesn’t work so I will get back to you on that.
Senator Duffy: Do any of the members of the panel have thoughts on the capital gains piece? It affects not only rural areas but all kinds of things that people would like to give to charities.
Mr. Hébert-Daly: I can speak to the issue of the environmental question. I’ll never forget a meeting I had with ranchers in Manitoba about the fact that most of, or a lot of them, are on grasslands that are actually used in such a way that is beneficial to environmental needs and that there is actually this great symbiosis that happens in these places. There is a lot of frustration with them that there isn’t that kind of opportunity to find those places. Overall, on the capital gains question, CPAWS was never involved in private land acquisition, so I can’t speak about that from first-hand experience or a CRA experience. However, I certainly hear from a number of ranchers who have had this kind of challenge that they would love to see that addressed.
Ms. Locilento: AFP is certainly supportive of the proposal to remove the exemption as a way to further encourage charitable giving. I’m not in a position to talk about, as you’re speaking of, from a perspective of land use and impact, but certainly to incentivize giving. Absolutely, we are supportive of that.
Senator Duffy: The obvious answer is that they say it’s too big a gift or is too expensive. In the overall scheme of things, when you look at the size of the federal government budget, I’m sure this is a very small part and I think it would make a big impact on people who are living near these areas or on the institutions who depend on donors who have art and other things.
Mr. Hébert-Daly: Right now, 90 per cent of land in Canada is publicly managed. You are right, we are talking about a very small amount of land that’s even in movement from that perspective.
Senator Duffy: Thank you all for coming and the important work you do. It’s going to become more important as the population ages and the demand for services rises. So we really appreciate your contribution.
Senator Omidvar: I’m very lucky today. I have gotten an extra round. I want to ask you, Ms. Locilento, about that very precise figure of $1 million to be allocated annually to Statistics Canada. Is that a figure you have consulted on? Is it a figure that is mentioned in other briefs? I forget if the Muttart Foundation had a precise figure.
Ms. Locilento: There has been some consultation between Imagine Canada and AFP on that number, so there has been some thought as to whether or not it is the right number. I think it is a bit of a ballpark, but certainly we are aligned that is about the envelope.
Senator Omidvar: My question to you, which arises from Senator Duffy’s question, is about the YMCA. I wouldn’t consider the YMCA one of the big charities, it is not a small charity but it is not the Hospital for Sick Children, whom we will hear from later today. When the changes in the budget were made, I think, in 2013-14 to allow for the donation of publicly held securities to charities as a charitable gift, did the YMCA and its members receive a bump in donations? Was it a small bump, or a big bump?
Ms. Locilento: We did. Every year — and I have been with the Y for about four years — we receive gifts of shares. It’s not a huge amount, but we have donors who prefer to give through that vehicle and like to know they have that option. It’s had a positive impact on us.
Senator Omidvar: If this recommendation goes through on extending the charitable donation facility to gifts of privately held security and real estate, the literature suggests these gifts will go to and enrich large institutions and charities — hospitals, foundations, not the kind of charities that Ms. Ramsundarsingh was talking about. Can you give us a proposal that would balance this and incentivize small donors who would likely give to small charities?
Ms. Locilento: I’m going to answer your question a little sideways. One of the things we are seeing among donors, even donors who might typically have given to large institutions, is more interest in social justice philanthropy. And certainly donors think about if I want to make a large gift to a small organization, does it have the capacity to deliver? It will definitely consider that. But we don’t want to make a blanket assumption that these gifts of private securities and real estate will only benefit large institutions because I think that donor behaviour is changing, and there are donors who are interested in saying I want to make social change on the ground. I can do that through a community foundation that will then support smaller charities or directly to smaller charities.
I absolutely take your point that we need to also think about how donors who give small amounts are encouraged to give. That’s certainly part of it, but I don’t want to make the assumption that only large charities will benefit from this particular proposal.
Senator Omidvar: The evidence so far suggests that is the case. I’m citing the evidence and, of course, there are always exceptions to the rule. If your organization could consider proposals to us, please send them to us in writing that would benefit small donors and small charities and the same for you.
Ms. Franc: When you think about the world perspective and our members, I mentioned we have 800 fairs and agricultural societies across Canada. The majority of them are in small rural communities. That’s where you see the impact of the small donors of real estate and private investments.
The Chair: The mentioned the YMCA in your thought process not being a large charity. The YMCA in Toronto is the third-largest Y in the world, which puts it in a different league. Also, the AFP chapter in Toronto is the largest chapter in the world. The activity that is behind her is quite significant.
Senator Omidvar: Thank you, chair, for that correction. I am talking about the total sum of dollars raised.
The Chair: I appreciate that and when we hear from SickKids Foundation later on, we will be blessed from hearing from one of best in the business.
Thank you, witnesses. Ms. Ramsundarsingh you wanted to make a comment.
Ms. Ramsundarsingh: I was going to say I don’t think it would completely balance everything, but some education and capacity building for those smaller charities would help to make it more balanced. Just with what Ms. Locilento had said, if you don’t ask, you don’t receive. And a lot of smaller charities really don’t ask and when they do they ask, it is for small donations and they don’t have an understanding of the breadth of what is possible in terms of their fundraising.
The Chair: I did want to mention that today is Social Work Day on the Hill and you coming from the school of social work, I thought we would mention that today Monday, March 18 is Social Work Day on the Hill. From 4 to 6 pm this afternoon, it will be held in room C128 of the Senate of Canada Building. You get a free advertisement because of the timing here. If the Hants County Exhibition were here, I would plug them too; I think I just did.
Thank you to the witnesses. You have made a major contribution.
It’s our pleasure to have, for this panel, John Pellowe, Chief Executive Officer of the Canadian Council of Christian Charities; and, from the Centre for Israel and Jewish Affairs, Shimon Fogel, Chief Executive Officer.
We were scheduled to have, from the Muslim Association of Newfoundland and Labrador, Imam Haseen Khan, Treasurer and Executive Committee Member, but Mr. Khan has fallen victim to Air Canada scheduling, as many of us from Atlantic Canada often do. I wanted to mention that he was to be here as part of our panel but was unable to be here.
We will start with Mr. Pellowe.
John Pellowe, Chief Executive Officer, Canadian Council of Christian Charities: Thank you for the opportunity to address the committee today and to expand on my written brief. This committee is charged partly with examining the impact of the voluntary sector. I’d like to highlight for you today the impact of religious charities on the common good.
In my written brief, I outlined four categories of benefits to the public: the benefits experienced personally by religiously active adherence; the benefits they in turn give to the public; the benefits their places of worship offer to their local communities; and the benefits that religion as a whole offers to society.
It is our submission that, aside from the benefits that accrue to religious people as individuals, the broader community, including the non-religious, benefit from all the other public benefits outlined in the brief.
When a non-religious person receives assistance from a secular charity, they also benefit from the gifts of time and money made by religious people who learned to be generous in their places of worship. This is not an insignificant fact. Statistics Canada data on giving and volunteering reveals that religious people support secular charities more than non-religious people do, greatly increasing the support that the non-religious have available to them.
Many non-religious people benefit from community support programs run by places of worship such as marriage and parenting seminars, after-school programs, tutoring, seniors’ programs and adopt a neighbourhood service initiatives. Many non-religious programs make use of low cost or even free space available at places of worship to run clubs for scouts, arts and sports programs. Community members in crisis often receive help from places of worship such as counselling, referral to a social agency or direct provision of service from a local place-of-worship-based food cupboard or clothing bank.
The mere presentation of a place of worship in a community contributes to its well-being and vibrancy in terms of its stability and its social development as indicated by the decline in a neighbourhood’s viability index when a church leaves the neighbourhood.
Canadian society in general benefits from having a strong core of Canadians whose religious beliefs and teachings teach them to be other centred and willing to personally sacrifice for the greater good of helping fellow citizens regardless of their religious or non-religious beliefs.
At its best, the kindness, generosity, compassion and graciousness of the religiously active among us contribute to greater civility in our county. Religious people aren’t the only people who contribute this way but, as the research shows, they are markedly different in their pro-social attitudes and behaviours from all other Canadians, as a group.
Finally, Canadian society benefits from the practice and expression of religious belief because religion and religious freedom are foundational to other freedoms that are characteristic of liberal democracies. Former Chief Justice Dickson of the Supreme Court of Canada stated in the Big M Drug Mart decision that:
. . . an emphasis on individual conscience and individual judgment lies at the heart of our democratic political tradition.
. . . Religious belief and practice are historically prototypical . . . .
That is to say, religious beliefs such as the value and intrinsic worth of every human being and religious rights blaze the trail for many other rights, including freedom of assembly, freedom of speech and freedom of the press. It is good for everyone that our society encourages the institutions, which are the places of worship, that bring people of faith together to leverage individual freedoms into communal freedoms. This is why the European Court of Human Rights stressed that the autonomous existence of religious communities is indispensable for pluralism in a democratic society.
Religion provides, as detailed in the brief, a holistic mechanism unlike any other that converts beliefs and ideals into habits and practice. The common world view of the various religions is that life is lived in community, and this entails a sense of communal responsibility to fellow believers, neighbours and the community at large.
Such a world view turns the focus of the religiously observant outward and inspires them to find fulfillment in serving others, both within their places of worship and within their broader communities.
Charitable status enables places of worship to do more good than they otherwise could do. Canadian research has found that Canadian taxpayers, when all the various tax concessions — municipal, provincial and federal sales tax and income tax — are put together as an investment, they receive a 12-time return on investment.
The Canadian Council of Christian Charities asks the committee to support the continuation of advancing religion as a charitable purpose by affirming in its report that advancing religion is charitable because of its many public benefits. Thank you.
Shimon Fogel, Chief Executive Officer, Centre for Israel and Jewish Affairs: Thank you, Mr. Chair, and to all members of the committee for welcoming CIJA’s participation in this important conversation. The Centre for Israel and Jewish Affairs, CIJA, is the advocacy agent of the Jewish federations of Canada. We are a national, non-partisan, non-profit organization representing more than 100,000 Jewish Canadians affiliated through their local affiliations.
Today our testimony is offered on behalf of the Jewish Federations of Canada-United Israel Appeal.
Federations are in many ways the United Way of the Jewish community. They are a one-stop shop for philanthropic giving enabling community members to support a diversity of charitable projects. Collectively Canada’s Jewish Federations, excluding the direct fundraising efforts of federation-funded, not-for-profit social service agencies, raise well over $120 million every year for services, programs and initiatives to support society’s most vulnerable, such as people with disabilities, low-income families and seniors including Holocaust survivors, educational initiatives, humanitarian and disaster relief, as well as community engagement.
Like those of many charities across Canada, these initiatives which benefit Jewish and non-Jewish clients alike are life-changing for countless Canadians who would be at risk of falling through the cracks. Charities, like businesses, often operate in environments that are complex. Unforeseen challenges can arise, from economic downturns to natural disasters to public policy developments, requiring charities to have a degree of flexibility in delivering on their mandates. This is entirely compatible with ensuring clarity of mandate and full accountability, particularly given that taxpayer dollars are involved.
With this context in mind, I’d like to share three observations in my remarks today. First, vigilance is warranted to ensure charities remain true to their stated CRA-approved objectives, particularly in the area of advocacy. To be eligible for charitable status, an organization must demonstrate that its purpose is to advance one of four categories of charitable objectives. Until recently, charities were also required to ensure that no more than 10 per cent of resources were devoted to political activities.
Following a court decision last summer that struck down this provision, Bill C-86 now allows charities to conduct unlimited advocacy work defined within the parameters of public policy dialogue and development activities while maintaining a strict prohibition on partisan activities.
This, in our view, is a reasonable and balanced approach, especially as it is clear many charities would simply not be able to achieve their stated goals without engaging in public policy dialogue. However — and returning to the set of four valid charitable objectives — it’s essential that policies ensure charities only engage in advocacy activities that are well within the framework of their approved charitable objectives. To be sure, the specified purpose of a given charity should be broad enough to reflect current realities, including the fact that charities often wear many different hats, but Bill C-86 should not be used as a pretext for charities to carry out advocacy campaigns that do not directly flow from the stated CRA-approved objectives.
As a corollary, we must also be vigilant, especially with respect to charitable activity that takes place outside of Canada that the charitable activity itself is transparent and directed toward legitimate enterprises; that overseas local partners with which the Canadian-based charities secure agency agreements are bona fide and that the ultimate recipients of the aid represent qualified donees.
My second observation is that flexibility is particularly crucial in the area of donor-advised funds which are a vehicle relied upon by the Jewish Federations and many other charities to encourage giving. Donor-advised funds are a valuable means for givers to establish legacy funds to advance a philanthropic goal without the logistical challenges and the costs associated with setting up with a discreet or stand-alone foundation. Under current policy, donor-advised funds are established under the guidance and direction of the giver who articulates a particular intent but administered independently by the charity responsible for managing the fund. This allows for allocation decisions that best reflect the intention of the donor but take into account evolving circumstances. Any policy changes as they pertain to donor-advised funds should maintain this flexibility and not put into place narrow constraints, such as annual disbursement requirements that undermine this.
Financial giving is crucial to the success of Canada’s charities as our tax laws rightly recognize through various incentives. My third and final observation is that it is no less vital for the system to foster a culture of volunteers. Without an active base of volunteers, countless charitable programs and services would simply not succeed.
According to Statistics Canada, more than four in ten people over the age of 15 conduct volunteer work each year. Canadians perform nearly 2 billion hours of voluntary work annually equalling roughly 1 million full-time jobs.
While we acknowledge that most volunteers do so for its intrinsic worth, we believe tax laws should be amended to recognize the value of volunteering. This is especially worthy in that many volunteers may not be in a position to contribute financially and therefore contribute their time and energy instead. While thoughts automatically turn to the younger demographic when considering this kind of programming, it’s important to note that the elderly end of the spectrum, those who value a charitable spirit but who may have restricted incomes, would also benefit greatly.
Anecdotally I can confirm that many seniors feel a sense of belonging and purpose through their volunteer efforts and there is considerable social value in that alone. These considerations, too, should be valued as a matter of tax policy.
There are a variety of parameters that could be explored in designing this policy but, regardless of the model adopted, it should require a minimum number of volunteer hours completed, a cap on the number of hours that may be claimed, and simple but effective reporting requirements on the part of the eligible charities to ensure accountability. CIJA welcomes the opportunity to be part of the conversation on such a policy initiative, recognizing that it forms what I describe as simply the tip of the iceberg on a complex but promising topic.
In closing, on behalf of Jewish Federations of Canada-UIA, I would like to thank committee members for considering our perspective and for your dedication to ensuring that public policy effectively supports the charitable sector to perform its vital work. I welcome any questions or reflections.
The Chair: Thank you. We appreciate your presentation. We will go to questions now.
Senator Omidvar: Thank you to both of you for your time. Faith is on everyone’s mind after the horrific incident in Christchurch. We have had incidents in Pittsburgh and in Quebec. In times like this, faith communities, with considerable backing through charitable donations, come together to comfort people and to develop bridges of understanding where there was only grievance and grief. Perhaps both of you could give us some information as to what your institutions are doing, either separately or collaboratively, to advance multi-faith understanding?
Mr. Pellowe: The Canadian Council of Christian Charities represents primarily the evangelical Christian sector. We have an unrelated but sister organization, EFC, the Evangelical Fellowship of Canada. My organizations are primarily about the charitable aspect of running an organization. The interfaith work is done primarily through EFC. They are in very close communication with members of other faith communities, aside from Christianity. We are always looking for ways to foster better understanding between us. Our communication is cooperative in terms of working together for the good of all. That’s not a field where I’m working myself.
Mr. Fogel: Often, if truth be told, when we reflect on different faith communities, we focus on division, on the differences between them, each one believing that they have some unique insight into truth, into the divine, and so forth. That may lead to separation and division between different segments of Canadian society.
I can speak for us most directly, just based on my experience with so many other faith communities, it would fairly characterize the general approach of the religious community here in Canada. There is an extraordinary effort to reach out and find common cause and purpose among the different faith communities.
For our part we participate in multiple, both, if you will, bilateral as well as multilateral organizations and initiatives where we reach out to identify shared interests among many different faith communities. But as well the collective value-added that communities of faith are able to provide to the overall Canadian public policy process, as the reverend mentioned a few minutes ago.
For faith communities, there is a particular imperative to exercise great zeal in reaching out to others. In times like the tragedy that we were confronted with just before the weekend, to offer support, express solidarity, and be of material help to our neighbours and friends of different faith communities. As well to, in a proactive way, engage in the dialogue and activity that enriches the Canadian experience for all.
Mr. Pellowe: In addition to that, during Canada’s hundred and fiftieth celebration, there was a year-long multifaith initiative. If you are asking what our organization did we were financially supportive of that, and I served on the Cabinet of Canadians. That effort to draw people of faith together continues today.
Senator Omidvar: Thank you. Canadians certainly look to our institutions, particularly our institutions of faith, when we need to heal and go forward. I wish you best in those efforts.
Now let’s get to the nuts and bolts of this committee. Mr. Fogel, I would like to mention that previously on this committee we have not heard the kind of support around donor-advised funds you have mentioned. In fact, the witnesses have talked about greater transparency and accountability. We don’t know what the total amount of money in donor-advised funds is, who the donor advisers are, how much or when they pay out, or even if they get there. It’s ironic. You put $1 million into a donor-advised fund, and you get your tax receipt immediately, but you don’t have to disburse it until way out in the future.
I wonder if we can get more transparency and accountability as well as giving you the flexibility you have called for.
Mr. Fogel: I have looked at this a fair bit both in terms of our conversation about it here in Canada but more particularly in the United States, where donor-advised charitable activity has gone on since the 1930s. I reviewed, with considerable interest, some of the testimony that came before this committee and some of the concerns expressed by a number of your colleagues about it.
I say this with respect and not because I want to be combative, but looking at it one step removed, I consider some of the concerns that were expressed, and I’m a little puzzled because, from the donor’s perspective, once they have given over the money to the foundation or the charity, they no longer have the money. It seems reasonable that they should benefit from whatever credit they are going to get regardless of when the funds are actually disbursed. Because the test, it seems to me, should be the expression of commitment on the part of the donor, which is acted upon once they have cut that cheque and they divest themselves of that asset. When the foundation disburses money is an entirely different question, and that should be directed more to the charity than the individual.
If we are looking for transparency, I would argue it should be on the part of the charity that received the funds rather than the donor who remitted the funds. I have some experience with the reporting requirements of CRA in terms of charitable activity of a foundation over the year, and it shouldn’t be too onerous for there to be a section that simply requires a charity to describe the precise activities that have taken place with donor-advised funds.
Senator Omidvar: Can I have a constructive discussion with you? You said that once the donor hands over the funds to the charity, it’s the charity’s obligations — they no longer have the funds — but they do because a donor-advised fund can only be disbursed at the direction of the donor advisers. I have set up a donor-advised fund; so I know what I’m facing.
Mr. Fogel: Frankly, senator, that wasn’t my understanding. I understood that the donor provides instruction about what the intention is that they always have the right to be active in saying they want funds to go to X, Y or Z. But even in the absence of that explicit direction, there is an obligation on the part of the charitable recipient to in good faith direct funding to the kinds of programs the donor had indicated.
Senator Omidvar: We need to check that out. My information is that the donor adviser has direct control over the funds even though they are located in the charity. Let me move on.
The charity itself — let me talk about the Toronto Foundation, which is the host of many donor advisers — in their T1044 they provide an aggregate amount. We have 30,000 funds with $300 million. Do you think it would be advisable in terms of transparency and accountability to ask such holding charities to disclose the number of funds they have and the amount of money in the fund and what gets disbursed? Because the real question is that charities are saying that there is all this money socked away somewhere and it’s not getting disbursed.
Mr. Fogel: I have no difficulty with applying that requirement on the charity. There are other ways in which we are obliged to provide publicly accessible information. When you look at discrete, dedicated charities, you can look up and see what the record of the giving is, to where funds are disbursed, and I’m not sure it’s unreasonable for us to expect the same thing of donor-advised funds that are being held within a charity. Will it mean more work? Not really because if they are not internally doing that work anyway, and not tracking on an Excel spreadsheet all the disbursements from a particular fund, they are not carrying out their fiduciary responsibilities to the donor.
Senator Omidvar: Thank you.
Senator Duffy: Thank you for coming this morning. Mr. Fogel, in my notes I believe it was you who said that there are 2 billion hours of community work annually.
Mr. Fogel: That’s according to estimates from Statistics Canada.
Senator Duffy: You made some very compelling points about senior citizens and others who are not financially able to contribute money but time, energy and their life’s experience.
How would you incentivize that? Are we talking about a system where volunteers would be paid? How would we encourage senior citizens and others, such as young people, to get involved? With the demographic situation we are in, we are going to have more need than ever before.
Mr. Fogel: I agree. Regarding young people, I don’t want to make this an absolutely comprehensive comment or exaggerate it, but most provinces do have programs that require high school students to engage in volunteer activity as a credit course, or at least part of what they require for their matriculation. One could argue that students who are engaging in volunteer activity are already being rewarded for that activity.
More generally, I take your point about the elderly segment of our population who no longer have the same financial discretion as they had previously and really want to feel that they are making a contribution. Volunteer activity is a wonderful way for them to do it.
I don’t believe that any money should exchange hands for volunteer effort. I’m by no means a specialist in this, but there are a variety of tax credit considerations that could be given. I think that because of the potential scope, there is a cost to the government. There is a cost to society every time you issue a tax credit. There should be a cap on what an individual might be able to claim.
Had we managed it with charities there would be a temptation on the part of the charity to issue all sorts of what we’ll call volunteer receipts because it doesn’t cost anything and there is no paper trail or money trail for it. I think that we have to exercise some caution in that and a set of criteria should be developed. The charities can look to see if they meet in order to offer that as an option for people within particular sectors.
Senator, I reflect on work done in hospitals, for example, where there is a surprisingly large reliance on volunteer activity. When you reflect on it for a moment, those going to a hospital are among the most vulnerable, so that soft, gentle encouragement of a volunteer, who has no agenda other than to help, provides an enormous value.
I think that if there is a way for us to recognize it, not only does it help the individual, but it says something about how we value volunteerism within our community and within our society. At a time when people are becoming increasingly narcissistic and preoccupied with self, this is a way of pushing back against that and saying it does matter and it does count.
Senator Duffy: I’m not sure if it’s still in existence, but a few years ago a government brought in a tax credit for volunteer firefighters who have to buy their clothes and helmets and all that stuff. Is that the sort of thing you are thinking of?
Mr. Fogel: It’s based on that model. Yes, volunteer firefighters and first responders are still able to access that kind of a credit, and rightly so. There is a huge personal commitment that they express when they take on that kind of a job. Certainly, it’s our experience in the Jewish community where, because the health care sector is so overwhelmed, there are volunteer ambulance corps in different communities that work 24/7 for which are there is no compensation whatsoever. Being able to recognize it in this way isn’t going to balance out financially but it does give a little validation for the commitment that they express.
Senator Duffy: Thank you.
Senator R. Black: I have one question for Reverend Pellowe. In the work that your organization does, do you find any difference between rural and urban requesters of services or the questions that you have coming from rural churches and organizations and urban ones? Is there a higher need you can share with us?
Mr. Pellowe: In the rural areas, we deal a lot with the treasurers and the administrators and so forth. Regarding the rural charities, we monitor our questions and email requests and so forth. They are quite often struggling with basic compliance issues. How do they comply with CRA for receipting or whatever? I think the questions that come in from the larger charities, because we have some of the largest charities in Canada that are members, they tend to be what I would call more sophisticated and nuanced questions.
In the rural areas you have people who are good-hearted and who are trying to help the organization stay compliant but they may not have all the training that they need, so that’s a big service that we provide. What we are famous for is that people can just pick up the phone and call or send an email and our staff of lawyers and accountants can help them out.
Mr. Fogel: This theme of rural versus urban is something that has come up several times. There is within the charitable world a notion, at least here in Canada, of something that we in the Jewish community call national collective responsibility.
There is a recognition that urban centres, with the benefit of very sophisticated infrastructure in terms of agencies and capacity to deal with the demands within the Jewish community, have a responsibility to provide support to communities that may once have been developed but for various reasons have shrunk.
Atlantic Canada would be a perfect example of that. In New Brunswick alone there were communities flourishing in pretty much every small town and city, and now Halifax is pretty much the only proper urban centre. There is this notion of extending support and assistance to those communities that don’t have the capacity on their own, and almost all of that is done through charitable dollars. Just to underscore the kind of symbiosis that exists between urban and rural, it’s so evident in our own charitable experience that these kinds of programs work to cement the country rather than divide it.
Senator R. Black: Thank you. So the services that your organization provides, then, do support rural areas in a big way and I’m delighted to hear that. Is there a need to build the capacity further or provide opportunities for capacity building at the rural level versus urban with your organizations and other organizations that are affiliated? If you weren’t around, who would they turn to?
Mr. Pellowe: That’s a good question. Two thirds of our members are under $300,000 in revenue, so they are small and another two thirds are also rural. Who would they turn to? If they are a church then they would likely have a denominational office to refer to. The denominational offices actually prefer that we take those questions in most cases. It’s a more efficient way of doing this.
There are online resources that are there. The problem we find is that people can read on our website or others and the information is there, but understanding of the application of it is what they still call in for. We thought when we put up our website 15 years ago with all the detailed work that the phone calls and emails would drop right off because they’ll find it themselves. What they do is they find it and then they call: Can you help me understand in my situation? It’s a personalized response. They want to understand for their specific application. That’s what’s hard to get elsewhere. But the churches would certainly turn to their denominational offices, and other independent charities tend to be on their own.
Senator R. Black: Thank you for your answers.
Senator Omidvar: Mr. Pellowe, I’m on your website. It’s really very impressive. You have deconstructed the guidelines on fundraising dinners and charities, the summer jobs program. It’s almost as if you are a Coles Notes for the CRA.
I want to examine the relationship between you and the CRA a little. Is there ongoing communication? For instance, when you say charities call you, you then have to provide them with contextualized information. Do you feed this back up the pipeline to the CRA so they can make it also generally available, not just to your members?
Mr. Pellowe: Yes. The Charities Directorate of the CRA, there are many ways they consult with the sector. We are extremely pleased with the Charities Directorate, and the work they do. They have a Technical Issues Working Group that meets several times a year and a four-C’s staff member has been on that for several decades now. This is where you get to the nuts and bolts. So that information, yes, is happening regularly with the directorate.
The directorate also has consultations that take place twice a year, and depending on the topic — I have been invited to five or six of these over the last 15 years — it is four or five days spent with CRA. What they do is they say, “We are thinking about developing a policy.” They don’t have it yet. They would like to have people from the sector think with them through the issues. So they share their legal opinions they have had and other things. All the ones I have been at, they have had people from Australia, the U.K., and the U.S. there. The foreigners have all said there is absolutely nothing like this degree of consultation in their own countries. It is an amazingly successful consultation process. We fully support it.
Senator Omidvar: Good to know.
Mr. Fogel, I’m tempted to ask you more about donor-advised funds, but I’ll shift. You made a comment about charitable activities outside Canada. We have not yet heard from significant charities that have activities overseas. I don’t have your presentation in front of me, but hopefully it will be provided to us. I believe you were anxious about ensuring that charitable dollars raised in Canada for activities overseas are spent in a charitable manner.
What are some of the risks associated with charities operating overseas?
Mr. Fogel: I think the most obvious one, senator, is when we consider money as opposed to sgoods and services. When it comes to purchasing rice or wheat and sending it abroad to a drought-stricken area, it may be fungible, but it’s more of a challenge for somebody to do something illicit.
When we are talking about money being transferred overseas, there are risks attached to that. Is the money going for the project that was intended? If it’s intended to pay for teachers, is that where it’s ending up? Is the local beneficiary then freeing up money that it would otherwise allocate to teachers, and directing it to something that is inimical to Canadian policy or Canadian interests?
I am simply flagging that charitable activity in Canada is relatively easily verifiable. Charitable activity outside of Canada that’s benefiting from Canadian donations and Canadian government receipting and so forth is a little more challenging.
I know that, even in the best circumstances — because we have any number of activities that take place in Israel, for example — with the best of intentions and with genuine good faith, things like agency agreements, demonstrating Canadian ownership or Canadian control over a project and so forth can sometimes get complicated, how much more so when perhaps the motivation is less than genuine or pure. So I was simply flagging it as something that perhaps this committee may want to give some consideration to, because it’s one of the areas in which Canadian generosity can be exploited for less than generous purposes.
Senator Omidvar: Talking about Canadian generosity, what is your response to the proposal that the Canadian government matches the donations of Canadians when disaster strikes overseas? Should we not have a similar proposal to incent the charitable giving of Canadians when disaster strikes in Canada?
Mr. Fogel: I think the one difference between the two is that when, God forbid, we experience disaster here at home — flooding, for example — there are built-in mechanisms through which support is provided for the affected communities or regions. The premise I think of foreign assistance is that we are trying to offer some statement about our sense of obligation or responsibility for those who are disconnected from us. Therefore, it is an elegant way for us to talk about public-private partnerships and it underscores for Canadians that we should see our responsibility as perhaps being first at home but extending beyond home to other parts of the world.
I’m not sure the same rationale would apply for the experience here in Canada. But as a Canadian who has witnessed so many challenges that our neighbours, friends and families here in Canada have experienced over the years, my breath is taken away by the extent to which Canadians do respond to challenges here in Canada. I don’t want to sound sanguine or complacent, but I think we’re doing pretty okay.
The Chair: Gentlemen, thank you very much. Mr. Fogel, it was a good point to end on. I’m always amazed at how we manage to come together, and how we manage to have people who are not natural friends come together at times of adversity and pull in the right direction. We see it in certain parts of the world. We saw it in Christchurch this weekend. It makes you feel good about being a Canadian. Thank you both, gentlemen. I appreciate your participation.
For this panel we have, from the SickKids Foundation, Ted Garrard, Chief Executive Officer; and from Northern Lights Health Foundation, Cindy Amerongen, Executive Director.
We will start with Mr. Garrard.
Ted Garrard, Chief Executive Officer, SickKids Foundation: I want to thank the committee for giving me the opportunity to speak to you today. The charitable sector has been my life’s work for the past 37 years with well-known organizations such as the United Way, Western University and SickKids Foundation. During this time, I have had the privilege and the honour of leading fundraising efforts that have generated more than worth $2 billion with, I can assure you, a lot more to come.
We all know that donations fuel Canada’s 86,000 charities. The work we do, often in partnership with government, is vital to building civil society in our country. Today I can spend time talking about the charitable sector’s considerable achievements, and there are so many. However, achievement is not my focus today. I’m here to raise the alarm, albeit in a calm, resolved and very Canadian way.
The committee’s review of the state of Canada’s charitable sector is timely. Huge demands are being placed on the sector through public funding constraints, burgeoning demand and even our own success. For example, advances in research at hospitals like SickKids have allowed us to successfully treat more children who are living longer, but these children are left with significant and complex, lifelong health issues which require support that government alone can’t provide. At the very time needs are growing, giving from Canadians is declining. The percentage of Canadians claiming charitable tax credits is at an all-time low. Fewer donors are being relied on to give more money. Taking inflation into account, the over all value of donations in Canada has not reached the levels prior to the 2008-09 recession and total giving has remained flat since 2010. Corporate and foundation donors are increasingly focusing giving, which is positive in achieving impact in an area but negative in that other worthy causes see fewer donations. For the charities that are succeeding, growing their donor bases and raising more funds, they are doing so at the expense of other charities. This is a shame, as the pie needs to grow for all of us.
We also know that giving is highly correlated with religiosity, educational attainment and age. Religious participation is declining and Canada is aging. Will Generation X and Millennials step up and be future donors? Inculcating them on the importance of giving and volunteering is vital, although reaching them — and I can tell you from first-hand experience — is very difficult and it costs money. I’m alarmed that our sector is not well positioned to engage with these cohorts. It will take more than the occasional tweet or ice bucket challenge. Our sector needs to adapt if we are going to acquire future generations of donors.
The perception of how charities should operate has not evolved at both the public and policy level and it must, because it inhibits our ability to have impact. I’m not speaking of the many charities and non-profits that run at the grassroots levels fuelled by volunteer dedication, but take the SickKids Foundation, for example. Our work is equally worthwhile, but functionally we are a complex, sophisticated business. We don’t rely on bake sales anymore. A $1.2 billion endowment, fundraising of more than $150 million a year, 200-plus employees, 300,000 annual donors and 1 million transactions annually. This is the scope of the charity that I’m associated with. Yet despite our size and success, we still only represent ten per cent of our hospital’s operating budget. Just ten per cent. We are a small player relative to the overall need.
So how do we deliver more impact? How can our sector do what we do better? First, we have to smash our inherited perceptual framework for charity. We remain straight jacketed in a centuries-old paradigm about what charity is. We conceptualize the act of charity as an individual in a state of grace giving incidentally. That model is provisional, reactive and unchanging, and it reinforces the ideas that charities should run on a shoestring. Professionalism is suspect, spending money to raise money anathema, entrepreneurial behaviour the purview of the private sector. This is a 180 degrees from where the charitable sector needs to be today as we try to address what Imagine Canada calls the social deficit, the projected and growing gap between the demands that individuals, communities and governments place on our organizations and what we can deliver.
One of the foremost thinkers on the role of the non-profit sector today, Dan Pallotta, says this:
It is time for a transformative conversation . . . . A conversation about setting charity free. Free to experiment. To risk. To make mistakes. To think in the long term. To envision. To build. To spend. Yes, to spend. To dream. And to make those dreams real, in the same way Nike and Nintendo and all the other free-market enterprises do, and in pursuit of goals far less urgent.
I couldn’t agree more.
Our sector must seize permission to be entrepreneurial. More impact in the charitable sector will come from investing to raise funds to meet our missions. Everything we do to grow giving must be done with accountability and transparency that defines how we do business, but impact will come from a different business model and how the public, and indeed government, perceive charities today. I have used the word “alarm” to encourage urgency, but there are solutions. Here is what the federal government can do.
The CRA has responsibility for compliance around Canada’s charities, but who in government is our champion? The cabinet table needs a minister for giving or social good to champion the evolution and growth of the charitable sector, both to the government and the public, to help ensure the culture of philanthropy glows more deeply in the hearts of all Canadians. We must shift the mindset in government around charities from compliance to championship.
The second area where government has a role is in giving Canadians more ways to give and here we need to improve tax incentives. One immediate step could be to increase the charitable tax credit rate on donations of up to $200, which is currently 15 per cent. Why not bring it in line with the tax credit rate for donations greater than $200, which is 29 per cent for income earners of less than $200,000 and 33 per cent for earners of more than $200,000? For example, the donor today giving $200 gets a credit of $30. If the tax rate went up to 29 per cent they almost double their tax credit to $58. Surely, an enhanced incentive to give, particularly for those making smaller donations.
I also want to acknowledge the role of philanthropists and Bay Street leader, Don Johnson. He led the charge to remove the tax barriers around gifts of publicly traded securities to registered charities, which has generated an enormous amount of money for our sector. I encourage you to embrace his further proposal, a provision that would enable the donation of shares in private companies and real estate to charities. I know that this will unlock hundreds of millions of dollars for Canada’s charities.
In closing, the government needs a vibrant charitable sector to help Canada flourish. More needs to be done to champion the sector. We need to reimagine how charities must operate to achieve meaningful impact and incent more Canadians to donate and for those who do donate to give more. Together we need to seize the opportunity. Now is the time to get Canada giving again. Thank you.
The Chair: Thank you, Mr. Garrard.
Cindy Amerongen, Executive Director, Northern Lights Health Foundation: Good afternoon, ladies and gentlemen of the Senate committee. Thank you for inviting me. I’m Cindy Amerongen, Executive Director of the Northern Lights Health Foundation and we are located in Fort McMurray, Alberta. We are a 34-year-old charitable foundation which has raised close to $75 million for priority health care programs, capital development projects, services, technology and equipment in northern Alberta. Our entire organization, plus all of the other social profits in Fort McMurray, could fit into the SickKids Foundation. I’m pretty pleased to be here.
We have been accredited with Imagine Canada since 2014 and are governed by a volunteer board of directors selected to represent the community on skills, gender and influence matrix. I appreciate that this committee is seeking ways to support, sustain and grow our charitable sector. My comments today are around my lived experience and observations as a charitable fundraiser in a community devastated by a wild fire three years ago. I would like to touch on the effects, the attempts to return to normalcy, the desire to bounce back better, and all during a time when our sector was in crisis.
When we evacuated our region, the number of evacuees was stated as 88,000 safely evacuated in a region of 125,000 people. They received emergency care, shelter and funding to support a one-month mandatory evacuation. Aid was provided by various governments through donations by the Canadian Red Cross and other local, national and charitable organizations. Almost $300 million was raised to help the victims and that is thanks to donations of more than 1 million people matched by provincial and federal government programs.
Most people did not return to the community for six to eight weeks after the fire due to environmental or medical conditions or lack of housing. No one was allowed to return to Fort McMurray until the Northern Lights Regional Health Centre was cleared to accept patients. The fire was absolutely disruptive to the foundation. We were not able to reopen our office as we are located right in the hospital until eight weeks after the fire. Of the seven foundation members, three lost their homes, the executive director tendered her resignation upon return and I was asked to step in.
The social profit sector in our region was also struggling to meet the demands of the clients of dealing with the impact to their organizations. Most of the non-profit and charitable organizations were impacted. Many lost their facilities, their financial and client or donor records. Many lost their staff.
A report produced 18 months after the fire showed that almost 80 per cent of the agency lost staff at the executive and management level. This left little understanding of the historical financial grant and donor records and regulatory requirements to run the business.
Lots of money and grants were flowing into the community. Most of the money was held by the Canadian Red Cross for future grants. Agencies need to apply under fairly rigid guidelines, and most of the grants were not received between 12 and 24 months after the fire. These grants were to replace program and service items, launch client support projects, support recovery and build resilience. There was very little allocated to administration from these grants and very little came into organizations as unrestricted donations to help relieve the administrative burdens and rebuild capacity. Traditionally, social profits have not been afforded the same credibility or value to the national or regional economy as small and medium businesses. This has led to inequality in available financial support, which was especially evident post-wildfire when social profit organizations were unable to access financial support in the timely and streamlined process, which was critical to keeping our businesses and services available. We were not eligible for small business recovery grants in our region.
The challenges to operating a charity or non-profit are similar to a small or medium business, although we have no products to sell, only services to people and projects. And those services are now and will continue to be in high demand. In our region, the social profit organizations joined forces to advocate for financial support to cover off the office and staffing expenses incurred during the time when the offices were not operable. It was many months before this money was received and it was equitably distributed through the Red Cross.
I’m heartened by the recent announcements of the creation of an Advisory Committee on the Charitable Sector. It seems to indicate a desire to add capacity and stability. It seems a perfect time to ask this Senate committee to look into a federal charitable sector emergency response team to develop scalable standardized strategies for volunteer and donation management, understand fund diversity and delineate efficient lines of communication during the crisis. This is a time to establish a seat for the charitable sector at the emergency response discussion tables and allow the sector to assist in decision-making and critical financial support.
The wildfires showed us there is no lack of generosity in Canada. Neighbours will help neighbours when times are tough and they are sparked to action, and donors can be motivated to give more when there are matching funds or other incentives offered. Charities require more than emergency services and we count on the generosity of Canadians as regular and consistent donors to support the growing needs for social programs, services and infrastructure that support them and their fellow Canadians.
Looking to the future, we know that we will need more money and that Canadians have the capacity to give more. The other piece of assistance I would ask you for is unrelated to the wildfire. As Ted has just mentioned, we have some lumpy administration around the charitable tax rate for donations over $200. Let’s increase it from 29 per cent to 30; let’s even this darn thing out. We do see the looming social deficit with an increased demand for social services, declining numbers of personal donors, and all of this is the same in Fort McMurray as it is in Toronto. Charities need stability; donors need affirmation and support to continue their philanthropic giving. My request is for a 33 per cent charitable tax credit for all income levels to equalize the cost of giving, simplify the tax code, promote fairness and incent donors to give more.
In closing, here’s what the wildfire taught us in Wood Buffalo: Social profit and for-profit businesses are more alike than different. People are generous and can be motivated to be more generous when government clearly states its intention to incent donation. We know that the human sector gets a double hit. Staff and facilities and organizations are damaged and demand for service is huge. Even when funding comes, its generous but there is nothing for administration. So I urge you to advocate for a national charitable sector emergency response team and to work with the Tax Policy Branch to equalize the tax credit.
The Chair: Thank you for your presentation. You reminded us in the presentation that it doesn’t matter how far we get from a disaster, it’s still very emotional.
Senator Omidvar: Thank you for being here today.
Thank you, Ms. Amerongen, for painting that picture of what happened in your region. We need to hear that a little more. And Mr. Garrard, you lead one of my city’s most beloved charities, so I take great pride in having you here.
I want to thank both of you for almost the first concrete proposal that we have around incentivizing small donors, and I won’t go down that further. You have been clear. I certainly hope we will look at it because we have received accompanying proposals for incentivizing more donations for philanthropists. And I’m looking at squaring off or levelling the playing field.
Mr. Garrard, you said that we need to be more entrepreneurial. And you have a section in your speech that’s very eloquent, but I won’t read it out. The Canadian way is to be generous, but the Canadian way is also to be risk averse. That is one of our governance strengths, in a way. When you think about the meltdown of the financial institutions worldwide, we stayed good because we are risk averse. We are particularly risk averse around tax dollars and charitable dollars are tax exempt dollars in a way, but they are still related to the tax base. How can you help us square being risk averse, on the one hand, and being entrepreneurial, risk taking, embracing the brave new world of social enterprise, et cetera, which I think is what you are talking about? Help us out.
Mr. Garrard: Yes. I’m fortunate to have a board of directors of 36 outstanding community and business leaders who, day in and day out in their businesses, take what I call calculated risk in order to achieve very reasonable and meaningful outcomes. And they have been pushing me, as the leader of SickKids Foundation, to be more risk tolerant, to actually take reasonable chances, with ones that have sound business plans behind them and will have returns on investment over a period of time, which I am held to account to deliver on and if I’m not, then I may not have a job. But the community itself observes what it is that you have pointed out: We tend to be risk averse. And it goes back to this point of not wanting to spend money to make money.
I firmly believe that in today’s world of raising money, unless we are prepared to make investments to transform the business models that we have grown up with in the charitable sector, we will not be successful at raising more money.
I will give you one tangible example. If I look at the millennial and the generation X cohort group that I described earlier, 95 per cent of them access information through their smartphone. That’s the way they consume information, so why should we be sending out direct mail anymore or doing the bake sales? If we truly want to convene where those cohorts are, in fact, congregating, we need to become technology-based charities, which is what we are doing. It requires investment, risk and calculated risk, but we are already seeing the transformation. I talked about this climate of stagnant giving and that we have been fortunate to increase our donor base between seven per cent and 10 per cent a year for the last five years and we have been able to grow revenues. I think it’s because the business model has become more risk tolerant. We must also stop building into our central value propositions, the charities, that efficiency is the only way we will be successful. I think that has to change. It is entrepreneurialism and effectiveness that will make us more successful in the future.
Senator Omidvar: May I follow up with you on another question, Mr. Garrard, which I asked a witness from the Association of Fundraising Professionals, about executive compensation.
You are a very big charity. I think you are among the top. In the last five years, we’ve had some negative reporting on the amount of money executives in your field are paid. There was a proposal in the House of Commons to limit compensation of executive directors of charities at a certain level, which I don’t believe is helpful. At the same time, is there a limit on the other end? Do you think the Association of Fundraising Professionals, should develop guidelines on executive compensation? Do you talk together about holding back? Is there a best practice here?
Mr. Garrard: Our board spent a lot of time comparing information to ensure there are reasonable compensation levels within the sector. First, I believe that if we are going to continue to grow charities, we have to attract experienced leaders to run them because in many cases we are complex organizations.
Second, I have a board of directors and a compensation resource management committee that sets the salary framework not just for me but for the entire organization. They do so on the basis of comparing information from across the charities sector in Canada so that we don’t aim to be the leader but we also need to be competitive.
Third, as I talked about how charities are transitioning into becoming technology-based organizations, we are increasingly hiring from the private sector to attract the skills that we need to be able to do that. We don’t pay anywhere near the private sector. I’m not saying we should in order to attract those individuals. However, if we are not competitive, we won’t build the skill sets we need to be successful in the future.
Finally, I think Canadians make awfully good fundraisers. In fact, I just lost two of my very best fundraises to the United States to run children’s hospital foundations there at salaries that were much greater than we have here in our sector. I can only say that my staff gets calls all the time to go abroad to raise money. There is something about the way Canadians raise money that is valued. If we put a cap on our ability to keep our best people, I think it would be disastrous.
Senator Omidvar: I don’t agree with the cap but I appreciate your point of view here.
Ms. Amerongen, in your presentation you said that your charity had been accredited by Imagine Canada. My question to you is around that process. Why did you feel you had to get that accreditation? Did that help you qualify for donations from Suncor and others? You have done very well raising money from, the corporate sector. Was that a lever to help you get there?
Ms. Amerongen: There are two parts to that. First, in 2014, the board was looking to move from being a management board with their fingers in the operation to a governance board. Imagine Canada forces you to create your policies looking at your business from a governance standpoint. They went through a very rigorous process the first time creating all the board library of policy and procedures and enacting those through a governance calendar. We now have an executive committee, governance committee and finance committee that do the business of the board. When the board meets, we are then prepared to make our business decisions.
The second part of that are the funding partners that we have. You mentioned Suncor, who is aligned to Imagine Canada with the percentage of giving they provide each year out to the Canadian market. They look to be aligned with us on how our goals and objectives can be working in tandem. When we can fit right into their pillars of support, it does make their life easier. I’m going through recertification — it’s a five-year process — and two weeks ago I pushed the button on submitting it.
Senator Omidvar: Congratulations. I’ll get back to you if there is time.
Senator Duffy: It’s become a bit of a running joke here about a minister or ministry responsible for charities. I have been beating this drum now for several months.
Ms. Amerongen, I want to follow up on the lack of infrastructure. The whole country, in fact the whole world, saw what you went through. Did you have to start from scratch — that is, computers, phones, everything?
Ms. Amerongen: We didn’t but many of the organizations did. We were housed in the hospital. We work with the agencies in our region. We are all trying to work under one group, FuseSocial, which has quite an extensive arm into the community. It has a volunteer arm, a charitable sector and a leadership sector that is all together. Immediately after the fire, when people were evacuated to Edmonton, ED started to meet and to put some work together on recovery. The lack of people and the turnover in the sector has been unbelievable.
Speaking of salaries and all the other things, we have dealt with all of that this past couple of years to try to attract people, train them and bring them up to some kinds of standards.
Senator Duffy: Going back to those dark days, did you then have to go to the Red Cross cap in hand?
Ms. Amerongen: Absolutely.
Senator Duffy: Do they have the kind of people and management skills? It’s one thing to be delivering blankets, food and water to somebody in their house that’s burned down, but do they have the kind of macro management skills that you need?
Ms. Amerongen: They stand with us but not as a leader of us. That’s a gap that I believe is needed in Canada.
Senator Duffy: We have emergency measures organizations in every province that is basically set up for disaster management. Should we have a place there? Should that be part of the federal mandate?
Ms. Amerongen: I think so. I think you need to be watching your charitable sector. It can go down so quickly without support. You need advocacy and you need programs that are in place. When you hear there is a fire in St. Johns, you might want to think what it means for the community beyond and for the individuals. What does it mean for the structures? In this particular group, what does it mean for the charitable sector?
Senator Duffy: Is it simply because the Red Cross has always been around?
Ms. Amerongen: Absolutely.
Senator Duffy: Is there institutional resistance to your idea is what I’m getting at?
Ms. Amerongen: I don’t know that there would be. The Red Cross has been a partner with the Canadian government for over 100 years. They do emergency response extremely well. They’re extremely protective of the donated dollars to them. You need a can opener to get at it. It takes a bit of work.
Senator Duffy: There you were running on empty. Millions of dollars were contributed to Canadians, and you couldn’t get your hands on it to get the thing going again.
Ms. Amerongen: Right. They become very specific dollars. Although they are donated generously and unconditionally once they go into the Canadian Red Cross, there are conditions. I don’t think a 9 per cent administration rate helps anybody on any project. That’s the cap.
Senator Duffy: The federal government couldn’t run on that.
Ms. Amerongen: If you were replacing product there is no administration fee at all.
Senator Duffy: Mr. Garrard, your eloquent words encapsulate where we are. When we look at this problem, we see the fire in Fort McMurray, wall-to-wall coverage on television and people feel touched and want to give.
In addition to emergency management, do we need a structure or a framework for this electronic giving so that when these unforeseen events pop up and people are moved, whether it’s in Saskatchewan with the horrific bus crash or other unforeseen events, some kind of legal framework or regulatory framework so that we can be sure that the charities to whom or the funds people give over the Internet end up in the right place?
Mr. Garrard: First of all, I think the infrastructure to be able to make donations exist, whether it’s through the Red Cross or other organizations. I don’t think you have to replicate the technology or infrastructure to make donations. I think your point is really around the accountability for spending the money to ensure that donors can have confidence that the money they are giving is going to the purpose for which they were intended. I think that there has to be effective oversight to ensure that happens. Canadians need to trust that the money they are giving for these disaster programs is in fact going to make a difference.
Senator Duffy: People trust the Red Cross, but there are these outfits that pop up, sort of crowd funding that comes up immediately, and you wonder who is behind this.
Mr. Garrard: Right. I would say, in that particular instance, there does need to be more oversight to ensure that crowd funding kinds of initiatives are spent in a way that the donors intended the money to get spent. I would support that.
The Chair: Mr. Garrard, it seems to me that other opportunities for raising money crop up in institutions such as yours where there is a good amount of research being done by your staff and the foundation funds some research. What is the structure for commercialization of results of research if you are fortunate enough to come upon something that is commercially viable? What is the structure for that to happen, and for the money for that to come back into the foundation?
Mr. Garrard: The way we operate at the Hospital for Sick Children and at Canadian universities is that there is usually an office of commercialization and intellectual property. They will endeavour to find investors who are usually given some ownership share in the intellectual property once it is commercially viable. Most of the money that I have been aware of stays with the institution to help bolster its bottom line, not unlike what philanthropy does, but we keep the two things very separate.
The Chair: Of course, SickKids Foundation has been the beneficiary of that in the past.
Mr. Garrard: No. We do not receive any funds as a result of hospital-based commercialization.
The Chair: You know your foundation much better than I do.
Senator R. Black: Thank you. I would like to better understand the charitable sector emergency response team. I like the concept. A concern I might have is if it is based in Toronto, Ottawa, Vancouver or Halifax, how will they be perceived parachuting into the Wood Buffalo area? Help me out here.
Ms. Amerongen: I see it a little differently in terms of emergency preparedness. The EDs that I work with in the community, we are currently working on our own emergency preparedness plans. Each of us is doing our own separately, and we are working on things together. What I believe is a committee that I’m talking about is one that starts now and starts to figure out what are the things that need to be done in any community and when it happens you can activate it. It doesn’t mean that the group is moving but the ideas are moving.
Senator R. Black: Thank you.
Senator Omidvar: I’m going to ask both of you a few questions. I want to go back to Senator Duffy’s favourite question around the minister for giving and social equity or social good. I hear some new language — minister for the third sector. We have had ministers before in previous governments and they have had no money, no policy capacity and they haven’t had a department. We have heard an interesting proposal from the Mowat Centre, which I’m sure you know of, and they have recommended that a place at the table means a place for the charitable sector beyond the CRA, which is just a regulation interpreting, regulation-making place. They actually recommended a joint committee, which I think is a problem, but still. Senate and house committees that would look at legislation, review legislation based on their work, on pipelines to whales and dolphins, et cetera. What is your response to that suggestion?
Mr. Garrard: First of all, I said in my remarks that when we think about the perception that the federal government has of the charitable sector it’s only around compliance. It is not about this notion of championing the sector in a way that encourages thought leadership about the role the sector can play in building civil society. Encourage giving across the country. Being real partners as opposed to auditors and fact checkers. It’s shifting this notion about what the role is at the table. I think that’s important.
Second, putting some support behind it. Whether it’s a committee of the Senate, a joint committee, an office that would be helping us advocate for the charitable sector. I certainly support that. When I was very young and starting out in this sector in 1982, a good friend of ours Gordon Cressy, together with a number of other leaders including Allan Taylor at the Royal Bank and Arden Haynes of Imperial Oil, led what was called the Imagine campaign. It was the precursor to Imagine Canada. It was based on the ParticipACTION model that we needed to get Canadians active and engaged in their communities by giving and volunteering and participating. I think that could be a potential role for this, whatever this structure looks like or whatever this individual is responsible for.
Senator Omidvar: I am intrigued by your proposal to establish a federal charitable sector emergency response team. It’s a new idea. We have had our share of disasters in this country. What do you think of the notion of incentivizing donations to Canadian disasters in the same way as we incentivize Canadian donations to international disasters overseas, like if I give $100 will government will match it? What do you think?
Ms. Amerongen: Absolutely. We saw that in action in Fort McMurray. It was maybe 48 hours before there was a federal announcement of matching donations to the Red Cross, not to every organization that was receiving funds. The Alberta government was maybe a day behind to announce they would match the Albertans. It truly makes a difference. I know many of my friends that received their first helping money, and donated those knowing it would be a triple impact back into the community. I don’t think you can talk about that enough. We are just as deserving in our country for an emergency as any other country.
Senator Omidvar: I want to go back to your accreditation with Imagine Canada. If it’s helped you such a great deal, do you think the government should make it a standard fundable practice for all charities? Maybe you slice and dice it different ways, small charities, small training, big charities, big training. Can I get a response from both of you?
Ms. Amerongen: This year was our year to renew our accreditation. I brought that to the board and said, do we want to do this? We are strapped right now for things we are working with and it’s going to come to me and on my time.
We were also completing a $16 million campaign, which we just wound up in December. So I let them know, this was going to take a lot of time and a lot of energy. We decided that we wanted to stay accredited. So we put our energy into that.
Now, in Alberta, there are 69 charitable foundations that look after Alberta Health Services and there is no standardization in how the governance works for all of them. So Alberta Health Services Foundation Relations team is trying to find a streamlined way to into bring all of the foundations into Imagine Canada standardization. We are unfortunately going to be ahead of that, so we are going to do the whole thing again. The rest of them may have a way to smooth it out for the very small to the very large foundations and still have accreditation.
Mr. Garrard: I was the chair of Imagine Canada when the standards initiative was brought forward and put into place. And SickKids was, in fact, the very first health care organization in the country to be accredited. I would say it was extremely beneficial to our organization to ensure that best practices, as identified by Imagine, were being followed by our organization. But it is a time-consuming process. And it looks at more than just your financial management. It looks at issues such as board governance, management, human resources practices, stewardship and impact reporting, the policy framework you have in place.
I would just say that those are things that really are CRA compliance, many aspects don’t get into. It’s why the Imagine process is so valuable, because it is much more comprehensive and touches on how charities do operate. Should it be mandatory? I would say that it should be mandatory for boards to decide that it’s a mandatory thing for them because they will get so much value out of it. I don’t think government should legislate it, if you will, but I do think that through enough encouragement, charities will see enormous benefit out of this and we just have to spread the word.
Senator Omidvar: In order to give that legs, the T3010 would have to be revised with a question: Has your board put the question? Yes or no.
Mr. Garrard: Yes.
Senator Omidvar: Pretty good. That’s easy.
Mr. Garrard: That’s easy to do.
Senator Omidvar: We have had many previous witnesses and we have learned about the amount of charitable money that is located in donor-advised funds. I’m of the view that this is terrific if the money gets to the charities. But there are transparency issues, accountability issues, and we have very little information about how many donor-advised funds are held by a particular foundation outside in the aggregate. I think we want to go beyond aggregate. We don’t know whether annual disbursements are made or when they are made. Maybe 10 years after the fund was set up. You are the big daddies of charities here. What’s your point of view on this?
Mr. Garrard: Donor-advised funds have become a significant purview of the banking system in this country. The largest donor-advised funds are held by banks where customers can get both wealth management advice and, at the same time, get advice on how they should channel their charitable giving. In fact, several of my colleagues from the charitable sector are now working for those banks and providing that advice to their high net worth clients. There should be more transparency around it. I do think that just as our foundations are required to distribute a certain amount of money each year, so too should donor-advised funds. It should not be allowed to languish.
On the one hand, if you have tax relief for setting up a donor-advised fund, you should be accountable for spending the money on an orderly regular basis. I support more transparency and I certainly support more proactive spending around donor-advised funds. There are some in the United States that I’m aware of where the donor-advised funds, if it is not dispersed, the actual holder will be given the authority to spend the money at a certain period of time.
Senator Omidvar: That’s an idea. Just speaking about the wealth managers at financial institutions who advise both on growing the account and possibly on philanthropic advice as well, do you not think there is a conflict of interest when there is a wealth manager, who gets paid by virtue of the amount of money that sits in an account, is advising that individual to deplete some of the value of the account by giving it to charities? Help me out. I am a little person. I am thinking about how this works.
Mr. Garrard: If they have the expertise that I, as a client of a donor-advised fund has, I’ll listen to it. But at the end of the day, it’s still my decision. So I’m not sure that it’s a conflict of interest.
Ms. Amerongen: I want to add to that. We have referred to donor-advised funds as mystery money. How it comes to us is generally a mystery and generally with no one’s name assigned to it. Often, a donor has a fund. They will use an anonymous portal like Benevity or CanadaHelps. We will receive an EFT with no information and no one to thank and no donor. So it’s a mystery to me. There you go.
Senator Omidvar: Thank you. That’s good language for us to consider. Mystery money.
The Chair: I’d like to thank both of you for being here today. You both bring something unique to the table. You are someone who has been through an awful disaster in her community and its overall effect in the community. And Mr. Garrard, as the CEO of one of the most successful fundraising organizations in the country, we thank you for your time as well. You have made a major contribution to our study. We hope that when we finish our study, you will see some of your suggestions reflected in our recommendations to government.
(The committee adjourned.)