THE SPECIAL SENATE COMMITTEE ON THE CHARITABLE SECTOR
OTTAWA, Monday, December 10, 2018
The Special Senate Committee on the Charitable Sector met this day at 4 p.m., to examine the impact of federal and provincial laws and policies governing charities, non-profit organizations, foundations, and other similar groups; and to examine the impact of the voluntary sector in Canada; and, in camera, for the consideration of a draft agenda (future business).
Senator Terry M. Mercer (Chair) in the chair.
The Chair: I welcome you to this meeting of the Special Senate Committee on the Charitable Sector.
I’m senator Terry Mercer from Nova Scotia, chair of the committee. I would like to start by asking my colleagues to introduce themselves, starting with the deputy chair.
Senator Omidvar: Ratna Omidvar, Ontario.
Senator R. Black: Robert Black, Ontario.
Senator Duffy: Mike Duffy, Prince Edward Island.
The Chair: Today the committee will continue its study 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.
For this meeting, we will focus on advocacy and political activity as it relates to charities and non-profit organizations.
For our witness, we welcome Susan Manwaring, Partner and Leader, Social Impact Group, Miller Thomson LLP; and from the Advocacy School, Sean Moore, Principal. Thank you both for accepting our invitation to appear.
Sean Moore, Principal, Advocacy School: Thank you, Mr. Chairman. I appreciate and welcome your invitation to share my own observations about the issues which are included in the committee’s mandate. I intend to focus my remarks on the dimensions of those issues that relate to the role of the charitable and NGO sectors in public policy and advocacy.
First, a bit of my background. More than a decade ago, I have been semi-retired from a practice as a non-lawyer partner and public policy adviser with a large Canadian law firm, following almost 30 years of working for all manner of clients both in Canada and the United States. In 2011, I launched a social enterprise we call Advocacy School. Its mission is to educate, train, coach and mentor a broad range of organizations here and abroad on how they can best develop and build upon their own in-house capacity to deal with governments constructively and effectively. Separate and apart from Advocacy School, I also serve as a technical adviser to some charities, non-profits and professional associations on their compliance with various federal and provincial lobbying regulatory regimes.
It’s those perspectives that I’ve gained in these activities which form the basis of my remarks and observations.
My first point is I think we all need to be mindful about how serious the problem is of all who deal with government often find themselves choking on process. By that I mean the complex application and reporting systems, often obscure regulatory requirements involving grants and contributions, government procurement and a variety of other oversight bodies.
The problem is widespread, not just affecting the charitable and non-profit sectors but businesses as well. Though the burden is more severe on NGOs and charities that, to begin with, have limited internal resources and seldom have access to revenue that can help defray the economic cost of such regulation.
Here’s one thing the committee might do: turn its attention to how this process can be streamlined. I keep on encountering groups that tell me that, as much as they need the money, they wonder whether they can afford the time and resources needed to apply for and pursue such program support, and then have to deal with often onerous reporting requirements.
One of your witnesses the other day — I think it was Laird Hunter — asked the question, why does it have to be so hard to do good?
My second observation is about the capacity of the sector to effectively and constructively engage in political and policy process. A good many of them are very good at it. Many others, surely the majority, simply do not have the in-house capacity to play a serious role. They lack the financial resources to buy that capacity from external consultants. I’m often struck by how much charities and other public benefit enterprises do with so little.
Turning to some specifics regarding advocacy and the charitable NGO sector, I believe what the government announced earlier this fall, with respect to changes to federal law and regulations under the Income Tax Act, are on balance a positive step. Its intention to do away with the quantitative limits on so-called non-partisan political activities could be a constructive step overall, though there are possible unintended consequences that should be taken into account and dealt with in regulations.
For as long as I can remember, many charities have claimed the existence of an advocacy chill due to the CRA’s 10 per cent rule, which limits what it terms as restrictive levels of political activity, a phraseology that really needs to be removed or replaced.
My problem with that view has always been that this focus on what some believe they are restricted from doing has often resulted in not paying enough attention to what they can legitimately do, even under the existing rules. For example, nervous boards of directors have often misinterpreted that 10 per cent rule to mean that there’s a real risk to their charitable tax status if any advocacy work they do, including communicating with and lobbying elected officials and bureaucrats. They choose to stay away entirely from such activity, thus missing an opportunity to be constructive players.
The net effect of what came to be mixed signals from governments over the years prompted countless registered charities, and even many non-charity NGOs, to fear not only for the loss of their grant funding but their very existence.
The 10 per cent rule, as it’s known, explicitly put limitations on what is termed calls to action; that is, prompting citizens to write or otherwise communicate their views to policymakers through advocacy advertising, social media or demonstrations. This has obscured a fundamental reality for charities: that even without calls to action, there is much they can do legitimately to lobby both elected and unelected public office-holders, such as meeting with them, exploring options for resolution of difficult issues and putting together coalitions of interests for or against certain policy options — all of this without limitation, as long as the subject matter relates to their charitable purpose.
I’ve cautioned many groups that I’ve worked with to be careful about putting too much emphasis on social media, campaigns and petitions. Clearly they have a potential role to play in gaining media, political attention and mobilizing grassroots opinion. The reality is to really have much of an impact, these social media campaigns often need to have truly remarkable numbers behind them. If they don’t — for example, a petition that is envisaged to have activists demonstrate that hundreds of thousands of people endorse a particular course of action and only a few hundred do — it ends up being a very public admission of a lack of public support.
There has always been an imbalance in Canada between the relative ability of well-resourced interests and those who are not so well resourced in playing an active role in public policy advocacy. Even though the power of political financial donations has been largely restricted over the years through changes to the federal Elections Act — that is, corporations, unions and professional associations are unable to make donations — no such limit exists when it comes to accessing seasoned, well-informed professional resources such as consultant lobbyists, lawyers and other public policy specialists. Often, only a relatively small number of NGOs and charities can afford such resources.
If that can be part of the levelling of the playing field, it might be worth the elimination of the 10 per cent rule and relieving charities of much of the apprehension they have about advocacy.
One last thing I’d like to point out that’s not directly related to your mandate, but has implications for the non-profit and charitable sector: The federal government will be launching very soon a five-year review of the federal Lobbying Act. A number of the changes to the act will be considered, including one that would eliminate what’s called the 20 per cent rule, not to be confused with the Income Tax Act’s 10 per cent rule. It’s no wonder people are often confused.
The Lobbying Act’s 20 per cent rule says that any organization which has one employee or, cumulatively, a group of employees that spend 20 per cent or more of their time doing things defined as lobbying must register under the act. This change, if enacted, could mean hundreds, and maybe thousands, of small non-profit organizations even having passing relationships with the federal government would be required to register and report regularly under the act. This could be a real and unnecessary headache for many of those charities and NGOs.
At the same time, one of the other ideas for change that may be raised in the federal Lobbying Act review is the outright exemption from registration for all charities. It’s not a new idea. Some provinces already have an exemption under the Lobbying Act for registration by charities and non-commercial NGOs. That might be some ease of process of burden for charities referenced earlier, but it also needs to be considered in the context of transparency and the activities of charities in public policy advocacy. It’s yet another one of those trade-offs that need to be made in the complex world of policy and decision-making.
I look forward to responding to your questions. Thanks for the opportunity to talk today.
The Chair: Thank you very much, Mr. Moore.
Susan Manwaring, Partner and Leader, Social Impact Group, Miller Thomson LLP, as an individual: Thank you, Mr. Chair.
It’s a pleasure to be in front of all of you once again. As you know, I’m a partner at the law firm Miller Thomson. I practise in the charities and not-for-profit area. My background was in tax before I started doing this. I’m quite familiar with regulatory issues. I was one of the five officials on the Consultation Panel on the Political Activities of Charities and wish to take the opportunity to thank the members of this committee, and all other senators, for their careful consideration of and subsequent support of Bill C-86, which contained provisions to implement virtually all of recommendation 3 of the panel report.
In preparing comments for today, I intended to build on that and move a little bit away from the political activity discussion. I hope I don’t disappoint; I’m happy to take comments on the political activity discussion, as well. I knew that Bill C-86 had been supported, so I wanted to take an opportunity to identify a few other issues.
I’ll take the opportunity to point out how the resolution of these other issues is, in many ways, a consistent resolution to what we’ve done on the public policy dialogue, which is focusing on purposes and furtherance of a charitable purpose rather than activities.
There are four items. One is the revenue generation and destination of funds issue that you’ve heard about. The second is the removal of the “own activities” or direction and control requirements that exist in the regulatory regime where a charity is working with a non-charity to further its purposes. The last two are less focused on purposes but they relate to the disbursement quota and the Tax Court of Canada.
To start with revenue generation, the current rules regarding it are outdated and, in my view, need to be updated. Charities today need more flexibility to generate revenues to support their activities for many reasons in addition to financial stability.
Theories about how to support those in need have changed in ways that require us to think differently about revenue generation. For example, charities that wish to provide low-cost or affordable housing to assist those in poverty are forced into using complex legal structures because the regulator takes the position based on its interpretation of the common law and the Income Tax Act that a mixed-use housing facility cannot be operated by a charity because the affordable or market aspects of the facility are not a related business.
If you’re someone who works in the poverty and the relieving of poverty space, you know that the current theories say that it is wrong to silo poor people into buildings that are only for poor people. Mixed-use facilities not only help the financial status of those organizations, but they also help pull people out of poverty and help the charity to support those in need. We need a system that allows the modernization of how charities do what they do best, which is helping people.
A destination-of-funds approach to this example works. Provided the surpluses earned from the market housing portion of the development are fully directed to support the facility and to assist it in providing the low-cost housing, that approach should be acceptable and permitted.
When I say that, I’m thinking about the funds being used to further the charity’s purposes.
There are many other examples when a destination of funds approach could strengthen the sector. Others have suggested this as well; for example, the Muttart Foundation, in its submission, argued this point.
I would say it’s time to permit a charity to carry on any type of revenue-generating activity so long as the proceeds are used to further its charitable purpose. This would mean the focus would be on the use to which the funds are put, not on how it raises the money. This would be consistent with the Australian approach, which has been in place since 2008, after a decision of the High Court of Australia in the Word Investments Ltd case. To my knowledge, that system has been quite successful in supporting the sector in Australia.
The second point that, again, is derived from thinking about the same-activities-versus-purpose issue is the “own activities” or direction and control. I put those two together because I know in some submissions people have talked about removing the “own activities” requirement in the provision. In other submissions people have talked about the need to move away from the direction and control requirements. I’m not sure if anyone has ever pointed out that they’re actually one and the same thing.
It’s because the act talks about “own activities” that CRA has said the law requires it to say that where a charity is working with a non-charity, it needs to have direction and control over the funds it contributes into the project where the non-charity may have access to those funds. If they don’t have that direction and control, under the current provisions of the Income Tax Act, the charity either has to spend the money itself or it has to grant it to another registered charity.
This requirement has led to the creation of an enormous administrative burden and the drafting of complex agreements, with little evidence of any harm being prevented. It is also, in most instances, inconsistent with other government or community values that govern the circumstance.
Take two examples. One is a registered charity helping a First Nation group in Canada with farming and food sustainability. The second is a registered charity working in overseas development supporting the building and outfitting of a school in a developing community. In the first example, the current rules would require the First Nation to accept the charity’s support only if the charity had direction and control over how the funds are spent. Can you imagine today a Canadian charity saying to an Indigenous organization, “We can give you the funding, but only if you let us direct and control how that is spent”? Similarly in the overseas example, can you imagine the charity saying, “I have to own the school and everything in it”?
In both examples, if the charities did that, in my view, it would be offensive to the group they are trying to support. More important, it would not help achieve the overall charitable purpose. Unfortunately, that is basically where the CRA guidance takes it, based and interpretation of the law and the rules as they exist, particularly because the act contains the words “own activities” in the definition of charitable organization.
One might ask: Is this necessary to protect charitable dollars? It’s my submission that it’s not. The Canadian charity in both instances can require reports and evidence that funding is being spent in a way that furthers the charity’s purposes without exerting direction and control. In the United States, they refer to this as the expenditure responsibility test, and it works. Similarly, in the U.K., charities must provide evidence that they know the funds are spent on the projects, and they must get reports that allow them to monitor, but they don’t have to have direction and control.
It’s also true that requiring direction and control in these examples is counter to government policies in working with First Nations and international communities. Global Affairs Canada long ago dropped the requirement for a paternalistic structure when funding development efforts. It’s time we dropped “direction and control” in the charitable space, as well. We look forward to the committee supporting that.
On the disbursement quota issue, questions have come up before the committee about the rate of disbursements for charities. When I’ve heard that, it occurred to me that the history of charity is relevant. You’ve heard from my partner Robert Hayhoe in his presentation about the developmental history of the law around politics having had an impact on where we find ourselves today. I would say that is true in this area.
The concept of endowments or contributing assets to be held in perpetuity can be found in the original discussions about charities over 400 years ago. The concept was that the charitable need to be addressed would always exist, so one wanted the funds to be held forever. Endowing funds continues to be a priority today to ensure the sustainability of charities into the future.
The current disbursement quota rate of 3.5 per cent is set at a level historically tied to a prudent rate of return on the endowments. At one time, it was set at 4.5 per cent, but it was reduced because interest rates and rates of return had dropped. Charities were having difficulty meeting a disbursement quota because the gifts they received were subject to conditions that were applicable in common law. They couldn’t spend the capital; they could only spend the income.
It seems today that this question of what the exact rate of disbursements should be has to consider the history and purpose for the existing rules. If there’s a change in this area, perhaps it is that the rate of disbursement could be set by regulation rather than in the statute itself. If there are variations in rates of return over time, and returns go back to 18 or 20 per cent — which I’m not hoping for, because that means interest rates will go there, but that’s what they were like in the 1990s —
The Chair: None of us are hoping for that.
Ms. Manwaring: No, none of us are hoping for that, you’re right. It’s one way to deal with the fact that if there is a different rate of return in the future, it can be changed.
Other than that, we have to remember part of the history and the reasoning for it.
Finally, I wanted to support the positions that have been put in front of this committee about the Tax Court of Canada being the court that would hear cases with respect to revocation and registration turndowns rather than the Federal Court of Appeal. With all due respect to the Federal Court of Appeal, the problem is not the different court; the problem is that the Federal Court of Appeal applies a judicial review test that is not “is the answer right” but rather “was the answer a reasonable conclusion based on the facts.” If we put this into the Tax Court, it would allow the parties to have a full hearing of the issues before the court.
I want to point to one example of a recent case. It was Credit Counselling Services of Atlantic Canada Inc.. This was a case that was put before the court on a revocation question. It was already a charity. The Federal Court of Appeal, when considering whether the organization was charitable, held that “preventing” poverty was not “relieving poverty.”
To my mind, this is further evidence of how not having a proper hearing has led to bad law. The court looked at the activity, which was trying to help people who are about to go bankrupt find a way to deal with their credit so they didn’t go bankrupt and could keep their families and homes, rather than the purpose, which was really to relieve poverty. It reminded me that we think of “relief of poverty” in the old way of handouts to the poor rather than thinking about what we can do today to relieve poverty that helps people.
Today, an excellent way to relieve poverty would be to ensure that people don’t get there in the first place, if we are able to.
A long-standing feature of the common law of charity is that the notions of charity must evolve with society’s views. There is not an originalist position that it should be like it always was.
When I think of this case, it occurred to me: Would the law suggest we could only help people who are sick, that a charity can’t work on how to prevent the illness in the first place? Shouldn’t charities be able to have a full hearing on issues such as a refusal to register an organization that might be furthering its objectives in new ways or the revocation of a charity because it has adopted a new approach to its mission?
It’s time for charities to have the ability to challenge the decisions of the regulator in a full hearing. I would suggest Tax Court is the appropriate venue. Other taxpayers go there; why not charities?
I would be pleased to take your questions on this or on anything to do with politics, if you’d like to go back to that issue as well. Thank you very much.
The Chair: Thank you both for your presentations. We will now go to questions.
I remind colleagues that we’ll allow a seven-minute window for you to ask questions and get answers. Simple questions and answers would be helpful so we can get as many questions in as possible.
Senator Omidvar: Thank you. Ms. Manwaring, I feel we should get you an office here, because you are here so often.
I, for one, am pleased we are talking about other issues that are equally important. We have been consumed with nonpartisan public policy dialogue.
I have two very different questions in my seven minutes for each of you.
The issue of direction and control has not really been addressed fulsomely. I’m very pleased you brought it up. If the committee recommends lifting the process around charities working with non-charities — in most cases, it’s not-for-profits — what do you think some of the unintended outcomes would be? We’re always trying to find the balance.
Ms. Manwaring: The fear people have is that somehow the charity is going to give their money to some non-profit, whether it’s domestically in Canada or internationally, and the money is going to go into activities that are not charitable.
My experience with the way it works is that it is not anymore likely going to happen without the current rules than it would if under the current rules. If somebody in Canada or elsewhere wants to take the money and do something inappropriate with it, they could do it today, even the direction and control, because it’s so hard to find.
Changing the rule would open up the flexibility and remove assets devoted to administration, books, records and record keeping and allow the charities to be more innovative about how they work and implement their programming with third parties. It would empower third parties to be in charge of projects but providing reporting. The types of agreements are very similar to other types of grant agreements that a charity would give to another charity. It would require reporting. It would require diligence, they could be funded in instalments. It would ensure the organizations were able to take control and learn about the project itself.
It would enable a lot more work, and perhaps a lot more than we can even anticipate than is under the current provision.
Senator Omidvar: Is it correct to assume that charities in the main have agency agreements that give them direction and control with only not-for-profits or do they, at times, in your experience, venture outside the space and contract with a research institute or even a public interest newspaper?
Ms. Manwaring: There are all sorts of different arrangements. Charities have been known to hire for profits as their agent to do something. It’s not limited. If you are hiring another organization as an agent, you can hire an individual, an advocacy group, and they end up doing that work on your behalf. It has to be charitable work. It is very consistent with the expenditure responsibility type test. If you are going to hire someone to further your charitable purpose, we require the concept that somehow the charity is controlling it.
I would hesitate to guess — I know this because I have so many clients who do it — that in many instances, it’s difficult to do that. You have the agreements in place but the organization on the ground has to be able to make decisions and make sure the project is running.
You have it in place today, but it’s not really that effective. The expenditure responsibility would be truer to how organizations are working.
Senator Omidvar: Thank you. I may come back to that in the second round.
Mr. Moore, thank you for your presentation. I know of your work for some 15 plus years. You said something, and I wanted to remind all of us that this is a committee focused on charities and not-for-profits, although I fear not-for-profits consistently get short shrift here though we have addressed that. You said we should focus on how processes could be streamlined. Perhaps you could be a little more illustrative of that recommendation to us, keeping in mind the burden on reporting a case that is both on charities and not-for-profits? What are some of the details you’d like us to look at?
Mr. Moore: On the matter of funding, funding agreements and the like. As we know, there was a blue ribbon panel some years ago that made a number of recommendations, some of which were adopted on government to streamline the grant and contributions process. I still hear complaints about that from some of the groups I deal with. There is a lot of both details in the applications and forms that are different from any other type of form they have had. There is a movement in the non-profit and charitable sector to try to get standardization of all sorts of reporting forms so they are not having to do them in different ways. That is one example.
If you have ever had to respond to any sort of government request for proposals, whether it be a procurement or service matter, I’ve long ago become convinced the people who write these RFPs have never had to respond to one. And as a result, it is drafting RFPs by committee where everybody puts in a wish list and they become virtually unmanageable. It is a huge discouragement for groups to do that.
I’m not saying there is necessarily a legislative remedy. I think it would help in the longer term to have a body such as the Senate make some specific recommendations about streamlining process able applications and making reporting systems easier.
I do cite another example at the end of my presentation about yet another reporting requirement that particularly small non-profits may have to face, and that is if they change the Lobbying Act requirements so that virtually all charities in Canada have to register under the act if they have almost any contact with government. That would be an unnecessary burden. It may not be within the mandate of this committee, but as senators that act is probably going to come before you and it’s up for renewal at some point in the Senate at large.
There are a number of those things. I find it everywhere; it’s not just dealing with governments. Dealing with large organizations, large corporations, the amount of process that people are subjected to is a discouragement to involvement. It’s a discouragement from compliance. It’s an encouragement to go around the edges and none of that is good public policy.
Is there something this particular committee can do, aside from the moral suasion you could offer in recommendations? I don’t have any particularly legislative suggestions. Again, it’s a problem that goes far beyond the charitable and non-profit sector.
Senator R. Black: Do you have any ideas from other jurisdictions? At the end of that last conversation, you talked about not having any legislative ideas. Do you see anything happening out there in another jurisdiction that we might reference or follow?
Mr. Moore: One that I did mention is that there are some provinces — I believe Alberta is one of them, and I was talking to an Alberta lawyer behind me here who said it might be slightly different from my understanding — are exempt from lobbyist registration requirements, for example, charities or non-commercial NGOs. A non-commercial NGO would be one that did not have as part of it a business membership.
That would ease the pain, although I do note there is a trade-off on transparency. One other principle we talk about in the charitable sector is need for transparency in our actions. Lobbying law provides one of those.
What other changes, what other jurisdictions? Again, it’s not just government. You would hope that other funders, and many NGOs and charities receive their funding from foundations. Some of their application and reporting processes are also very onerous.
I just finished doing some work with a Portuguese foundation; the request for proposals is three pages. They wanted a proposal of five pages. There was not any of the financial reporting information for NGOs and charities. Some organizations are doing that, streamlining it, trying to deal more in principles than in detailed regulations.
Senator R. Black: I have another question for Ms. Manwaring. Thanks for your explanations around the four areas that you spoke about. Would there be sub groups of charities that would benefit more from those changes that you are suggesting or less? Are there groups out there that would find this very good or, vice versa, very bad?
Ms. Manwaring: I think generally, we have two general categories of charity, which is the funders, the foundations and then the doers. The concept of being able to generate revenue from programming and devote it to charitable purpose could help all the doers, some more than others just because of the nature of what you are doing. If you are a settlement organization that has a training program and you’re training people to work in kitchens and you can have a catering operation that supports it, you are more likely going to use that than others.
Certainly all of them could use it.
Similarly, working with the non-charities. We very much see this in the international development world. They are working with charities in other parts of the world, but because they are not registered in Canada, they are still considered by our system to be non-qualified donees, which is the language we use. That would be a group that would benefit. Organizations working with First Nations and other types of non-profits that are doing community work in Canada who aren’t qualified donees would also a benefit. It is really across the board.
The disbursement quota rates are more on the foundation side rather than on the other. They all have to meet a disbursement quota. The Tax Court would be across the board.
Senator Duffy: Thank you both for sharing your expertise.
Going back to basics, one of the issues we first heard when we began these hearings was the concern about the decline in the number of charity donors in Canada. As the boomers age, the increasing demand for services provided by charities and non-profits by an aging population.
Do you have any ideas about how to go about reversing that trend? How do we get young people more interested? They are connected socially.
Mr. Moore, you talked about social media. I tend to agree with you, that as someone who gets a lot of email — all senators get a lot of email — you kind of wonder sometimes is there a real person behind it or is it some kids somewhere generating all of this spam?
It seems to me that the prevalence of these devices creates an opportunity. How do we get that generation interested?
Ms. Manwaring: I’ll tackle that. When the tragic bus crash in Humboldt happened, in a matter of less than a month, almost $16 million was raised, with no tax incentives attached to it. That was crowdfunding; it was not a charity.
I raise that because it may be that the modernization and the work you are doing to help modernize the rules to help charities to be a little more flexible, to do things light slightly differently. To help with the social finance and social innovation task force was sort of a little bit separated from the charities discussion. I think young people want to see things being done a little differently.
I believe there is still interest. It may be the way they are giving to organizations is different. I think having greater flexibility — I did a lot of advising through some of the innovation hubs for young people wanting to start community-type or public-benefit-type activities. They have the sense that the charity rules are from the 1600s — which they originally were — and they resisted. They start doing things differently.
I don’t want to lose what is important about charity, because charity is fundamentally about helping our communities and people. We want to keep the right constraints around it to ensure that it doesn’t get taken advantage of inappropriately, but by allowing them to be more innovative, we will see a difference as that goes forward.
The Chair: I go back to Senator Omidvar’s introduction earlier when she talked about charities and non-profits, that non-profits were getting the short shrift here.
The other aspect of this committee’s responsibilities is analyzing the volunteer aspect. This is a very important question. How do we now interpret the changing attitude of young people?
The Humboldt disaster is a prime example. That was a lot of money raised in a short period of time with no structure, other than the fact that there was structure because it came into one —
Ms. Manwaring: It came into one place.
The Chair: How do we respond to that in a general sense across the board? It will happen in other communities.
Ms. Manwaring: What is interesting about Humboldt is that Saskatchewan is the only province that adopted a statute that has rules and constraints around what would happen with that money once it was raised. In all the other provinces, there is no legal framework to do that.
They passed it in 2014, before the Uniform Law Conference of Canada had recommended a public appeals statute, that every province should adopt it across the board so there would be some kinds of controls around the expenditure of those monies. Saskatchewan is the only province that adopted it. That’s just an aside.
Senator Duffy: I want to make a note of that. What is it called?
Ms. Manwaring: I think it’s called the Public Appeals Act. I will send that legislation through Kevin.
Senator Duffy: Because charities are under the provinces, it would have been enacted by all of the provinces.
Ms. Manwaring: It didn’t, actually, because charitable property is. It doesn’t apply to that kind of crowdfunding by a registered charity because we have the Income Tax Act and the rules for registered charities. It applies to crowdfunding for informal public appeals for non-charities.
I didn’t know. Someone had consulted with me about what to do with all the money, and then I found out Saskatchewan had it. That’s why the court in Saskatchewan is dealing the distribution of those funds.
There are mechanisms out there, but how you engage a younger population in contributing to the sector and being involved is a question that is not one that we can answer through legislation. It’s a community question of how do we talk about this type of thing?
The Chair: The world continues to change.
Ms. Manwaring: Exactly.
The Chair: There was a time when young people got involved in things. It became a social thing besides doing good for the community. It’s the same as involvement in politics. It was a fun thing to do. Many times relationships and friendships were built up for a lifetime involved in charitable or in political work.
Ms. Manwaring: I think that still happens, because I see it through some of the innovation places where young people come together and put apps together and do this to help their community. We don’t see it in the same way. I can’t answer what it is we have to capture, but I agree with you.
Senator Duffy: Another issue that is in the background in the news and something we are going to have to deal with at some point is the conversion of newspapers to charities. What is that going to do to the charitable sector? How much money will that soak up from other worthwhile endeavours? Is there enough cash to go around? What kinds of rules and/or regulations do we need to deal with this new development?
Ms. Manwaring: I’m happy to comment. I was in a meeting recently. There were some Americans who were further ahead in this area. They have already started funding through IRS 501(c)(3)s. It’s public, independent, fact-based, non-profit journalism.
This woman made a very compelling argument for the public benefit of that kind of reporting. It’s considered public benefit.
The Chair: NPR?
Ms. Manwaring: NPR is one. She was from a group that was for non-profit journalism. It’s an association. I don’t necessarily think it will draw people interested in international development away from doing that. It’s hard to know. I think to the extent that if you think of news as having a public benefit as long as it’s non-partisan, independent and fact-based, then you could see how communities might want to support that in the future if we are losing the ability to provide that in a for-profit model. Not because news is any less valuable, but because the medium through which it is produced is too expensive or doesn’t work anymore. Now we have a different dynamic in which to provide it.
Senator Duffy: The CBC would argue they are moving into that space. We’ve heard various people in print complain that in fact the CBC has hired print reporters who have been laid off, opinion columnists and so on. The CBC has expanded its mandate beyond broadcasting to, in effect, become a newspaper on a tablet. I think it was probably Post Media, someone had an op-ed in the last week saying: Stop eating our lunch because you are already subsidized.
Are the current rules sufficient to deal with these developments?
Mr. Moore: I would think you are going to have some sort of new rules. If you look at what I call the argument industry, which is newspapers to a certain extent, advocacy organizations, people who are competing to influence public opinion and public policy, that too is changing very rapidly with technology, which we are all familiar with. My guess is there will be serious efforts made to create non-profit, whether they’re fact-based is another thing, other media to engage in these debates. I think you are probably going to see a profusion of them not from the usual suspects in the centre left but you’ll see some from the right as well. At some point I think there needs to be criteria. I have no idea whether the government has that in their current thinking. There needs to be some additional guidelines or principles established to make sure that doesn’t get out of control.
One other point you made, senator, about the decline of donations — and again your research people are probably more than top of this than I am — but I recall in my reading a while ago when I was researching another matter that there’s something of a correlation between the decline in charitable donations and the decline of attendance in the churches and organized religion. Is something going to replace that? I find one of the things that’s replacing it is not so much charities but social enterprises, whose objective is to do things that some charities if it was considered a charitable purpose would try and achieve. They are trying to do it through the vehicle of social enterprise, not necessarily not-for-profit, not necessarily charities. If you look at any of the innovation centres that exist, the MaRS Centre in Toronto or some of the hubs, one the biggest areas of activity they have are social enterprises. I dealt with six of them in Montreal a while ago encouraging a wide range of things that you would think would be interesting ventures for charities. It’s not charities that are doing it, it’s social enterprises. They are trying to generate contributions, not necessarily charitable contributions, to finance these things. It’s another one of changes happening out there.
Senator Duffy: Is this because the rules are so strict, charities don’t move or innovate. They feel hamstrung?
Mr. Moore: I get asked a lot by organizations that are advocacy groups that want to become charities. They say, “Should we become a charity?” My first bit of advice is, “Talk to a charity lawyer about that.” Second, “It’s expensive and time-consuming.” A lot of our organizations, when they hear about what is involved in applying for, getting it and then they choose a different model. Susan is probably a better person to answer that.
Ms. Manwaring: A lot of social enterprises are run by charities. The term “social enterprise” doesn’t really have a definition. As Sean says, it’s all across the spectrum but there are a lot of social enterprises in charities. I think it really depends on what they are doing.
Senator Omidvar: I will stick with Mr. Moore and then a question to Ms. Manwaring.
Mr. Moore, I’m going to stick with reporting and your suggestion that we should put some heft behind making life a little simpler for charities and not-for-profits. We have heard a recommendation here that in fact there should be some kind of cap on the amount of reporting you are required to do if you are a small charity versus the University of Toronto Foundation. At this point it’s all the same. What do you make of that recommendation?
Mr. Moore: I think size matters. It’s something like that. The complexity of the financial arrangements for some of these organizations should be a factor. I’m not saying there shouldn’t be any reporting requirements. When you look at what some jurisdictions have done on tax returns where the tax returns are much simpler. I’m not talking about charities so much as generally. Again, when we talk about reporting the thing I hear a lot of complaints about is when you get money, not just from government sometimes from foundations, that the volume of information they need to provide, the form of the information required virtually requires a lot of attention by a financial professional, an accountant, to do that, where if they could have just more general information provided it would be a lot easier.
Now how does that match with new standards of accountability? That is part of the problem. The new concepts and standards of accountability and transparency, which are in and of themselves worthy objectives, have complicated this. I can’t give you any particular examples of, I wish I did, I wish I thought about that before I came here, but of reporting that is just simply leaner and more direct. Again, I go back to the foundation I have been dealing with in Europe. Many of their reporting requirements for contractors, I’m not sure about beneficiaries, are one or two pages, they are not long.
Senator Omidvar: Thank you. If you think of ideas, you know you can send them in. My next question is to either or both of you.
In the last month or so there have been significant movements by the federal government in this space. It’s not only the lifting of limits on non-partisan public dialogue, the government has also established an advisory committee attached to the CRA, the government also announced, much to my gratification, a $755 million fund for social innovation. There is a task force sitting at Privy Council dealing with social innovation. We are going to now have an advisory group to the CRA. Are these parallel tracks useful or should they meet somewhere? In the end, as you’ve said, it’s often charities that are doing social finance, right?
Is this going to create confusion? Should they at some point in your view come together or even possibly merge?
Ms. Manwaring: I think they have to talk to each other. I’m not sure about merge, it really depends. The CRA as a regulator of charities does it in the context of the Income Tax Act. The advisory committee function of helping CRA understand the world within which the sector works and whether it’s charities or charities and non-profits, it could be both. Working with the social innovation and social enterprise and finance space makes sense because everybody is involved. There is some kind of overlap or there is some kind of connection between the two.
I truly think there has to be because you can have a task force say, “We need to do all sorts of things.” If we can’t modify the regulation to make that work you’re never going to see it come to conclusion.
Mr. Moore: The things that most impressed me, senator, about the task force on social enterprise and social innovation was the dynamic, this policy-engagement process that led to that. I left that out of my remarks because I was going on too long. That is one of the interesting things about how a lot of big-picture public policy is now being done. It’s not necessarily responding to old-fashioned lobbying where someone comes up with an idea and meets with senators and MPs and bureaucrats to sell an idea. It’s more of a process where you have the government and stakeholders in a process over six or nine months. I think the social enterprise one took almost a year, several different meetings over that time where they share observations about what the nature of a problem is, what the options are. At the end of day they come up with a response, a solution, that everyone can sign on to.
Now that’s labour-intensive. You can’t do that on every issue. To me that’s the future of really effective public policy-making going forward.
How it survives into the implementation stage, and whether they should all merge into one, I don’t know. On many of the great issues we are dealing with today, it will take a different mind set among policymakers including bureaucrats to invite into their deliberations about where to go on public policy.
It’s happening substantially in dialogue between First Nations and the Government of Canada. It’s called policy co-creation. That’s a whole other issue that is probably beyond your immediate mandate. To me it’s one of the more interesting things happening.
Senator Omidvar: My final question to both of you is around the changes in Bill C-86, lifting limits on non-partisan policy dialogue. There’s no mention of a review. There are many pieces of legislation that we look at where it says after five years the government should do a review.
Would you want the government to do a review of this particular change in the law or other changes, or is that up to the CRA advisory committee that will be established?
Ms. Manwaring: I don’t know how you could argue against a review. A review is to look at —
Senator Omidvar: A legislated review, which is different.
Ms. Manwaring: Yes, if it’s the advisory committee having a review to make sure we got it right. We’ve often said — and I’ve heard it said by Mr. Wyatt — that the Bank Act is reviewed every 10 years. Why not review the charities law every 5 or 10 years to make sure we’ve got it right? It’s just that concept. I can’t imagine there’s a negative to it.
Mr. Moore: I think that’s a positive. The term they sometimes used is modified sunset laws. The law doesn’t go out of force after five years. The Lobbying Act is an example of that. Every five years, Parliament has to at least consider what changes should be made. I think that’s a helpful stage in legislative consideration.
Senator Omidvar: Thank you.
The Chair: I think you’ve generated a fair amount of discussion. Society changes and how people react to the needs of society changes — Humboldt being an example. Mr. Moore, you talked about getting to the implementation stage.
Unfortunately, government likes structure. Sometimes society doesn’t like structure. We have to find a way to provide structure that’s easy enough so that everybody can participate and honour the desire for simple implementation rules. The long forms that used to be in play need to go.
We spend all kinds of time trying to simplify the Income Tax Act so taxpayers can respond properly to the questions. We don’t do that for other things such as the registration and oversight of the charities and not-for-profits.
It’s a big task we have chosen for ourselves. You’ve helped an awful lot. We appreciate your input. I would remind you that as you go home tonight if you snap your fingers and say, “I forgot to tell them this or that,” we’d love to have your comments through the clerk. As you observe how we’re proceeding, if you see something we’ve missed, please don’t hesitate to say, “You didn’t think about this.” There are a lot of things we haven’t yet done. Don’t be shy. We appreciate your input.
Colleagues, we’re going to take a break and have a short meeting before we move on.
(The committee continued in camera.)