THE SPECIAL SENATE COMMITTEE ON THE CHARITABLE SECTOR
OTTAWA, Monday, April 1, 2019
The Special Senate Committee on the Charitable Sector met this day at 11 a.m. to examine the impact of federal and provincial laws and policies governing charities, nonprofit organizations, foundations, and other similar groups; and to examine the impact of the voluntary sector in Canada.
Senator Terry M. Mercer (Chair) in the chair.
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, and I’m chair of the committee. I would like to start by asking senators to introduce themselves.
Senator Duffy: Michael Duffy, Prince Edward Island.
Senator R. Black: Robert Black, Ontario.
The Chair: Thank you. Other colleagues will join us as the morning goes on.
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 volunteer sector in Canada.
For our first panel, we welcome Mr. Peter Clutterbuck, Senior Community Planning Consultant with the Social Planning Network of Ontario. We also have with us, via video conference from Toronto, Mr. John Shields, Professor, Department of Politics and Public Administration, at Ryerson University; and Alex Mazer, Founding Partner, CommonWealth Retirement.
Thank you for accepting our invitation to appear and make presentations. I would like to remind our witnesses, as per our instructions, that presentations should not exceed five to seven minutes in length. Following presentations, a question and answer session will take place with each senator being given five minutes to ask questions. There will be as many rounds as possible, so we ask questioners and those providing answers to be as succinct as possible. We are going to start in the order in which I introduced the witnesses.
Peter Clutterbuck, Senior Community Planning Consultant, Social Planning Network of Ontario: Good morning, honourable senators. I’m here on behalf of the Social Planning Network of Ontario. We are made up of 18 local social planning councils and community development councils social research and community development advocacy across the province. I have been involved in the field of the non-profit sector, or what we now prefer to call the public benefit sector, at Cathy Taylor probably introduced it to you last fall.
I’ve been involved since the 1970s. I have been involved in the Social Planning Network of Ontario and have been interested in employment in the sector over the last 20 years because of a lot of changes in funding in the 1990s that reduced core funding and secure, stable funding, which had an impact on the workforce. I’ve done major human resource surveys and analyses in Halton Region. I’ve been an active member of the Ontario Non-profit Network labour force development work group that did research resulting in the decent work agenda that Cathy Taylor also summarized for you.
More recently, I’ve done future leadership competencies research and have some material I can leave on that for distribution to the committee later.
After so many meetings since the spring and hearing so many deputants, you probably know more than enough about the employment issues. I thought I would try to focus on what the federal role might be in the four areas identified for today: precarity of work; compensation levels; retirement income security and recruitment and retention of staff.
In doing so, I want to combine some of my own professional experience in that way with my own career development in the sector since the 1970s.
One of the most important issues for the sector is being able to develop a strong labour force development strategy. That means having good data. We are pleased to see the release this month of the StatsCan satellite account after a 10-year hiatus. It reinforces the sector’s contribution to the economy and highlights major employment disparities, such as the average Canadian earnings being $60,000, whereas the average compensation in the community core sector — the small or medium size sector — is $42,500. It’s a hopeful return of StatsCan to the issue of maybe identifying, at the big-picture level, what might be done in gathering labour.
This can be used at the local level by social planning councils and workforce development boards to dig down more deeply into their communities as we did in Halton in 2007 to get robust planning for resource development at the local and regional levels.
In terms of strengthening the labour market information database in the public benefit sector, we hope we would recommend that the satellite accounts be done every two years and kept updated in consultation with the Imagine Canada data working group and community-rooted organizations like the Social Planning Network of Ontario. We think StatsCan can develop more granular workforce data if they could break out the public benefit sector from the industrial and occupational classifications and help us with gender and ethno-racial composition and the multiple forms of precarity that exist.
I also hope that the Advisory Committee on the Charitable Sector that relates to you could add representation from the smaller and medium-sized community groups. Often, the institutional and the larger sectors are represented in these discussions, but the smaller and medium-sized ones that the social planning councils do a lot of work with frequently get ignored.
The second issue is the recruitment and retention of the next generation of public benefit leadership. As you know, from the satellite accounts, about 80 per cent of the GDP from the public benefit sector is really human resources. The sector is experiencing heavy competition as baby boomers age and our own workforce ages. We have heavy competition to get young people into the sector. Young people themselves, in surveys that were made, including my own in the 2006-2007 period, and a few years ago by the Mowat Centre for the Ontario Nonprofit Network points out that young people are attracted to the sector. There is something about the nature of the work they are interested in, the ability to make a contribution to the community and connecting their work to tangible results. The problem is that the high cost of post-secondary education makes the choice harder for young people to be able to get out from under the burden of student debt.
I’ll relate to my own experience. I was the first from my working-class family to go to university in the late 1960s. We supported that with summer work and family help, but not a lot in a big family. There was critical government assistance through student loan programs. I came out in 1972 with a $2,500 debt, which is more than $15,000 in today’s dollars.
Today, the Canadian Federation of Students points out that students are leaving with $30,000 debts and more, depending on which province you are in. That makes it harder for them to make the choice to go into an area that they might be interested in.
One possible area of federal help is a student loan forgiveness program for working in the sector after a number of years of commitment. Canada’s student loan forgiveness program for families, doctors and nurses is in place, perhaps, as a model. If they serve in remote communities for a number of years, they get up to $8,000 a year and up to $40,000 for working in these communities. The same kind of model might be tried here.
There is a program like this in the United States. It’s the Public Service Loan Forgiveness program. It does have some weaknesses in terms of what it expects up front from students. I think that’s an area in which the federal government could really help. As it turned out, my ability to work in this sector resulted in making a career in the sector when I had not originally planned to.
The third area is the federal support role in training and leadership development. Provinces provide most of the 40 per cent of funding to the sector, much of it in direct service, but the federal government often provides important support in training, skill development and human capital to the social sector and other parts of the public benefit sector, often employing things like employment insurance use. Again, in my own experience, in 1971 I graduated and took a year off before going back. I was supposed to be a teacher. I wanted to be a secondary school teacher, but I got involved in something called the Government of Ontario Project 500, which placed 500 university graduates into community organizations across the province for a year. It gave us on-the-job experience. The program was cost shared between the province and unemployment insurance — as it was called at that time — funds. They not only placed us in these communities but also brought us together several times during the year at Geneva Park to reflect on our experiences. It wasn’t isolated work with one organization. We got to share our learning with each other, to learn from senior people in the public and the non-profit sector in a way that helped me make a decision to redirect my career aspirations into this sector, which I have now been involved in for 40 years.
There’s potential here for the federal government to fund intermediary organizations like social planning councils in civil society to develop and provide leadership and learning programs that are more than about placement. They’re also about helping young people understand what they are involved in. In so doing, I think we could then help to build careers for people.
My final comment is about the retirement income security issue, which Mr. Mazer will deal with in detail as well. With these pension programs, sometimes the small and medium part of the community benefits sector does not have a chance to participate. When I did research in the Halton Region in 2007, I spoke to a social worker in the non-profit sector who told me how she supported other disadvantaged women in her job. When she thought about it, though, it was ironic in that she could see herself going into the service queue when she turned 65 because she didn’t have adequate retirement benefit opportunities.
We strongly support the Ontario Nonprofit Network’s decent work agenda which has set up a sector-based defined benefit program with OPTrust. Cathy Taylor summarized that for you a few months ago. We all know it takes Canada Pension and OAS — and GIS for those who need it — private savings and workplace pensions to have a more secure, decent retirement. We think the defined benefit program is the best way to do that. The federal government could support that, especially for the smaller sector. It takes contributions from employees and employers. The smaller sector often doesn’t have the room. They could create a 6 per cent contribution from employers and employees. That’s a hardship for smaller sectors. Perhaps the federal government, in its grants and contributions program, could take that into consideration as part of the decent work agenda. When it funds these programs, it could make some allowances for these extra costs so that small- and medium-sized organizations would have a chance to establish some retirement benefits to help keep good people in the field. Those are the comments I brought today. I’d be happy to talk about them later.
The Chair: Thank you very much. I appreciate that. You have generated some questions already. We’ll have to wait until we hear from other presenters.
John Shields, Professor, Department of Politics and Public Administration, Ryerson University, as an individual: Thank you for the invitation to appear before the committee today. I’m going to draw some of my information today from my past membership in the Ontario Non-profit Network Partnership Advisory Council and their examination of the sector’s human capital renewal. I was a core member of a research project that examined employment precarity in the Greater Toronto-Hamilton region that was partnered with the United Way and published a number of influential reports, including the precarity penalty.
First, I should reveal that I am chair of the board of a leading non-profit agency in the Greater Toronto area called Access Employment. My thoughts have come out of those different experiences.
I have been asked to address the area of employment in the non-profit sector in Canada. This is a important dimension of the sector. If we consider employment as a measure of the size of the non-profit sector in Canada, Canada ranks second in the world with only the Netherlands outdistancing it. The sector as a whole employs about 2 million people and engages some 18 million volunteers. The non-profit service sector is human resource intensive. Indeed, human capital is viewed as being its greatest strength. Consequently, the state and well-being of the non-profit work force are critical to the continued positive contribution of the sector to the economy and society. The sector as a whole contributes about 8.5 per cent to the GDP. The core non-profit sector contributes something in the order of about 2.5 to 3 per cent of the GDP. The sector’s work is highly gendered. About 70 to 80 per cent of the work is done by women. Caring work is typically associated with flexible work such as part-time employment. This highly gendered nature of the work, unfortunately, also reinforces the undervalued nature of non-profit employment.
A detailed survey of the Ontario non-profit sector conducted by the Government of Ontario in 2012-13 reveals for those working in the human and social services non-profit field within the sector — that is, that part of the non-profit sector that government tends to rely upon for alternative service delivery — less than half of their workers were considered full time, about 48 per cent of them. Of that, 30 per cent were part-time; 21 per cent were short-term employees. Given that all workers rely on a model of funding that competitive, short-term program contract financing for work, even so-called full-time workers in the sector lack security in their employment. They are all dependent upon the success of the next contract, which they usually hear about quite late in the funding process. So there is tremendous unpredictability in knowing if funding is going to be available to support one’s position in the sector, meaning inability to plan into the future and inevitable job stress.
In this model, even so-called full-time workers are, in essence, permanently temporary. They’re precarious in various ways. For this component of the non-profit sector, remember that 80 to 90 per cent of its funding comes from government-based contracts. So precarity in employment relates to the lack of predictability and security in work. This often has negative repercussions with regard to both the material and psychological well-being of those engaged in precarious work. Precarity tends to foster conditions of vulnerability, instability, marginality and temporariness. The sector is rife with such insecurity experienced by front-line workers, support staff and managers alike, who are all very dependent on short-term contract financing of their programs.
Dependence on such financing embeds precarity into the very DNA of the non-profit workforce and its organizational structures. In fact, the employment profile of the non-profit sector places it really in the vanguard of the shift away from so-called standard employment norms, that is full-time permanent employment with decent pay and benefits, to more flexible, contingent and poorly compensated employment forms that are found within the new labour market.
This problem has been magnified by stagnant wages due to years of government austerity following the economic crisis of 2009 and at best flatlined contract budgets. This has contributed to an intensification of work without compensation increases in the context of greater societal need for the services, contributing significantly to employee demoralization, burnout, and workplace stress, sickness and injury.
As Peter noted, average compensation for the full-time equivalent work in 2017 in the core non-profit sector was $42,500 while the average for the entire economy was $59,800 which represents a $17,300 discount for the sector. Moreover, core non-profit sector employees compared to other sectors also fall behind regarding job security, benefits and benefits such as pensions. Some of the employment-related challenges include significant recruitment and retention issues due to non-competitive wages, lack of job security and lack of career mobility paths within the sector due to relatively flat organizational structures. These are very lean organizations.
The leadership in the sector is aging rapidly, with a large percentage of EDs and other senior managers expected to leave the sector in the next few years with no obvious replacements, raising the problem of a pending leadership gap and loss of institutional memory. The sector, as noted, is heavily female. It’s challenged, as Peter also noted, in terms of recruiting young people. Outside of the settlement service area, it also lags behind in terms of ethnic and racial diversity. So that leaves the question of how the sector engages the next generation of workers and the changing demographic profile of the Canadian workforce.
There are significant challenges regarding morale, burnout, unpaid overtime and health issues brought upon by stress. In part, to address such concerns and to make the sector more attractive, the ONN has launched the Decent Work campaign in the sector to improve pay levels, benefits and working conditions. Peter also identified that.
It’s not insignificant that the sector is simultaneously known as the resilient sector, and conversely, and more troubling, as the precarious sector. Resilient because non-profits have been remarkably good at adjusting to adversity and difficult conditions to fill their missions. Their capacity to do more with less is renowned, driven by the workforce’s dedication to an ethos of caring and giving. But its precarious status is undermining its effectiveness and its survivability of many organizations.
On a pragmatic level, what can government funders do to address this situation? I would suggest three things: One, they can introduce longer-term contracts based upon performance. In fact, we already see this happening in the federal government in terms of IRCC, which in its latest funding cycle has issued five-year proposals, five-year contracts for organizations to bid on.
Second, funders can reduce overly rigid rules regarding how contract dollars are spent in delivering programs. This can reduce overhead costs and excessive staff time spent on administration and increasing the flexibility for service improvement. In other words, even without more dollars, better dollars or more flexible dollars can do a lot to help the sector.
Third, in terms of costing contracts, funders should include financing that provides a living wage for workers within the sector. All of this would go a significant distance to increasing job security, employment predictability and improving employment conditions in the core non-profit sector. Thank you.
The Chair: Thank you very much. We appreciate that. Next will be Mr. Alex Mazer, a Founding Partner of CommonWealth Retirement.
Alex Mazer, Founding Partner, CommonWealth Retirement: Thank you for inviting me today. My name is Alex Mazer, and I’m one of the founding partners of CommonWealth, which is a mission-driven business focused on expanding access to retirement security.
For nearly two years, our firm has had the privilege to support a growing national coalition of charitable sector leaders to address the problem of retirement insecurity in Canada’s not-for-profit sector. This collaborative effort is known as the Common Good retirement initiative. Its primary goal is the creation of a national collective retirement plan for the not-for-profit sector that is portable from job to job, broadly accessible and governed by the sector.
To date, partners in the initiative includes five leading foundations, 73 not-for-profit employers, English Canada’s largest credit union, a Champions Council of 20 sector leaders and some of Canada’s leading pension experts.
Common Good is overseen by a steering committee chaired by Alan Broadbent of Maytree, and our firm serves as the technical and operations partner.
On behalf of Common Good, I’m pleased to share what we have learned through this work. The bottom line is by working together, and that includes a critical role for government, we have the opportunity to close the retirement security gap in the sector, improve the financial security of its workers and ultimately strengthen the sector’s ability to serve Canadians.
Approximately 850,000 not-for-profit employees across Canada, which represents about half the sector, do not have access to any workplace retirement plan. Uncovered workers in the sector share a number of characteristics. About 60 per cent work for organizations with fewer than 100 employees, many have lower and moderate incomes, a large and growing share are not full-time, and a large majority are women.
Canadians benefit from a strong public retirement system consisting of OAS, GIS and CPP. However, to maintain their standard of living post-retirement, most Canadians need more than these public programs. Unfortunately, the share of Canadians with a workplace retirement plan is declining, especially in the private and not-for-profit sectors.
A recent study by statistician and Common Good’s Champions Council member Richard Shillington illustrates the impact of lack of access to a workplace pension. His study found that the median retirement assets of Canadian families aged 55 to 64 without workplace pensions was a meagre $3,000 in total.
Evidence also shows that collective retirement plans tend to be far more efficient than individual approaches. A recent study that our firm conducted with the Healthcare of Ontario Pension Plan, together with the National Institute on Aging, found that a collective approach to retirement security could be up to four times more cost efficient, turning savings today into retirement income tomorrow, than an individual approach, and amounting to a lifetime difference of nearly a million dollars for a typical worker.
Informed by extensive consultations with the sector, Common Good would be a nationally portable, collective retirement plan that combines the principles of the world’s best pension plan with a more flexible design to reflect the unique needs of the not-for-profit workforce.
It would have the following features: It would be established as a not-for-profit entity where profits accrue to plan members, a board of directors with a legal duty to put plan members’ interests first but oversee the plan. It would be established as a group TFSA, group RRSP, with the TFSA element being especially important for lower and moderate income earners because it protects them against the clawback of their GIS benefits.
The plan would be open to sector employees as well as freelancers and family members. Contributions would be flexible and employer contributions optional. It would use a pooled, low-cost approach to investment management overseen by an expert investment committee. The plan would provide post-retirement options to turn savings into a secure stream of retirement income.
Since officially launching the Common Good initiative last spring, we have made significant progress. We conducted a national survey of employers and workers in the sector and found that 94 per cent of workers and 92 per cent of employers had an interest in joining Common Good. So far, 73 not-for-profit employers from 12 provinces and territories have endorsed Common Good and publicly committed to offering the plan if it were to be available.
We have conducted nine round tables with employers and other stakeholders in places from St. John’s to Vancouver. Common Good has already received international recognition. It was a finalist for the U.K.’s Royal Society of Arts’ Future Work Awards and has also been highlighted as a promising innovation by such respected organizations as the U.K.’s NEST pension plan, The Aspen Institute and the public policy forum.
The initiative requires sufficient funding to cover implementation costs and costs associated with scaling the plan, including a robust education and engagement campaign. The coalition behind Common Good continues to engage potential funders about providing the seed funding.
We believe that common good is an essential missing piece of the social infrastructure for the sector. Other public purpose sectors have their own pension plan — municipalities, health care workers, educators and federal civil servants. Not-for-profit workers should too.
The good news is that sector leaders have already come together to design and build a broad-based coalition of national support for Common Good as an institution. However, there is an important role for the federal government in strengthening retirement security in the sector. No jurisdiction in the world that we know of has made real progress on retirement plan coverage for lower and moderate income earners without a significant role for government.
We recommend that the government do three main things. First, become an official partner of Common Good by contributing to its start-up funding. Second, review its funding arrangements and framework for not-for-profit entities to ensure they do not discourage and ideally encourage the provision of retirement benefits by not-for-profit employers. Third, collaborate with the Common Good coalition in educating employers and workers in the sector about the public pillars of Canada’s retirement system, including CCP, OAS and GIS.
Retirement insecurity in the not-for-profit sector is the kind of complex, social and economic problem that the private market cannot solve on its own, but it can be solved if all three sectors work together.
On behalf of the Common Good project, thank you for your interest in this issue. I look forward to your questions.
The Chair: Thank you, gentlemen, for your presentations.
I will go back to Mr. Clutterbuck for a moment. You talked about competition for young people, which I think for young people would be a welcome piece of news that people actually are out there looking for them and wanting them to be involved.
The student loan forgiveness program — it’s the first time we’ve heard the suggestion. It’s an intriguing one. Do you have any idea how much that would cost the government?
Mr. Clutterbuck: No, I don’t know specifically how much it would cost the government. The advantage of the Canada Student Loans Program for physicians and nurses is that $8,000 a year, up to $40,000 for working in remote communities, does show a major investment in the government being concerned about having health services in remote communities, and access to physicians and nurses.
I’m sure the people you’ve heard since last spring have pointed out the social value and benefits that communities receive from the non-profit sector. That should be valued in a way that the government wishes to invest in it. For that reason, something similar to the medical program would be useful in the non-profit sector — say, at least paying a portion of the annual loan payments for workers who come into the sector.
Remember, they come in at a lower wage. We have to attract them in. I did a survey in 2007 of 30,000 graduates out of universities and colleges in Canada. Ten per cent of them, 3,000 students, wish to work in the sector, which is in the mid-range of all 20 industries they were given a choice to enter.
If they’re going to take a bit of a discount on their wages because of the ability of the sector to pay, we could support them in other ways, like loan forgiveness.
The Chair: One thing you didn’t say, though — you talked about lower wages. I would suggest that there might be a combination of lower cost to the charity involved as opposed to lower wages for the employees. There used to be a program in the early 1990s that you could apply to — I forget the name of the department at the time — for people on unemployment to come to work for a charity. The charity would pay a certain amount, but the government would pay another amount to make it a more livable wage. The charity would benefit by having these people. At a charity I worked for at the time, we employed five people, and they made our place hum, because we had those extra bodies doing that work that we couldn’t have afforded to do without the assistance of government.
Mr. Clutterbuck: Sure. Those kinds of supports and subsidies can be helpful, but if you’re really going to value the work in the sector, we have to establish a decent minimum wage, and even a living wage for people to stay. If you’re really valuing the work, you pay at least the minimum expected — $15 an hour is what we propose now — and there are other ways government can support, supplement and assist non-profit organizations, some of which I mentioned, to be able to cover that.
The Chair: I will move to my colleagues momentarily, but just to comment: Of those five people we employed, three of them stayed in the sector.
Mr. Clutterbuck: That’s good.
The federal government did the Opportunities for Youth Program in the 1960s and 1970s, and the Local Initiatives Program —
Senator R. Black: You were in there?
Mr. Clutterbuck: I was in something called Project 500. But many people like me who had a different career path in mind ended up coming into the sector because of the opportunity with federal or provincial support. Maybe John has a comment on that as well.
Mr. Shields: Types of supports from government can be helpful. It’s also about providing youth and others with a perspective on the sector, where they can actually see the value of the work. Once people are in the sector, they really are captured by the mission of the organizations. They become very passionate about that work. That speaks to the three of the five people who stayed in the sector that you’ve identified.
I think those kinds of programs can be helpful. Although a lot of the sector now is also highly professional. So it’s also about the retention of more professional staff and the need to improve conditions in the sector to attract those types of people who are not coming through these other kinds of programs.
Senator Omidvar: Thank you all for being here. This feels like being back in boardrooms in Toronto, because I know so many of you. So full disclosure here.
I want to share part of my own life story — and remembering that from Senator Mercer’s comments. I believe I got my start in the sector, too, in that same way — through such a federal grant. I only ever worked in not-for-profits and charities in my career, until I became a senator.
The Chair: We’re not-for-profit, too.
Senator Omidvar: We’re a not-for-profit, too; you’re right.
So I understand in a fairly visceral way the call and the pull of the sector but also the penalty you pay for choosing the sector. I appreciate that all completely.
My question to any and all of you is this: We have heard a great deal from previous witnesses about the need to develop a human capital strategy that will invest in leadership, attract talent, renew talent and make sure the sector is actually reflective of the people who live in this country.
The complexity in all of this is this question: Who should take the lead? What is the machinery of government that should be dedicated to a human capital strategy, given the fact that it touches charities and not-for-profits work on sports, health and on such a wide variety of issues?
Can you reflect on this proposal of a human capital strategy for the sector that would include Mr. Mazer’s pension proposals, for instance? Where should it ideally be located, and who should be in charge of leading it and making sure some of these aspirations are turned into half a loaf of reality if not a full loaf?
Mr. Mazer: I can speak to one small piece of it, which is the benefits part. The initiative that we’re working on really came about organically as a result of sector leadership. That’s worked quite well. There’s a role for government in supporting it, certainly, but it wasn’t initiated by government.
It’s informed by a lot of input from the sector so that by the time we’re speaking to you, we’ve spent a couple of years thinking through carefully with a combination of pension and retirement expertise, on the one hand, and sector input, on the other hand, what the right approach is. That’s one model for developing the strategy.
There’s probably a broader missing piece in terms of benefit provision that probably isn’t just about retirement security. There are probably other kinds of portable benefits that should be part of that infrastructure as well.
But a model of something that is a bit more bottom-up, if you will, and developed by the sector in collaboration with the right experts could work. Perhaps the government ends up setting the framework regarding the kinds of things needed as part of that infrastructure, but there is a lot of leadership obviously in the sector across the country.
Mr. Clutterbuck: We in the sector at the committee level necessarily work collaboratively. We have to work together to get things done. This is an issue of identifying the potential partners that could work with government to introduce some of these more innovative ideas. There are now more provincial-type organizations like ONN across the country. They show the initiative, doing some of the research and making proposals like the pension program with OPTrust.
I wonder about perhaps thinking, again, about the Human Resources Development Council that was eliminated 10 years or so ago, giving it a more specific role and mandate to work collaboratively with some of these provincial organizations so that the federal role is defined. What the community brings through its provincial networks is connection to people — and making joint decision-making on what works best for human capital strategy.
There have been some false starts in the labour force development strategy over the last 15 years, and we can no longer wait for talking and writing papers. We need to actually move toward some kind of action.
Mr. Shields: It was mentioned by other panellists. I would also come back to say that human capital in much of the sector is dependent upon the funding kind of model that they rely upon.
Government needs to address the funding model, which would go a long way in terms of improving working conditions so that a strategy can actually be implemented by the sector.
Senator Omidvar: Mr. Clutterbuck, you talked about sectoral leadership and intermediary organizations — and I realize how important they are, organizations such as the Ontario Nonprofit Network, which has developed a range of ideas, and others, the social planning councils, et cetera.
My experience is that these intermediary organizations - and I was chair of a number of them - is that their own funding is so precarious because they’re funded by membership fees from precariously funded organizations. It’s like a damned if you do, damned if you don’t kind of thing.
I wonder if you could make some proposals to us around how important intermediary organizations are, and should there not be a separate pool of funding from the federal and possibly provincial governments to provide discrete funding to sectoral organizations to develop solutions, such as Mr. Mazer’s or platforms for change?
Mr. Clutterbuck: Certainly the Social Planning Network would support that. We have my full-time or half-time dedicated work to the work of the Social Planning Network only when we get project funding. We get a year-long funding around something like social inclusion, then I can dedicate myself to working with councils across the province to make an impact. Otherwise, we have no administrative or core funding.
We play as vital a role in helping communities understand and figure out what they need, and there should be some level of stability in our research and community development capability to help communities think strategically about their development as opposed to an annual basis and holding the line on what they’re doing. Mr. Broadbent, even 20 years ago when he was making his first study in this sector, referred to the importance of intermediary organizations. They’re not recognized so much because they don’t provide direct service to people in the community. It’s important to have the infrastructure to support those groups as well.
Senator R. Black: Thank you very much. Thank you to our speakers. Talking about the precariousness of jobs and employment in the sector, I come from the rural sector. Rural Ontario. Is there a difference in precariousness around jobs available and the precariousness of jobs between rural and urban? Why is that if there is? What are the options that we might look at in our recommendations going forward that would bring those two together?
Mr. Shields: Thank you for the question. I think there’s a commonality to precariousness. It’s the insecurity. I think rural areas are particularly hard hit by this. They tend to be more under-serviced in terms of the number of non-profits. Oftentimes they are, obviously, in smaller communities, so getting volunteers can also be a challenge.
I think the financial stability of rural non-profit organizations is perhaps even more precarious than in the case of more well-networked city-based organizations.
I think non-profits provide a lot of the services for our societies today. Government is very reliant upon them in terms of alternative delivery mechanisms.
Preserving the rural non-profit and building on the rural non-profit infrastructure is quite vital. It probably does need special attention and financing to shore up support in that area.
Mr. Mazer: I don’t have too much to add to this. We haven’t noticed a material difference between urban and rural settings in terms of the level of interest or the problem of retirement insecurity. For example, we’ve had a lot of interest from places like Toronto and Vancouver, and also a lot of interest from places like Newfoundland and Labrador and P.E.I. I think there are probably reasons, the higher cost of housing, obviously, for people who live in an urban setting which plays into it. There can also be a lack of access to financial services and other kinds of services in rural settings that make it more difficult to get access to high-quality benefits for some people. We found it to be a fairly common conversation across the country from urban and rural perspectives.
Mr. Clutterbuck: For the leadership study we talked to a large group of people in Chatham-Kent, for example, I talked to the district Parry Sound and communities there. I think one of the real issues around supporting the non-profit sector is also the concern people have about losing their young people. If you’re talking about a new generation of leadership to support communities in which there are older populations needing more forms of health, social and cultural supports, you can combine a strategy to fortify the non-profit sector with a youth retention strategy or a youth callback strategy. If we can pay doctors to work in remote communities, why can’t we help people to stay in their communities with rewarding and useful work?
Senator R. Black: More a comment than a question. Your Project 500 or the paying of doctors, that makes a whole lot of sense in my mind from a rural perspective. Thank you for bringing that up.
Senator Duffy: Thank you all for coming.
I have a number of questions, but first Mr. Mazer, you mentioned my home province of Prince Edward Island. When we had witnesses here last fall, the expansion of a retirement program across the country was an issue I raised.
Can you tell us more about where smaller provinces, like P.E.I. and Newfoundland, are going with this? In these retirement plans, is there any sign of the provincial governments, who receive so much indirect benefit by having these not-for-profit groups doing this amazing work in their provinces and communities, are showing any interest in kicking in money into the employer’s side of the contribution for your retirement program?
Mr. Mazer: Thank you, senator. P.E.I. is my home province as well, so I’m happy to speak about that.
One difference with the plan we’re proposing and working on with sector leaders is that it would be a national plan. There are no other national retirement plans quite like this that we know of that are open to people from any province, as well as being open to both employees and freelancers. We’re trying to think about where the sector is going, the nature of work, and adapting a plan to this.
That is one thing that has been fairly appealing to people as we’re going out and speaking to people in places like Charlottetown or St. John’s, where there may be more mobility between provinces. You could take this plan with you to another province if you’re moving to an employer somewhere else. That’s one feature.
The other thing that’s appealed to people is the flexibility and the contributions. A lot of non-profit employers have told us they have volatile budgets. It’s difficult to commit to ongoing contributions to a pension program, especially a typical pension program which tends to have higher contribution rates. We’ve tried to design this, so it’s somewhat flexible. If you have the funding you can match, which is a great thing obviously, but if you don’t you can still participate in the program and have your employees participate.
In terms of provincial government interest, we’ve had some interest from provincial governments. We haven’t explored it in great depth because we’re more focused on engaging employers, the federal government and the foundation community. But I think it would be a natural partner to engage because of the funding arrangements you mentioned. We have the same recommendation we’ve given you today that provincial governments look at their funding framework to make sure they don’t discourage the provision of retirement benefits.
The Chair: Islanders are everywhere.
Senator Duffy: We’re taking over.
Mr. Clutterbuck, like the chairman, I think we were all quite intrigued by your reference to student loan forgiveness in return for young people working in some of our more remote areas or in cities where you have social agencies that need the person power.
You did say that there’s a program in the United States and there are some problems or wrinkles in that. Based on your knowledge of what they’re doing in the States, how difficult would it be to import something like this to Canada?
Mr. Clutterbuck: I think we have some of our own models to build on, but we could probably learn from the program. The main weakness in that program is that you have to work for 10 years in the field and make 10 years of payments before you can actually qualify, which is counterproductive in terms of encouraging people into the field. That’s why I prefer the Canadian model for the doctors and nurses.
But in that implementation of the program, there are probably other things we can learn from it that would be useful in doing a program like that here for the public benefit sector.
Senator Martin: Apologies for my late arrival. I missed most of your presentation. Thank you to everyone on this panel.
My first question is for Professor John Shields regarding your two recommendations, the longer-term contracts and the more flexible dollars.
What this study has provided me is a greater understanding of how important this sector is and that with this third industry, we have to really look at treating it like an important industry, as with other industries in Canada. It’s amazing the work that people are doing with very limited resources. I just want to applaud everyone for the work that they do in this field.
Regarding the more flexible dollars, I and others have heard comments about some of the mismanagement, “corruption” within some of the larger charitable organizations because of whatever — it may be just concerns of whether the money reaching the people and if the need is being addressed. These are some of the comments that I’ve heard over the years.
We know why we have to demand more transparency and accountability. I agree with these recommendations, and some of the recommendations we’ve heard from other witnesses.
I want to ask the professor how we ensure that there will be absolute accountability and transparency when applying this second recommendation about reducing the overly rigid rules? I think there’s an expectation, but there’s a need. I would love to have you expand a bit more on that recommendation of how do we ensure that whatever we recommend to the government of the day, that we can achieve it, as well as give assurance to funders and donors in Canada regarding accountability?
Mr. Shields: I would say accountability, of course, is critical. I think the sector is aware of that. It’s very concerned about that. It has always been a sector that has taken accountability extremely seriously.
What emerged over the years was that there was so much of a focus on counting widgets and making controls that it created an overly rigid structure. If you go back to some of the recommendations of the Independent Blue Ribbon Panel on Grant and Contribution Programs, they recommended quite a number of years back that this was an overly rigid type of approach that was actually costing money that could have gone into the more delivery aspects of the program.
So the switch has become one to move toward performance-based contracting, rather than counting widgets, so that non-profits are given more flexibility in terms of how those dollars are used. Sometimes there needs to be shifts between budget line items to more effectively deliver services, while further emphasizing outcomes and results. I think that actually increases the effectiveness of the funding and does not discount the accountability of the funds given by government.
It doesn’t cost government more to do these measures. It simply improves the quality of dollars that go to non-profit organizations. In doing so, it allows for greater predictability into the future for planning within these organizations, the longer-term contracts, the more flexible dollars, and that mitigates, to some degree, some of the precarity of the sector.
Senator Martin: Thank you, professor.
To Mr. Mazer, one area I’m most concerned about is the smaller organizations. What you’re proposing with the national portable collective retirement plan for the sector and all of the organizations that have endorsed this plan, all of this sounds promising. But I know it’s a big undertaking to launch something such as this. Would you specify whether or not this is something that will be accessible to smaller, less competitive organizations? Because we know that these programs are important and even if government does set up various programs, we find that the smaller organizations and cultural communities have difficulty in bridging that gap and do not always have the same sort of access.
Would you speak a little bit about whether your consultations and planning are addressing this, and what you’ve noticed about access to such programs by smaller groups?
Mr. Mazer: It’s an excellent question. The program we’re looking at really is primarily designed for smaller and medium-sized employers. We know that larger employers, if you think about hospitals or colleges, tend to be covered by pension plans already. So most of our engagement with the sector has been with organizations of 100 people or less. Of the 73 employers that are signed on, it ranges from organizations that have two or three employees and never thought they would have the chance to access a retirement plan, to organizations that have in the range of 100 employees that have a group RRSP or an RRSP match. Because they’re not a large employer they end up paying a lot more in fees, for example, than a larger employer would pay because the pricing tends to be based on the size of the organization.
The other thing I would note is that a lot of the organizations that are interested have fairly significant part-time or freelance staff; people that traditionally do not have access to a retirement plan at all. I think that’s an area of interest as well. If you think about the kinds of organizations, there are women’s shelters, YWCAs, United Ways, arts organizations, and smaller umbrella organizations. So it’s a range of groups, but really it’s aimed primarily at people with 100 employees or less. That is not to say there wouldn’t be a benefit for larger organizations, especially as the plan scales, but initially I would expect most of the demand to come from the smaller organizations that don’t have access to high-quality benefits today.
Mr. Clutterbuck: There should be a range of opportunities for people to make the choice around retirement. In terms of the Ontario Nonprofit Network and the OPTrust, it is definitely the idea of making sure smaller and medium-sized organizations and their employees have an opportunity with something that offers some real security in terms of a defined benefit, something you can count on every month. For people at the lower end, frankly, their CPP contributions will be lower as well, so their benefits will be lower. You either enhance the CPP or do something that gives people a defined amount of money for as long as they live after retirement. We think it is a higher level of income security.
The Chair: Gentlemen, I appreciate your contributions this morning. It has been very worthwhile. You’ve added a lot to our study.
We will continue our study to examine the impact of federal and provincial laws and policies governing charities and non-profit organizations and foundations and other similar groups, and to examine the impact of the voluntary sector in Canada.
We are pleased today to have as our witness Mr. Brian Emmett, Chief Economist with Imagine Canada. Thank you for accepting our invitation to appear. I now invite you to make a presentation, and I remind you that you have five to seven minutes and then we’ll get to questions from senators.
Brian Emmett, Chief Economist, Imagine Canada: Thank you very much, Mr. Chair. The title of my talk is “upside-down thinking.” I want to talk about something I consider to be a barrier that will be encountered in discussions of regulatory reform for charities. I want to begin by setting up the general situation charities are facing, and that is that I think we are going to see a future of slower economic growth. We saw estimates in the budget of about 1.6 per cent a year in demographic change, an aging population and the changing culture. Demographic change threatens the donor base. Government funding is going to become more difficult, I think, because growth is going to be slower. Earned income opportunities are constrained and, again, will be constrained by a slower-growing GDP.
On the other hand, the demands facing charities are not going to slow down. They are going to continue to increase with social and demographic change, so you have a diverging path with more pressure on charities and more constraints on funding. We have estimated there will be a social deficit gap of about $26 billion, if you could put a number to it, in the year 2026. You won’t see that on a balance sheet anywhere. What you will see is charities that are overstretched, over capacity and overworked with long waiting lists for services and needs that are not met.
In that context, with constraints emerging and demand increasing, charities are going to need to be able to explore every funding opportunity available to them. Out of government funding, philanthropy and earned income, only the last one offers any prospect of long-term growth, and it’s a constrained alternative.
What I think we will see as charities seek to expand earned income, and on the other hand, the private sector seeks to become more involved in social markets, is a different sort of marketplace. You will see what you might call a market ecology in which both for-profit businesses and charities coexist and compete in many markets. I believe that what you will see is something that we have seen, and see regularly, and that is that for-profits will complain that the tax treatment of charities already tilts the marketplace against for-profit firms. I think that perception is a significant barrier to progressing with reform.
I want to make a couple of points. First, tax support is far from unique to the charitable sector. We do benefit from nontaxable charitable income and from tax receipts for donors, but tax advantages are a pretty common way of pursuing public policy objectives, and you see them in areas from RRSPs to support for research and development, innovation, SR&ED and support for charities to carry out their missions.
The OECD has estimated that if you added up all the tax expenditures in Canada, I think the federal government would come to a total of about $140 billion a year. When you look at what charities account for in that, it’s in the area of $3 billion. That’s pretty similar to what you would see in the private sector. If you look at the top 10 business subsidy programs, which the government pursues for legitimate public policy reasons, such as jobs, growth and innovation, there is a list of the top 10 business subsidy programs provided by the University of Calgary, and the total for that is about $11 billion.
What I’m trying to point out is when you put the support the charitable sector gets in context, it’s not out of line with the public policy objectives it serves.
The second point I want to make is that when trying to figure out where the playing field is level, a lot depends on where you sit, but the data is scarce, particularly Canadian data. You will notice I have used only American numbers in my work. The U.S., however, takes a similar although not identical approach to Canada, and I think the results are valid in the Canadian case. The evidence from the U.S. shows that taxes are far less important than commonly thought in terms of market penetration and the competitive balance between charities and for-profits.
Analysis over time shows non-profits steadily losing ground to for-profit enterprise where the two compete. Here we have some data from Lester Salamon of Johns Hopkins University, which has a very sophisticated non-profit and charity program. They show that between 1997 and 2012, charities in home care are down 33 per cent. Community care for the elderly is down 23 per cent. Individual family services is down 30 per cent. You can go on and on and see the private sector providers gaining ground on charities in these markets.
Another data table that I found really interesting is by Peter Frumkin from Harvard. It is well worth having a look at his work. There are a number of establishments in non-profits in the U.S. These numbers are a little dated. Between 1977 and 1997, non-profits grew by 125 per cent and for-profits by 202 per cent. The number of employees in non-profits grew by 134 per cent and for-profits by 273 per cent. Receipts for non-profits grew by 704 per cent and for-profits by 827 per cent. So if for-profits are being discriminated against, if the field is unlevel, it’s certainly not working very much to charities’ advantage.
I think one of the reasons for this is that for-profits have an advantage in changing markets, which is what we see out there. They are better at managing risk, have a greater tolerance for risk and have greater capacity to invest and innovate. It’s a market in which charities and for-profits specialize in different things. For-profits tend to specialize in volume, efficiency, cost effectiveness and that sort of thing. Charities specialize in compassion, links to the community, inclusiveness and so on.
Governments are more and more cost effectiveness oriented, as I know from personal experience. Many governments also target for-profit firms and exclude charities when they develop programs to support innovation, regional development, what have you. They don’t necessarily consider charities as a force that can produce value, growth and employment.
The other thing that you see in government quite a bit is the change from working through charities to dealing with marginalized groups to providing direct assistance. A good example of that is the child tax credit, which delivers spending power as opposed to working through a child care provider. Another one I noticed was the recent government announcement on housing, where a substantial amount of that was to be spent on rent subsidies so that people could participate in the private market as opposed to support social housing.
In summary, what I’m trying to say is that in this changing environment, taxes giving charities a competitive advantage is not supported by evidence. In some fields, some charities are at a real disadvantage. To me, the real policy debate shouldn’t be whether the playing field is tilted and if charities are unfairly subsidized, but what mix of action on tax incentives, on things like current income, social investment, the design of programs and the collection of data is needed to preserve a beneficial mixed ecology? That is, I think we actually benefit from having a market in which both for-profits and charities participate. As we see charities declining in those markets, I think Canadians are going to lose something special; the ability of these community-based social missions to achieve that connection with marginalized groups. I believe the bottom line here is the government should take measures that preserve a mixed organizational ecology in which both non-profit and for-profit providers play an important role.
The Chair: Thank you, Mr. Emmett. That was very informative. At the beginning of your comments you talked about areas where there could be some growth. You said that philanthropy doesn’t meet that criteria; you don’t see that as an area for growth. I’m curious about that because the number one problem with philanthropy is that people aren’t asked. If people aren’t asked, they are not going to give. Organizing the asking of Canadians to participate is important. Do you not see an opportunity for growth on that side of the coin?
Mr. Emmett: I think demographics to a certain extent are working against the sector. There is a report that was done by Imagine Canada with the Rideau Foundation. It’s called 30 Years of Giving in Canada. It’s very much worth having a look at. It shows that philanthropy donations from individuals are fragile. The overall level of donations is keeping up — maybe declining a bit as a percentage of GDP — but it’s keeping up because a smaller number of donors are giving a larger amount of money. Those donors tend to be people who are boomers, an older generation. At some point, those donors are going to exit the scene, and succeeding cohorts of donors do not seem to be as interested in donating as previous generations.
There is a very good analysis of that. One pessimism I have about philanthropy is based on the fact that with an aging population and the exit of the high-donating groups, it’s not clear that subsequent cohorts are going to pick up on that. So I worry about the future of philanthropy.
The Chair: My contention is that we need to evolve how we ask people, how we engage Canadians to give and how we make it a more meaningful experience. If we can do that, we can not only maintain the level of giving but grow it.
Mr. Emmett: One of the contentions, when I look at philanthropy, government support and earned income, is that charities are going to face such a squeeze that they cannot afford to ignore any of these areas that philanthropy and innovative approach is doing. I know that’s a great preoccupation of my colleagues that they work hard on it. I don’t think any sources can be ignored, and you are right to stress the importance of being innovative in that area.
Senator Omidvar: Thank you for appearing before us for the second time. I’m taken by what you say, which is that only earned income offers any prospect for long-term growth for charities. In that light, we should take your presentation very seriously. If we were to change the legislation, it would enable the Boys and Girls Clubs in the country to raise revenue from walking tours as long as the revenue was destined for charitable purposes. It seems to me it is common sense. Can you explain to us, outside the U.S. comparison, what Australia and the U.K. have done? Is there anything we can learn from their journey down this road as we consider our recommendations?
Mr. Emmett: The U.K. I don’t know a great deal about. I have spent a lot of time looking at Australia’s material. Their civil service is first-rate, and the work they do on charities is outstanding. They take the sector extremely seriously. They have new legislation in Australia. I’m not a lawyer so I can’t speak too authoritatively, but with respect to earned income, there was a court case, and I think the judgment was one that resulted in a considerable amount of freeing up of earned income in Australia, and the removal of some constraints.
In general, a look at the Australian legislation and analytical work on the sector is very worthwhile to get some good insight into how one might proceed.
Senator Omidvar: Can you help us with our history in Canada? There have been legal challenges. I remember the YMCA being taken to court by some fitness chain. Can you inform this committee around the legal decisions that have been made and precedents we are currently operating under?
Mr. Emmett: I’m afraid I can’t because I don’t know the legal area. One thing I could comment on is that one of the references in my full paper is to a study done by the University of Pennsylvania on YMCAs competing with private gyms in the U.S. Private gyms in the U.S. have been very aggressive about claiming charities benefit from an unlevel playing field. What that study found was when a YMCA pulls out of an area, the private sector gyms do not expand in that area because the YMCA serves different people; people who are not profitable. In some sense, the YMCA is there benefits from what the Americans provide as subsidies to the charitable sector, but it leaving does not provide a market incentive for the private sector to expand. That is a good example of what I mean by “market ecology,” that the community is better off when you have both sorts of providers healthy and dealing with their own constituency.
The Chair: If I could put on my old hat as Vice President of Financial Development at the YMCA of Greater Toronto many years ago. The reason there is a difference between the YMCA and a private fitness club is the Y will give away their services to people who need it, and, if you priced it out, give away millions of dollars worth of services to people in the community they serve. That’s why the YMCA is different; that’s why the YMCA survives. That’s why I was happy to work for them when I did.
Senator Omidvar: If we were to make this recommendation in our report that the CRA and Finance Canada should make a change to the rules governing destination of funds and earned revenue, do you know how much it would cost the government? Would it cost the government anything?
Mr. Emmett: I don’t know. That strikes me as being a fairly sophisticated calculation. You would probably need an econometric model. What you would want in a situation where people are looking at earned income would be to say that Revenue Canada, Finance Canada and the charitable sector should sit down together and work out what is a fairly complicated problem. It’s complicated legally and in terms of the economics you just talked about — how much revenue would be foregone, how it would affect competitive balance — so the next step in that sort of recommendation would be to say that let’s sit down and explore what’s going on here and what beneficial changes we could make.
The Chair: Senator Duffy has proposed a number of times that we have one spot in government that charities are regulated by and that the public and charities can go to for information. Senator Duffy talks about having a minister responsible. At the bare minimum, should there be a secretariat responsible for pulling all those together because it’s now all over the place?
The reason people can’t understand it is because it’s like picking up Jell-O; you can’t pick it all up and keep it in your hands.
Mr. Emmett: In my civil service career, I was Assistant Deputy Minister for Forestry; so I had 1,000 people working for me doing research, kind of stewards of the forest sector. There is the Department of Agriculture on agriculture, a Department of Fisheries and Energy and Innovation Canada that have directorates on aerospace and telecoms.
There is nothing on the charitable sector; yet the charitable sector accounts for 8.5 per cent of GDP. It is a major sector when you think about it. I agree that a very useful thing would be a place in government, a steward, someone who cares about the sector. Having experience of the hurly-burly of developing programs and getting them through to cabinet and getting approval, they go through a process of interdepartmental debate and discussion. In that interdepartmental debate. I would like to have somebody involved say, “What does this do for charities? What are the implications?”
Senator Omidvar: We don’t have a minister yet — if Senator Duffy gets his way, we will — but we do have a CRA advisory panel, and your CEO, Bruce MacDonald, is, I understand, the co-chair of this panel. Would you recommend that this panel be charged with looking urgently at developing the proposals and the analysis around earned income for charities?
Mr. Emmett: Yes, I would.
Senator Omidvar: Thank you.
The Chair: Now that I have stolen your thunder, Senator Duffy, you have the floor.
Senator Duffy: I’m delighted that you picked up on my ideas. I hope that means we can look forward to something positive in our report.
Mr. Emmett, you have touched on a number of points we have been hearing over and over, including the baby boom generation. I liked your line “exiting the scene.” That was very genteel. You are concerned about the future of philanthropy. As I understand it, the demographers tell us we are in the midst of the largest intergenerational transfer of wealth in the history of the world, i.e. in the four countries — Canada, the U.S., Australia and New Zealand — that have the baby boom phenomena. As the older people die off, their cash is coming to the boomers, and then the question becomes, amidst all of that cash, how do we get it to the next generation? How do we get them as interested as boomers are? That was one of the reasons why I was promoting the idea of a minister or minister of state or whatever.
But the other side of that is: How do we create a culture? Would you be in favour of something in schools? We talked earlier about the government providing some kind of incentive for people go to work in the charitable sector.
How do we move that awareness side of the issue to this new generation? As you say, the numbers all suggest we’re getting to a tipping point. How do we get the kids to care?
Mr. Emmett: Again, fundraising is not an area in which I’m an expert. The intergenerational transfer question is a really interesting one, and it leads to different views on the future of philanthropy. Just before coming here, I was reading an article from Forbes which talked about that, and used that to forecast a golden age of philanthropy.
Now, how that interacts with the succession of the different cohorts, I’m just not sure. In some ways it’s an open question. I have tended to concentrate on the demographic side of things.
With respect to creating a culture in schools, I think my own fairly young children have a culture that’s extremely socially aware. I’m just not sure that translates into thinking about charities as opposed to thinking about starting a company with a social conscience or something like that. Maybe what we’re seeing are fewer donations being given in the normal receipted funds and claimed on our income tax as younger people use things like crowd funding.
I think those are all issues of which the charities are extremely aware and working quite hard on.
There was a question about incentives, senator.
Senator Duffy: Yes. I was just going to say: In your data, do we see tax incentives — and this has become kind of a mantra — as being the be-all and end all, or is that age passé with the new generation?
Mr. Emmett: There was an earlier paper we wrote on the Stretch Tax Credit, and there’s a view in government — I know from dealing with this issue — that Canada already has one of the most generous tax systems in the world with respect to donations. That’s true. There’s no contesting that. I think the room to actually change that in a meaningful way is probably very slim in a policy sense.
There are specific areas that might be quite relevant to the intergenerational transfer. One of them that strikes me is Don Johnson’s recommendation that shares of the private firms and so on be treated in the same way as publicly listed firms. I know the Department of Finance has trouble with that but since many of the intergenerational transfers will consist of just that, that might be a very valuable thing to look at.
In terms of overall tax incentives, I’m not sure what the receptivity is for that and actually I’m not sure what being even more generous than the most generous would do for us.
Senator Omidvar: Mr. Emmett, since you brought up Mr. Johnson’s recommendations to increase incentives for the donation of privately held securities, et cetera, and the evidence suggests that that will benefit big charities, big institutions and big philanthropists, could you provide us with an accompanying recommendation that would benefit the small donor and small charities?
Mr. Emmett: Not immediately, but I’d be glad to come back with something.
Senator Omidvar: Thank you. I would appreciate that.
The Chair: Senator Omidvar and I agree on most things. I think it’s a good thing that we have wealthy people giving large amounts of money to charities of whatever size, whether big or small.
Senator Omidvar: I don’t have anything against big charities and big philanthropists. I just want a balance to the small charities and small institutions.
Senator Martin: Me too.
Thank you, Mr. Emmett. I’m on your site, and as we’re talking about a need for a hub or a place where we can provide tools and resources, I came across your resources and tools page under Grant Connect. When I went to take me to Grant Connect — you’re following what I’m talking about here?
Mr. Emmett: Roughly.
Senator Martin: It takes me to an app. I was curious, in terms of the role that Imagine Canada plays in supporting charities, I was curious about the app, but that’s probably not your area of expertise. You’re the chief economist. However, I was curious: Is this a free app? Was it developed by Imagine Canada? That was my question.
There’s also a question regarding the importance of collaboration between charities and NPOs. In the view of some of the witnesses, the rules precluding charities from funding non-qualified donees can inhibit collaboration in the sector. I was curious about your assessment of this view. What, if any, are the risks of allowing charities to fund non-qualified donees, and to what extent, if at all, could these risks be mitigated?
As a commentary, as I was listening to your presentation, I’m from Vancouver, and I just attended some amazing gala fundraisers and I see all these young people engaged. I’m seeing a lot of positive development and long-standing tradition of successful events that are done so well. I do have hope for the sector, but I understand the challenges that it also faces.
I want to go back to the question about the importance of collaboration between charities and NPOs and the questions I asked.
Mr. Emmett: That’s a bit of a technical and legal question that is a bit beyond my competence. I would not want to mislead the committee. I think it comes back to Senator Omidvar’s comment about the advisory committee that will work with Revenue Canada. It should be one of the elements of its mandate to look at the legal background and assess the risks and benefits of freeing that up.
Senator Martin: Again, it’s a commentary, but I think some of the best practices should harness the knowledge and experience of the very successful, long-standing charities that were once smaller and could help the other organizations across Canada. I think if we could do the matchmaking or resource sharing, it would benefit everyone. The wisdom is all around us. In any event, thank you for what you’re doing.
Senator Duffy: Following the lead of my colleague from Vancouver, I’ve gone to your website as well. It’s excellent, and I would urge our viewers go to ImagineCanada.ca. It tells you a lot.
We were having a discussion earlier and we always want to make sure our viewers are in on the conversation. You relate to this on your website. We’ve used the term “earned income.” For many people watching this broadcast, they probably don’t know what we’re talking about.
What is earned income and how does that relate to charities and your article on your website, Unfair or unwanted: Competition between charities and for-profit businesses in Canada, which elaborates on that?
Mr. Emmett: Certainly. Thank you, senator. Earned income is essentially very much like what a small business or any business would do. It’s the sale of goods and services in the marketplace. It could be things like gift shops in a museum; that’s kind of a micro-example. It also includes the sale of memberships. So if you add together the sale of goods and services and the sale of memberships, which accounts for about 60 per cent of the revenue of the core charity business, so it’s a significant chunk.
Senator Duffy: Right now, the way the rules are written, there are limits placed there by Revenue Canada on what charities can do.
Mr. Emmett: Yes.
Senator Duffy: Boy Scouts can sell apples, but they can’t sell something else.
Mr. Emmett: Absolutely. They have to be a related business, there are certain restrictions on the number of paid employees and that sort of thing.
Senator Duffy: Building upon what you told us earlier, are you advocating that those rules be loosened up to allow a more dynamic charitable sector in which as new ideas, concepts and services arise, they would be in a position to use some of that knowledge and perhaps that part of the market to supplement the monies they raise elsewhere?
Mr. Emmett: I would. I think that’s something the policy advisory committee should have as part of its mandate.
In the budget, the government announced funding for social finance and social innovation. On our podcast, which I recommend listening to, on the Imagine Canada website, there was an interview with a woman from VERGE Capital, which is related to the Pillar Nonprofit Network in London, Ontario. She was saying that the target for their investing with this new money will be charities or non-profits that have a stream of income from the sale of goods and services.
From that, I take that the sale of goods and services is going to become much more important to charities and a much more important link into the innovation, the financial expertise and so on that’s going to come with the social finance initiative — the idea of linking charities and non-profits with a supply of patient capital from socially aware investors.
Senator Duffy: In the past, there’s been a mantra among some people in this town that if it’s available, if it’s listed in the Yellow Pages, the government should not be doing it.
Based on your comments about the research about the YMCA in Pennsylvania, how should we view that?
Mr. Emmett: I suppose I would say that the problem is that poor people don’t go to the Yellow Pages, because they don’t have money to spend. The Y actually reaches out to people like that and offers them services other people would not. That’s why Canada benefits greatly from having a community-based, inclusive charitable sector that wants to reach out to people who would otherwise be unserved.
Senator Duffy: The fall-off in attendance at church — does your research show that’s been a problem and creates a void into which other groups have to move?
Mr. Emmett: I think if I recall —
Senator Duffy: In other words, the charitable aspects of what churches have been doing in this country since we were created.
Mr. Emmett: A series of 30 years of giving, if I recall properly, show that religious organizations still contribute a great deal in terms of charitable funding, but that it has been a little bit in decline. The outlook might be a little bit uncertain.
The Chair: Different subject, different places to talk about it.
Senator R. Black: I have a question and a comment. My question follows Senator Duffy’s. Where should we be looking outside of Canada, outside of this jurisdiction, for information and knowledge regarding how earned income is dealt with among charities? You’ve referenced Australia. Are there other places we should be going that you’re aware of?
Mr. Emmett: I know people frequently refer to the experience in the United Kingdom. I’m less familiar with that, personally. They also refer to the experience in New Zealand. I’ve actually recently suggested to people that one of the best things charities and government could do is set up a fact-finding mission to go to places like Australia, spend some time there, interact with people who have done quite innovative things in terms of legislation and regulation, and see how it’s going for them.
Senator R. Black: My comment is to thank you for confirming some things that we’ve heard and adding to them your comments regarding the mixed organization ecology. That resonated with me. Maybe one of our recommendations should be that this group, or some subset of this group, be part of that fact-finding mission.
Mr. Emmett: Absolutely.
The Chair: I should point out that it’s difficult enough to get funding to travel to Saskatchewan.
Senator R. Black: In the next Parliament.
The Chair: I know the Agriculture Committee, of which Senator Black and I are members, has had difficulty getting funding to travel within Canada. Although I think your idea is a good one, we should pursue — you know how difficult it is to get government to do things sometimes.
Senator Omidvar: Mr. Emmett, I want to, first of all, thank you. You have really given us and our audience the facts that charities do not compete with small businesses. In fact, small businesses get far greater support through various programs than charities could ever do so.
But you’ve also pointed out something that we haven’t had time to explore: How can charities raise equity? That is another problem. Could you speak to the limitations of charities receiving investments as opposed to donations so that they can develop their business lines of revenue and growth?
Mr. Emmett: Senator, that’s an excellent point. As far as I know — and, again, I’m not a lawyer — charities have no opportunity at all to exploit equity. They do not have beneficial owners. Equity is a share in ownership, and so there’s absolutely a complete contradiction in terms.
The idea of coming up with some sort of hybrid in which charities were able to make some use of equity or equity like capital would be a real benefit to the sector. But I’m not clever enough on the legal side to know what this should be, exactly.
Senator Omidvar: You’re very clever, certainly.
The Chair: I could make my comment about my wise decision many years ago not to go to law school.
Mr. Emmett, thank you very much for your contributions. They’re very important ones. You’ve stimulated some discussion and perhaps some debate among the committee members, which is also good. We’d like to thank you for your continued support and the support of Imagine Canada to the whole process.
As a reminder, today, the committee is continuing 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.
This afternoon, we are very fortunate to have with us from the Canada Revenue Agency, Mr. Antonio Manconi, Director General, Charities Directorate. Accompanying him is Ms. Sharmila Khare, Director, Policy, Planning and Legislation Division, Charities Directorate; and Ms. Roxane Brazeau-Leblond, Director, Business and Employment Income Division, Income Tax Rulings Directorate. Welcome to all three of you.
Mr. Manconi, I understand you are going to make the presentation. It will be followed by questions from my colleagues.
Antonio Manconi, Director General, Charities Directorate, Canada Revenue Agency: Good afternoon, Mr. Chair. Thank you for the invitation to appear before you today.
While the role of the Department of Finance is to develop and draft the rules to support government’s tax policy agenda, it is CRA’s responsibility to administer these rules. Today, we anticipate that we will be discussing issues arising from testimony you have heard over the course of this study since our last appearance on April 23, 2018, but before we delve into these issues, I would like to start by providing you with important updates, since our last appearance, that affect registered charities and their regulation.
First, this January, the CRA issued the draft guidance document CG-027, entitled “Public policy dialogue and development activities by charities,” for public consultation. The guidance follows Parliament passing legislation that changed the rules governing charities’ political activities and explains how the CRA expects to administer these changes that now permit a charity to carry on unlimited public dialogue and development activities in furtherance of a stated charitable purpose.
The CRA is accepting comments on the guidance document until April 23, 2019. All feedback received will be considered to inform the publication of a final version of this guidance.
Second, I know there has been a lot of discussion here at the committee about the Canada Without Poverty v. Attorney General of Canada case that was before the courts. In case this wasn’t already known, on January 31, 2019, the government decided to discontinue its appeal of the decision because the legislative provisions at issue in the litigation are no longer applicable following Royal Assent of Bill C-86.
Third, on March 7, 2019, the Minister of National Revenue responded to the report of the Consultation Panel on the Political Activities of Charities. The response announced new initiatives, such as new funding over the 2018-19 to 2023-24 period for the CRA to enhance sector outreach and education, and to strengthen internal training for employees to ensure policies are implemented consistently.
Also, as you know, the government is establishing a permanent Advisory Committee on the Charitable Sector. This committee will provide recommendations to the Minister of National Revenue and the Commissioner of the CRA on important and emerging issues facing charities and qualified donees on an ongoing basis.
So far, Hilary Pearson, President and CEO of Philanthropic Foundations Canada, and Bruce MacDonald, President and CEO of Imagine Canada, have been named co-chairs and will join the CRA co-chair Geoff Trueman, Assistant Commissioner of the Legislative Policy and Regulatory Affairs Branch, along with 12 other members who will be confirmed in the near future.
Lastly, on a very positive note, I’m happy to report that to reduce the administrative burden on charities, CRA is modernizing its information technology systems to provide digital service options. Specifically in June 2019, the Charities Directorate will make several digital services available as part of this initiative, including a new online application for registration, as well as online filing of the annual T3010 Registered Charity Information Return online.
We look forward to our conversation today. Thank you.
The Chair: Thank you.
Senator Omidvar: Thank you, Mr. Manconi and other guests, for coming, as far as I can remember, for the second time. We have been on a very long journey since we first saw you. We have a lot of questions to ask you, so I’m going to dive right in.
Mr. Manconi, I understand that the Department of Finance and the CRA have launched consultations on the draft guidance on public policy dialogue, and you’ve gotten online. It’s still ongoing.
At this point, can you share with us whether the response is vibrant, whether the response comes from all parts of the country and all sectors, whether you are seeing certain trends and whether you can share those trends with us?
Mr. Manconi: From what I’ve seen to date, we do have a variety of input from across the country. I’ve spoken to various sectors, and there is a lot of positive feedback, especially since the guidance does provide clarity of the existing policy that is there today.
We do see some good outcomes. Of course, there is always going to be folks that want a little bit more, and that’s to be expected. All of these comments will be taken into consideration when we are preparing our final version of the document.
Senator Omidvar: Thank you. I look forward to seeing the final product when and if it is ready. You also talked about the CRA advisory panel and its membership. I, for one, am incredibly gratified that this has been put in place.
My question — and maybe it is for Ms. Khare, as well — is about the work of the advisory panel; it will not just touch on sector relationships with the CRA. Because of the nature of the sector’s work, it will also touch on a whole bunch of other departments in government. The sector deals with sport, with health, with education, with technology, et cetera. How will the advisory panel be able to connect with the very necessary stakeholders in other parts of government?
Mr. Manconi: Once the agenda is established, we foresee connections to other departments. We can potentially invite them as guests or to listen in on conversations. If not, there would be follow-ups to those conversations once they have taken place.
Sharmila Khare, Director, Policy, Planning and Legislation Division, Charities Directorate, Canada Revenue Agency: I would add the agendas will be developed in collaboration between the co-chairs. There are actually three co-chairs, two from the sector, one from the government. There will be a lot of input from stakeholders into what the group discusses. The committee is still evolving. We don’t know the final membership. We don’t know what issues they will be interested in discussing.
Senator Omidvar: I get that this is slightly hypothetical but witnesses have, again and again, raised the concern that the work of the sector, whilst it’s monitored and enforced by the CRA, actually touches the lives of Canadians through the machinery of government elsewhere in the government. I understand those departments are not members of the advisory panel. You do have one individual. I think Mr. Manconi mentioned he is the head of public policy; I forget the exact title. That is just one person. How will you connect the work of the sector to other government machinery? It’s the big concern we have heard.
Mr. Manconi: On the administrative side of the committee, we have a whole secretariat that is responsible for managing the agenda items. As I mentioned earlier, if there are touchpoints with other government departments, we will ensure that those touchpoints happen. They could be invited to a committee hearing on that particular day of an agenda or we can follow up.
Ms. Khare: I know it’s all very hypothetical right now because final decisions have not been made. There will be terms of reference to set out more particularly the mandate of the ACCS. There is an idea to set up working groups with memberships not restricted to those who formally sit on the Advisory Committee on the Charitable Sector. I will just pick an example: If they wanted to study social enterprise, it would be quite odd that it was only the CRA, Department of Finance, and members of the committee who would be part of those discussions. There would be an opportunity to broaden the dialogue.
Senator Omidvar: Thank you. I take some comfort from that. I certainly hope to see that translated into reality. Let me go beyond hypothetical questions to questions from the past. I want to talk about the decision of the Finance Department, implemented by CRA, to reduce the disbursement quota of charities from 4.5 per cent to 3.5 per cent. That was made in the context of an economic downturn. The public policy rationale was around the reservation of the assets of charities.
That was in 2008-2009. Since then, things have changed. The economy is doing much better. Yet the disbursement quota remains at 3.5 per cent. Mr. Manconi, who makes the decision to reduce, increase or calibrate the disbursement quota?
Mr. Manconi: That is part of the Income Tax Act. It is a legislative function that is there now. To change that, we would defer to our colleagues in the Department of Finance.
Senator Omidvar: That would be the task of the Minister of Finance?
Mr. Manconi: Correct. We merely administer that role.
The Chair: It seems you are dealing with a multi-headed issue. Even though you are the CRA, you still have to go to Finance to get other things done. Is that not burdensome? Does it not slow down the process?
Mr. Manconi: We are just the administrators. That’s the process that’s in place today.
The Chair: I probably put you in an awkward position to ask you to make an editorial comment, but I’ll make an editorial comment. It seems, from the outside, to be burdensome that you need to go to another department when you work for Canada Revenue Agency. It may be jumping ahead to some recommendations that we may make; perhaps things should be under one heading, whatever that heading is. We are not going to find that at this time.
Senator Omidvar: Do you know whether the disbursement quota in other similar jurisdictions is also a matter of legislation? Is it the purview of departments in Australia or in the U.K.?
Ms. Khare: I’m not familiar with the similar requirements across all jurisdictions. I believe there is something similar in the United States. We have to remember that the disbursement quota is really just the minimum amount that charities are required to spend on charitable activities. Fundamentally, charities are supposed to be devoting their resources to further their charitable purposes through charitable activity. It’s really just a stopgap.
Senator Omidvar: There has been a decrease in donations over the years. I’m sure you have all seen the report. Can we tie A to B with that decrease in donations? I understand what you are saying is that 3.45 is the floor; not the ceiling. I know a lot of charities who do way more, but I also know many charities who say, “Phew, now we don’t have to do 4.5 per cent; we can do 3.5 per cent.” Can you draw that line between the decrease in donations and the disbursement quota?
Ms. Khare: It’s not work that I have done.
The Chair: It would seem to me, the lower we make the disbursement quota, the greater risk we have of someone not presenting the charity sector in the manner in which it was designed. The object of the game is to disburse funds on the charitable intent. Having that disbursement floor of 3.5 per cent means there is an awful lot of money being spent elsewhere or not disbursed.
I know it’s not your job to disburse it but to regulate it. It seems to me that 3.5 per cent is very low. Having worked in the charitable sector for all my career, I would be very disappointed if I were ever in a position where I was only disbursing 3.5 per cent.
There are exceptions to the rule; some charities might not meet the quota. For example, a charity that is planning a capital campaign to build a new facility of some sort or to help fulfill their charitable purpose may, from time to time, because of timing, withhold a very large sum of money. They may not disburse it until they are ready to complete that capital project. Are there provisions for that if a charity does not meet the 3.5 per cent?
Mr. Manconi: In that case, the charity can call us and present their case and ask for an exception. That would be documented. An action plan would be created. They would define their project and why they need an exception for that particular year or two.
Then we would set up an arrangement where, once that project plan comes to fruition, that they would then meet their disbursement quota.
Senator R. Black: We have heard testimony that the number of organizations receiving charitable status has declined from the start of this century through to today. We have also heard that other organizations who have previously failed to file their T3010s and want to reregister are experiencing difficulties doing so. Does the CRA have an unspoken policy to limit the number of charities in Canada? Why has approval in reregistration rates been declining?
Mr. Manconi: No we don’t have a policy. There is no ceiling or benchmarks we want to hit. With the decline in registration we have also seen a decline in applications as well, so the two go hand in hand. Proportionally, we still register approximately 50 to 60 per cent of the applications per year that we receive. That has been consistent over the years.
Senator R. Black: Okay. Thank you. We have heard a lot about earned income in the organizations we have talked to and heard from. How does CRA assess and audit these earned income ventures to ensure the profits are being directed back to the organization?
Ms. Khare: The question relates to charities? Charities are allowed to engage in related business activities. In order to be related, the activity needs to be carried out either completely by volunteers. This morning there was an example of boy scouts selling apples. That would be an activity that’s conducted by volunteers. We would consider it to be related. Or you engage in a business activity that is subordinate and linked to your charity’s purpose. Subordinate essentially means that it’s not taking up substantially all of your time, and linked, very simply, it’s not something random. If you were a hospital, a related business activity could be the cafeteria or the parking lot, both of which you need in order to fulfill your charitable purpose related to the promotion of health.
Senator R. Black: A charitable casino?
Ms. Khare: We always have to look at all the facts of a particular situation, but that doesn’t seem to be very likely.
Senator R. Black: Are you out there assessing these things or are you taking my word as the organization sending you the information? Are you checking or knocking on doors if you have a concern? How does that work?
Ms. Khare: The system for charities is very similar to that of other taxpayers. It’s a self-assessment system. Charities are filing an annual information return. Then we have a range of compliance activities. We have over 85,000 registered charities in Canada, but not every organization will be subject to an audit in a given year. There may be reminder letters. If we notice that charities are consistently filing information returns late we might have a targeted education project to help remind charities of their reporting obligations. We find that those types of interventions are also very effective. We have a new program that has been in operation for about a year and a half. It’s an education program, the Charities Education Program. It’s very similar to a liaison program that exists for small businesses where we have auditors going out and visiting charities that have been registered for a couple of years, doing reviews of their books and records, providing some education and leaving them with some recommendations. The philosophy is that you want to get compliance right from the start.
Senator R. Black: Thank you.
The Chair: If you have a number of people who are failing to reregister on time consistently, do you analyze if there is a common thread? Is something happening here in the registration process that is being slowed down in a particular sector of the charitable sector? Are all club Xs being late or club Ys being on time? Do you analyze that to see if there is something that you are asking for that is slowing them down? We know that not all charities have the same ability to respond to your request because of their size and staffing. Maybe some of them don’t have staff at all, some have one staff, et cetera.
Ms. Khare: The most recent campaign, that was done relating to filing on time, was about educating organizations. I think there was a low level of awareness of this annual obligation and we are dealing with a sector where the turnover of volunteers, especially those serving on boards, is fairly regular. Many times you have a volunteer who have been filling out the form, they do it for a couple of years and move on. It was really more about understanding what the obligations were on an annual basis. I’m not aware of any other research that’s been done.
Senator Martin: I’ll continue on how you are streamlining and simplifying the process. In the government’s response to the report of the Consultation Panel on the Political Activities of Charities, we are aware the Minister of National Review noted that CRA has launched the Charities Education Program and a review and update of the website.
My first question is regarding the review and updating of the website, could you elaborate on how that has led to better information and streamlined systems? You mentioned that you have new digital services, but I know that going digital isn’t always the most efficient. Sometimes it can be very complex. If you could comment on how it has been effective and streamlined as a result.
Mr. Manconi: Perhaps I could start with the digital services we are intending on launching. We have done that in consultation with the sector. In October we met with the sector across the country. We gave them hands-on demos, and we got some positive feedback. The way we designed both the application online and the information return is very user-friendly. As you go through every field there are help indicators that will help you to provide information or will adjust to whatever that formatting should be. It’s very intuitive in terms of helping the user as they go through the process. On the application aspect, it also helps ensure applications are complete when they come in to us. That will expedite the registration process, as opposed to sending back and forth requests for more information. When they press submit it will be a completed form, so that helps them a lot. On the filing side, as I mentioned, it helps make calculations so it will avoid some inputting or calculation errors. It’s very intuitive and there are a lot of help menus as they proceed with the process.
Senator Martin: That sounds good. What about for users who have certain culture needs, whether it’s a language and/or very specific aspects of their organization? Whether it’s Indigenous communities or ethnocultural communities?
Mr. Manconi: Our 1-800 number is there. They can call and we can help them walk through the process, so we have that human touch as well.
Senator Martin: Is there assistance in other languages other than the two official languages?
Mr. Manconi: Yes. As part of governments as a whole, we have identified folks with different languages. I registered to help with anyone who wants to speak Italian, because I’m Italian. There are people who can provide services in different languages.
Senator Martin: I think that’s quite important. For the charities’ education program, will the new program differ from previous outreach efforts that included in-person visits with registered charities? Are there other ways you will do the outreach?
Mr. Manconi: The Charities Education Program launched about a year and a half ago and then nationally last November. This is our in-person visit. We want to make sure they get it right from the start. We first focused on newly registered organizations. Following six to 12 months of being in operation, we meet with them to make sure that they understand what their obligations and the rules are.
It’s an information sharing exercise. We take a quick look at their books and records to make sure they’re going down the right path, and we provide some advice on how they can avoid going down the non-compliance path.
It’s very positive. We’ve done about 540 over the year. Again, we received a lot of positive feedback from the sector. They’ve written a lot of positive feedback to us.
Senator Martin: That’s a lot within a year, but I know there are probably as many, if not more, new charities. In terms of your personnel and the limitations of how many people are actually doing this, are you expanding? Can you do more? Would you talk a bit about that?
Mr. Manconi: We want to launch it the first year to see how it goes, and then we look at our resources and how we can realign our resources.
As we made 540 visits, we actually reduced the number of audits. It actually multiplies its benefit as you do more of these in-house, and, hopefully, it will reduce the number of audits. Then the number of audits we actually do will be focused more on the high-risk audits.
Senator Martin: These are in-person visits, but are there other outreach methods you are doing?
Mr. Manconi: As part of the recent announcement, we will also be doing what we call “the road shows.” We will be going across the country to provide information sessions to different areas of the country. We’ll be starting that sometime in spring/summer. We received funding for that in the recent announcements.
With that, we’ll try to expand more on how we do our outreach to try to hit as many folks as possible.
Ms. Khare: We will also supplement the in-person charity information sessions with video conferencing because we won’t necessarily be able to reach everybody everywhere in the country.
You had also asked about updates to our website. We are planning some updates to the web pages relating to the audit process to demystify what goes on if you’re selected for a charity audit. There’s a plan to update the information on the appeals process for charities. We are also looking to update our web pages on information that would be of interest to Indigenous groups.
That work is not complete. It is work that is under way. That was part of the government response as well.
Senator Martin: Thank you.
The Chair: In your presentation, you talked about the permanent Advisory Committee on the Charitable Sector and the appointment of Hilary Pearson and Bruce MacDonald as co-chairs, along with Geoff Trueman from the government side. There are 12 other members who will be confirmed in the near future. How long is “the near future”?
Mr. Manconi: Right now, we’re waiting for a response back from the minister’s office and our commissioner, as they will be making the appointments.
The Chair: Do you know how those names are being solicited?
Mr. Manconi: No. They want to make sure they can address the coverage of all the organizations across the charitable sector, so that’s why they’re probably taking time.
The Chair: Are they consulting with people active in the sector, do you know? If it’s happening in the minister’s office, you may not know.
Mr. Manconi: No, I don’t know.
The Chair: You also said that in June 2019, the Charities Directorate will make several digital services available as part of the initiative, including online application for registration, as well as online filing of their annual T3010 Registered Charity Information Return online.
What other services will be streamlined and available?
Mr. Manconi: They will be able to do some self-help, self-adjustments on their accounts online, and they will be able to do address changes, or if there’s a change in directors. They will also be able to submit documents electronically to avoid paper and speed up the process. We’ll have inboxes, and we will be able to respond to them electronically as well.
Senator Omidvar: I’d like to ask you a question about what the department has done based on policy decisions and directives of the government. I’d like to understand better the work that was undertaken to broadcast the first-time donor credit. We know it was cancelled, and I imagine it was cancelled because it was not successful.
I want to dig a little deeper and ask what activities did your department undertake to broadcast this to donors? How much money did you spend? How many people were assigned to it? Was this decision to cancel the program related to the numbers of individuals’ take-up or the lack of effort? I’m struggling here, because I actually think it was a great proposal to provide a level playing field to small donors, as we are trying to enhance the incentives for philanthropic donations.
Ms. Khare: I’ll try to answer your question. Essentially, whenever there are new tax measures, new tax credits, the CRA does try to engage in promotional activities.
With respect to the First-Time Donor’s Super Credit, there was a news release issued in 2013. We had a web page that was linked to the web page about T1 filing, which is for individuals, and our charities and giving web pages were also linked to this area.
We had something on our website called a donation tax calculator. You could input the amount of the donation you intended to make and assistance you were receiving. That was updated for the First-Time Donor’s Super Credit.
There was a video available for a couple of years. They had something called carousel slides. When you went to the CRA’s home page, you would see a slide about the First-Time Donor’s Super Credit. There was also a radio campaign titled “Unleashing Your Inner Superhero with the First-Time Donor’s Super Credit.”
Those are some of the things the Canada Revenue Agency did. In my recollection, I know that organizations and charities were also doing some promotional efforts. I know Imagine Canada had a nice piece on the First-Time Donor’s Super Credit on their website, and I know some universities were also promoting the tax incentives.
With respect to your question about how much money we spent on advertising and marketing the credit, I don’t have that information available. I don’t know if it would be available if we looked, because we have a lot of tax incentives and tax measures to advertise as an agency.
In terms of the decision to cancel the First-Time Donor’s Super Credit, it was introduced as a temporary tax incentive. It was meant to sunset. I think the rationale for not continuing with the credit is really something you could talk to the Department of Finance about to see what type of evaluation they might have done.
Senator Omidvar: I will do that. It seems to me that even though there were some interesting radio campaigns, it was largely reactive and not proactive. I don’t remember seeing anything on television about “Find your superhero. Give your first $50.” I don’t remember seeing that. It would have been good to have that, but I will check with the Department of Finance.
I wanted to ask you, Ms. Khare, about a recommendation we have received from a number of individuals that appeals on charitable status revocation, non-granting, non-approval of status, should be moved from where it is, which is the traditional system, to the tax court. That seems to make eminent sense to those of us who are not in your place or in all your places.
Could you give us your response as to what the disadvantages could be? We’ve only heard about why it would make sense. I’d like to hear your argument as to why it should stay where it is.
Ms. Khare: These are decisions made by the Department of Finance, not the Canada Revenue Agency. At the end of the day, we are regulating the provisions in the Income Tax Act. I think it’s important to remember that before something would go to the Federal Court of Appeal, the Canada Revenue Agency has an internal appeal process that doesn’t involve the courts at all. A separate part of the agency reviews the work that’s been done in the Charities Directorate. The entity has an opportunity to be in dialogue with the appeals directorate to provide additional information. They play a bit of a challenge function, or an internal audit function to make sure we’re applying the law correctly.
Senator Omidvar: How many times is the decision overturned?
Ms. Khare: It depends on the type of appeal. I do have the data with me that I could provide you with.
Senator Omidvar: Thank you.
Ms. Khare: For registrations, I think they were 277 and about a third.
Senator Omidvar: Are then either reinstated for grant charitable status, one third?
Ms. Khare: Yes, but I’d prefer to find the exact data and leave you with that. They do play a real role. It’s not a rubber stamp of the decisions that we’ve made in the directorate. We learn from that. We use the information from the appeals process to review our policy guidance documents to see if there are holes and things that can be clarified. We review our registration process, and we review our audit process as a result of the learning.
Senator R. Black: With respect to your digital services and the growth in what you’re offering, are they connected to the respective provincial agencies? My ears perked up when you spoke about changing directors because in the province of Ontario, you have to let the province know as well. Might those two systems speak to each other, so you only have to fill it out once, or are we there yet?
Mr. Manconi: We’re not there yet. This is our first launch of something of that nature. It’s pretty big and was quite expensive. From here, we’re looking at opportunities of how we can expand the system to do things like that. It will be our continuous challenge to try to reduce the burden for the sector.
Senator R. Black: So that is on the books as something —
Mr. Manconi: I’ll make it a take-away right now.
Senator R. Black: Thank you.
Senator Francis: Do you have designated personnel working with Indigenous groups, specifically, who have a good understanding of the culture and needs, for example, applying for a charitable number?
Mr. Manconi: Because the sector is so broad, we don’t have specific folks for each type. However, we invest a lot in learning about the sector and Indigenous groups as much as possible over the last 12 months. We’ve spent a lot of time meeting with folks, representatives, from the Indigenous communities. We do provide services. We know there are folks that want to work in the charitable sector. We do pay attention to those needs.
Senator Martin: You said April 23 is the date before which you’re expecting or asking for feedback. I was curious as to what the follow-up to the feedback will be from the CRA. Do you have a timeline of what you plan to do? Also, in terms of the updating that you’re doing on the website, you say it’s in progress. Do you have an anticipated timeline for yourself when this will be updated?
Mr. Manconi: For the guidance, like you said, the end date is April 23. To make it clear, we continuously accept feedback from the sector throughout the year and we’re always considering information and feedback. In this particular case, we want to set a date so that we can then try to come up with a firm, final version of the document.
How long will it take? That depends on how much change is requested, if any change is requested. That will guide us in terms of how much time because we do want to make sure it’s the best product that’s available there. Once we finalize that version, then we upload it to the website.
The Charities Directorate has access to our website directly, so we can make changes pretty quickly on it. As part of the recent announcements for the committee, we have invested funds to modify our website. This will be a continuous action over the next couple of years.
Senator Martin: A couple of years, that general timeline. Thank you.
Senator Omidvar: I think your department has a challenging job because you have to interpret, in one department, the decisions that are made in the Income Tax Act and by Parliament. We have received testimony that charities are often unable to draw the line between your activities and the will of Parliament, of legislators. They have a hard time understanding and recognizing that.
Could you tell us how you make sure that your processes, your decisions in terms of regulation, monitoring, enforcement, are in line with the Income Tax Act and the will of Parliament?
Mr. Manconi: First, we have that education aspect on the front end. I mentioned earlier the Charities Education Program, where we go out and meet with folks. We’ve also invested a lot this year on our social media, tweeting a lot as well in terms of interpretation of policies. We’re also involved in what we call graphical tools. Basically, it’s one page of pictures. We’re trying to interpret policy through pictures that are easy to understand for folks. We call them educational graphical tools.
From there, we meet with the sector representatives a couple of times a year. We get feedback on how things are going. We identify emerging issues that are going on in terms of understanding policies, procedures or law.
In turn, we continuously look at how we monitor, update our guidance and websites to make sure there is an understanding of what the rules are.
Senator Omidvar: You will need to issue guidelines in terms of the changes to public policy advocacy whether an activity is direct or indirect partisanship. Is this an area where the CRA advisory panel will do some consultations and give you advice on or is it something you will —
Mr. Manconi: It’s actually in our draft guidance today as of now. It describes the two. In terms of feedback from the sector in terms of how they like to see it, we also have examples. We also did a graphic educational tool containing dos and don’ts. We’re trying to make our guidelines as simple as possible to read and understand. Of course, there’s always consultation.
The Chair: Thank you very much. Before we finished, I wanted to say it’s always good to have people from the CRA here before the committee and before many other Senate committees. I always like to make sure that we tell you in public, with the television cameras going, how much we appreciate the work you do on behalf of Canadians. Not everybody gets to say that to the taxman, but I think it’s important that we do. Also, I’m pleased to see the new breath of fresh air of the CRA willing to respond to concerns of Canadians, whether it be parliamentarians or groups of Canadians in various sectors. That’s a very positive thing. It’s probably a difficult thing to continue to administer, but it’s also an important thing to engage with Canadians. I salute the quality of the people that do work for the CRA.
I thank you for being here. We’re now going to reset the table. We have seven witnesses at the next panel, so I’m giving you fair warning that the hour long that we have set aside is probably going to go to an hour and a half. Please prepare for that. Thank you very much.
We have a large group today, so I’ve told my colleagues that this hour-long session will now be an hour and a half. I hope that doesn’t inconvenience our witnesses too much. But to accommodate everybody, I thought let’s do this right from the beginning and extend it by an extra half-hour. That also indicates that we want statements to be succinct, questions to be succinct and answers to be succinct. Everybody, get your succinct attitudes ready to go.
Today we have with us, from the Department of Finance, Pierre LeBlanc, Director General, Personal Income Tax Division, Tax Policy Branch; Blaine Langdon, Director, Charities, Personal Income Tax Division, Tax Policy Branch. And from Innovation, Science and Economic Development Canada we have Mark Schaan, Director General, Marketplace Framework Policy Branch; Darryl Patterson, Director, Corporate, Insolvency and Competition Directorate. And from the Treasury Board Secretariat, we have Michael Lionais, Executive Director, Costing Centre of Expertise, Office of the Comptroller General of Canada. That’s a big business card. From Public Services and Procurement Canada, we have Lorenzo Ieraci, Director General, Acquisitions Program.
From Employment and Social Development Canada we have Catherine Scott, Director General, Community Development and Homelessness Partnerships Directorate. And we also welcome Jocelyne Voisin, Director General, Youth and Skills Innovation Directorate.
I hope I haven’t insulted anybody with my Nova Scotia interpretation of your name.
Pierre LeBlanc, Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance Canada: Thank you for the invitation to appear before your committee and for continuing your very important work in this area.
Mr. LeBlanc: Blaine and I were here about a year ago and we are delighted to be here again. Thanks for your very important work.
Last time we were here, we went over mainly tax incentives for charitable donations and the general regulatory framework for governing the charitable sector. We are going to tell you about political activities and what has transpired since we last met. I think you touched on that in talking to our CRA colleague in terms of the legislative changes that now allow charities to carry on unlimited public policy dialogue and development activities, provided that those activities are in furtherance of a stated charitable purpose.
You have also heard about the Advisory Committee on the Charitable Sector. As representatives of the Department of Finance we are looking forward to being part of this important initiative.
I have one new thing to tell you about that CRA didn’t already get to. Most recently, in terms of relations to your work in Budget 2019, is a series of measures to support journalism in Canada. The government announced its intention to extend qualified donee status to qualifying journalism organizations operating on a not-for-profit basis. Just to tie it in with the regulatory framework for charities, qualified donees — what we’ll call registered journalism organizations — will be eligible to receive funding from charities, including foundations. They will also benefit from charity donation tax incentives, meaning that registered journalism organizations will be able to issue donation receipts for any gifts that they receive. We announced more details in the budget of a couple of weeks ago.
We are very happy to answer any questions you might have.
Mark Schaan, Director General, Marketplace Framework Policy Branch, Innovation, Science and Economic Development Canada: Thank you.
Our branch analyzes and fosters the role of marketplace frameworks in meeting the department’s objectives. This includes analyses of corporate governance, competition, intellectual property and privacy laws and policies, amongst others, and their respective roles in facilitating an efficient marketplace, consumer confidence and the innovation economy.
A primary entry point for my department to the charitable sector arises through the statute through which non-profit entities are able to incorporate as legal entities without shared capital, the Canada Not-for-profit Corporations Act. I note that incorporation as a not-for-profit corporation under the statute is not sufficient for a corporation to be considered either tax exempt or a registered charity for the purposes of the Income Tax Act. Rather, the act merely sets out ground rules for forming and governing the corporations, in contrast to business corporations, which are governed federally by the Canada Business Corporations Act.
As with business corporations, non-profits can be incorporated at the federal, provincial or territorial levels. The legal framework I’m discussing here only applies to those that are federally incorporated. Our latest records show there are approximately 30,000 such corporations active in Canada at this time in all provinces and territories, but with over half in Ontario alone. The 2017 data from the Canada Revenue Agency shows that less than half of the total — approximately 43 per cent — were also registered as charities.
The Canada Not-for-profit Corporations Act came into force in 2011 and was designed to meet the needs of large and small corporations while providing accountability and transparency. As a framework statute, it helps to foster greater public trust and confidence in the not-for-profit sector while granting these corporations a useful baseline structure with the flexibility to run their affairs as they see fit. It was enacted in part to help alleviate administrative burdens associated with federal non-profit corporations. For example, the act streamlines the incorporation process allowing incorporation by way of right in contrast to its predecessor, part two of the former Canada Corporations Act, in which the then Minister of Industry was required to approve the issuance of letters patent; that is, its incorporation documents.
Incorporation can now also be made electronically and is automatically granted providing the provisions of the act are complied with.
In this respect, the new act mirrored the Canada Business Corporations Act in an effort to bring advantages of a modern corporate statute to the not-for-profit sector. This effort is also evident in the provisions dealing with enhanced financial disclosure, bylaws and clarifying the rights and responsibilities of directors, officers and members.
Historically, special acts of Parliament were also used to create non-share capital corporations. When the Canada Not-for-profit Corporations Act was enacted, these corporations were given a choice to either continue under their special act or continue under the new law.
Not-for-profit corporations, despite the term, are able to make profit and conduct the same business activities as business corporations. If they do, not-for-profit corporations may be subject to regular corporate taxes under the Income Tax Act. Rather, the main difference between not-for-profit corporations and business corporations has to do with the way they are structured. On the one hand, business corporations issue shares and pay dividends to their owners, those holding the shares. While not-for-profit corporations have members, they do not issue shares and cannot pay dividends.
Members of a not-for-profit corporation, as defined in its articles and bylaws, have certain rights and responsibilities under the act, including to elect directors or remove or fill vacant director positions. Members can also approve or amend the articles in incorporation or bylaws. The board of directors is accountable to its members and is responsible for managing and supervising the activities and affairs of the corporation, and generally the directors are elected by the members and the members are admitted by the board in accordance with the articles and conditions set out in the bylaws.
The Canada Not-for-profit Corporations Act requires directors to provide its members with the corporation’s financial statements, including the public accountant’s report, before every annual meeting. The act also requires soliciting corporations, that is, those that have gross annual revenues over $10,000, to appoint a public accountant.
A corporation is obliged to keep certain corporate records at its registered office or at some other location in Canada established by the board of directors which members and creditors can examine. There is, of course, far more detail in the law than I have laid out today, but this has hopefully provided a useful overview of the federal legislative landscape.
Before taking questions, I want to acknowledge the many other ways, outside of my primary responsibility, in which my department supports the government’s broader goals of a vibrant and thriving third or charitable sector. This includes support through a number of our grants and contributions programs. Moreover, the department, as part of broader government efforts, has taken an important interest in social enterprises. A social enterprise is a business operated primarily for the purpose of addressing social, environmental or economic challenges in which shareholders or members generally agree that a large portion of profits will be reinvested to support the social purpose.
Innovation, Science and Economic Development Canada has been active in advancing certain initiatives for social entrepreneurship, which include: working with Statistics Canada and Employment and Social Development Canada to include non-profit and charitable social enterprises in the 2017 survey on financing and growth of small and medium-sized enterprises to fill a data gap on business, financing and growth characteristics; actively engaging the Canadian cooperative business sector on how to improve access to federal programs and services, raising the awareness of the cooperative business model and how best to modernize national-level business data on cooperatives; and portfolio programs and services such as the regional development agencies, which have initiatives in place to support social enterprises and the Women’s Entrepreneurship Strategy’s Ecosystem Fund, which ties funding to certain social objectives.
At this point, I would be happy to field any questions that you may have.
The Chair: Thank you. Now from the Treasury Board of Canada Secretariat, Michael Lionais. Welcome back.
Michael Lionais, Executive Director, Costing Centre of Expertise, Office of the Comptroller General of Canada, Treasury Board of Canada Secretariat: Thank you for the invitation to appear before your committee.
I am pleased to be here as part of my duties as Executive Director responsible for the policy on transfer payments at the Treasury Board Secretariat of Canada.
During my previous appearance before this committee in September, you will recall that I outlined the ongoing efforts of the OCG at TBS to reform the administration of grant and contribution programs for the benefit of all Canadians. I also outlined recent developments since 2017 related to the renewal of the policy and transfer payments and the introduction of generic terms and conditions that promote innovation and experimentation in the delivery of programming.
Today, I would like to provide the committee with an update on this work, highlighting our strategy for engaging with departments and the feedback we have received to move forward with the reset of the policy suite.
As part of a co-development strategy, my team collaborated with subject matter experts from 22 departments and 4 working groups to discuss, debate and provide detailed input to the policy renewal instruments and concepts.
Prior to whole-of-government implementation of these instruments and concepts, select departments will participate in a pilot. This is an innovative and iterative approach to policy development that has never been undertaken at the federal level. The pilot will involve the Treasury Board of Canada Secretariat, working closely with early adopter departments to identify policy instrument gaps, challenges and inconsistencies based on real-world application of the grant and contribution programs.
The pilot will enable TBS to test key concepts, such as redefining grant and contribution programs based on risk management principles to improve recipient experience and to ensure departments have the delegation to deliver their programs to achieve objectives and report on results. It will also enable departments to engage directly with recipients to gain a better understanding of the impact of the proposed changes.
As a result of the pilot, TBS will collect evidence from departments, their recipients and TB policy centres and integrate the feedback into a modern policy for broader implementation.
With respect to the promotion of innovation using transfer payments, as you may recall, TBS launched a five-year pilot called generic terms and conditions, which are a preapproved package of policy exceptions, language and provisions that make it easy for departments to add innovation and delivery approaches to their existing programs. As part of our one-year pilot evaluation, uptake by departments has been good.
In 2017-2018, 13 different departments proposed generic terms and conditions for more than 30 transfer payment programs. According to ministerial statements, five microfinance projects, two projects focusing on prices and challenges and five results-oriented projects have been implemented. One hundred and fifty-two people who were consulted in departments indicated that generic terms and conditions are a solution for implementing innovative approaches within the program. While departments believe that generic terms and conditions on effectiveness and efficiency encourage innovation and the achievement of results, they noted some problems with their early adoption and recommended that the limit for microgrants be increased by $1,000 and that training be provided to increase departmental capacity for options.
Since my last appearance in September 2018, I have provided supplementary information to the committee about the Public Accounts of 2016-17. The Public Accounts for 2017-18 indicate an increase of approximately $2 billion in GNC funding from the previous year for not-for-profit organizations and institutions. This represents about a third of the GNC funding.
As I have outlined, the work we do in the area of transfer payments is evolving rapidly. It is through continued collaboration that we are making these significant changes. We continue to be committed to putting in place foundational pieces to impact real change for all communities across Canada, including the charitable sector. Thank you.
The Chair: Thank you. Next we have Lorenzo Ieraci, Director General, Acquisitions Program, Public Services and Procurement Canada.
Lorenzo Ieraci, Director General, Acquisitions Program, Public Services and Procurement Canada: Thank you, Mr. Chair. I have my speaking notes in both languages. Would it be easier if I read it in one language?
The Chair: Whichever you prefer. Both languages are acceptable to us.
Mr. Ieraci: Thank you. Good afternoon, Mr. Chair and honourable members of the special committee. Thank you for having me here today. My name is Lorenzo Ieraci, and I’m the Director General of the Office of Small and Medium Enterprises at Public Services and Procurement Canada.
I understand that the committee is examining how Canada can improve our laws and policies governing charities, foundations and non-profit organizations, and help them to overcome challenges. This is an important issue as the charitable sector plays a key role in bettering Canadian society by assisting vulnerable individuals, often through improving their economic opportunities. Bettering Canadian society includes helping those who are part of under-represented groups.
At Public Services and Procurement Canada, we are exploring ways on how the Government of Canada can contribute to that goal through procurement. We are doing this in two ways.
First, my organization, the Office of Small and Medium Enterprises, is working to reach out to underrepresented groups to increase their awareness of federal procurement and to help them understand and navigate the federal procurement process. We do this by providing free seminars, webinars and one-on-one meetings to explain how suppliers can find federal procurement opportunities and how to register to sell to our department. We have a network of offices across Canada as well as a toll-free telephone line available for suppliers to use.
In undertaking our work, we collaborate with numerous associations that seek to help underrepresented groups. This includes organizations such as Canadian Women Business Enterprises (WBE), the Canadian Aboriginal and Minority Supplier Council or CAMSC, Startup Canada, Cando or the Council for the Advancement of Native Development Officers, and Buy Social Canada, to name only but a few of our key partners. These partnerships are important in making sure that those within underrepresented groups are aware of the potential to sell to the Government of Canada and to ensure they are aware of the services that our organization offers to help them.
Second, we are finding ways to undertake procurements to increase the participation of under-represented groups.
As the committee knows, Public Services and Procurement Canada is the government’s central purchasing authority. The Government of Canada buys about $22 billion of goods and services annually, of which about $16 billion is bought by our department on behalf of about 100 federal organizations.
The government has expressed its desire to leverage this buying power to generate positive societal impacts, and in support of that Public Services and Procurement Canada has been exploring ways to integrate social outcomes into public procurement. Our ultimate goal is to increase and diversify our supplier base. This includes supporting small and medium enterprises, including women-led and Indigenous businesses.
In addition, we are engaging social enterprises, which include not-for-profit organizations that seek to achieve social, cultural or environmental goals through the sale of goods and services.
We are looking at ways to create opportunities for these under-represented groups to become suppliers to the federal government. This has manifested itself in a number of pilots, which are providing us valuable insight on how to successfully integrate social outcomes into procurement.
This has manifested itself in a number of pilots that are providing us with valuable insight on how to integrate social outcomes into procurement. We have an ongoing pilot project for catering services in the National Capital Region. Through this pilot, we have established a list of social enterprises and small suppliers of diverse and underrepresented backgrounds capable of delivering catering services in the National Capital Region for use by federal organizations.
We also undertook a similar pilot in Atlantic Canada where there are now numerous pre-qualified women-owned catering suppliers available to provide services. In our western region, we’re developing pilots for catering services and meeting spaces that will seek social enterprises as suppliers.
In addition we have launched a renewal of our temporary help services method of supply, which incorporates social objectives. More specifically it will seek to increase the number of diverse suppliers.
As the Government of Canada continues to make social procurement a priority, our department will continue to reach out to underrepresented groups to help them do business with the Government of Canada and to modify our procurement to increase the diversity of our supplier base. I look forward to discussing how the Office of Small and Medium Enterprises is helping those from underrepresented groups to participate in federal procurement. Thank you.
The Chair: Thank you.
Jocelyne Voisin, Director General, Youth and Skills Innovation Directorate, Employment and Social Development Canada: Good afternoon, Mr. Chair, and honourable members of the committee.
Thank you very much for inviting us today to appear before the committee to provide an update on our initiatives.
I am Director General of Youth and Skills Innovation. I lead on the implementation and the design of the Canada Service Corps initiative, which was last introduced to this committee in June 2018. I’m accompanied today by Catherine Scott, Director General, Community Development and Homelessness Partnerships Directorate. She will answer questions related to the Social Innovation and the Social Finance Fund, which was first introduced to the committee in September 2018.
Since the last presentation on this second topic, the government has reviewed the recommendations of the Social Innovation and Social Finance Strategy Co-Creation Steering Group. In the 2018 fall economic statement, the government responded and proposed to make available $755 million over the next 10 years to establish a Social Finance Fund as a foundational element of Canada’s strategy.
Additionally, the government proposed to invest $50 million over two years in an investment and readiness program for social purpose organizations to improve their ability to successfully participate in the social finance market.
Together these measures mean community organizations have access to financing to create jobs and address important issues in their communities, and that investors will have new opportunities to invest in community organizations solving problems on the front lines.
Budget 2019 recommitted the funding to these programs and provided additional detail on the Social Finance Fund, with a $50 million investment to be made in a newly proposed Indigenous growth fund and a minimum of $100 million to be allocated to projects that support greater gender equality. My colleague, Catherine, will be able to provide more details about those initiatives.
Since your last discussion on the Canada Service Corps in June at this committee, we have learned a great deal from the design phase, which started in January 2018. It tested a range of different opportunities for youth with a coalition of 12 service delivery organizations. Some of those are long-term service opportunities and some are shorter and more flexible opportunities as in part-time. We also tested microgrants — small amounts of funding that went directly to youth to create their own service projects.
We also consulted with over 800 youth across the country this summer to help us co-create the national program. They gave us a lot of insight into what incentives, motivations and benefits they get from service. They are motivated by making a difference in their communities, creating connections with others, building skills and experience and being recognized for their service.
They noted that they needed flexible service opportunities that allow them to address other priorities in their lives that they are interested in having mentorship opportunities, looking for mental health supports and ways for us to reduce barriers for participation, especially for those who are facing more barriers or are underrepresented.
Based on the findings from the design phase, Budget 2019 commits $314.8 million over five years and $83.4 million per year ongoing to make Canada’s Service Corps Canada’s signature national youth service program. That would support up to 15,000 annual volunteer service placements by the year 2023-24, 1,000 microgrants that youth create their own projects, new incentives in program supports to help youth participate in youth service and a new digital platform to help them in their service journey.
We are working with our national service organizations to scale up the program and to design additional program supports. This new investment will ultimately help youth develop important skills for the labour market, provide them with meaningful connections and a way to give back to their communities while also creating a lifelong commitment to civic engagement. I look forward to answering your questions.
The Chair: Thank you very much. I want to start with our final presenter — Canada Service Corps youth opportunities. Have you got some success stories you can tell us that you have now experienced?
Ms. Voisin: We are hearing from youth that some of them are having powerful experiences in connecting with other youths. Some of the examples of projects that youths are creating themselves in their communities — for example, one young man in an Indigenous community wanted to make sure that other people in his community were learning the native language. So he created a project that would help himself and other community members learn. I think it was Cree in that particular community.
Another example is a young woman who wanted to create a project where she was helping Syrian refugees in her community. She engaged other youths in putting together packages to help Syrian refugees. Those are a couple of examples. Those are the microgrant experiences where youths are engaged in creating their own project.
The national service delivery partners also have a range of different service experiences. The Canadian Wildlife Foundation, for example, has an experience where youths are engaged in environmental issues and wildlife conservation projects.
Senator Omidvar: Thank you all for being here today — some of you for the second time. We have heard through our journey so far that the sector needs a whole-of-government approach. We have a physical manifestation of what that whole-of-government approach would look like, but I feel challenged. I have so many questions, chair. What is your direction? That we ask questions department by department?
The Chair: Ask questions to whomever you want on the panel. We have added an extra half-hour but be succinct, please.
Senator Omidvar: Thank you. You will cut me off as appropriate.
The Chair: I shall.
Senator Omidvar: And I will not object to that, chair. My first question will go to Finance. Before your arrival we heard from the CRA, and a number of questions we asked them are better posed to you.
I wanted to get your reaction to recommendations that we have received from the legal community and other members of the community around the appeal of registration or revocation, that we would be better served if these appeals would be heard by the tax court as opposed to a federal court. Is there a disadvantage that we are not seeing here?
Blaine Langdon, Director, Charities, Personal Income Tax Division, Tax Policy Branch, Department of Finance Canada: I’ll answer that, and I’ll be careful as to my response. My remarks on the subject in the past have not necessarily been well received.
I would point, like the CRA did, to the objections mechanism that was put in place. Following the recommendations of the Joint Regulatory Table, which came from the Voluntary Sector Initiative in 2003, they put in place an objection process for charities, which effectively takes either a decision to refuse to register or proposed revocation or even the sanctions that were put in place in 2003 and 2004. It provides for an impartial review of that decision by the appeals branch of the CRA. It is a no-cost option for charities. Charities can go there with or without a lawyer. If they hire a lawyer, they are taking on some costs.
I was at the CRA for the better part of 15 years, so I was around for the formation of that and subsequent decisions coming from that. I will say, as an ex-compliance officer, there was a significant amount of frustration from us in terms of them overturning our decisions. To the extent that speaks to the fact they are not rubber stamping these decisions, I would put that on the table, that there was a review process that was put in place following the recommendations of the Joint Regulatory Table.
I know the sector advocates for tax court as a means of providing a lower-cost alternative to the Federal Court of Appeal. Certainly, there is evidence that it may be less expensive to go that route. That said, again, I’m not convinced that this necessarily improves the process. To the extent that you take a decision of the Charities Directorate, move it through an objection process — which can take many months, up to a year — you add a layer of court to the tax court. To the extent the CRA does not agree with a decision or thinks it has significant implications for the charitable sector, they will appeal that, and then it will go to the Federal Court of Appeal and ultimately, possibly, to the Supreme Court of Canada.
That will, in fact, lengthen the process, both from an application process and in terms of a compliance procedure to deregister an organization that may or may not be deserving of being deregistered.
I would just point to that and leave my remarks there.
Senator Omidvar: That’s helpful. I heard later on — and I should share this with all my colleagues — that the internal appeals mechanism — or did we hear it from witnesses? We get scrambled at the end of the day — that one third of all decisions are overturned. It speaks to the independence of the internal appeals process, but still, two thirds have to go to Federal Court, and there is an impediment in terms of access, for various reasons.
Let me move on to a question around the cost of proposed incentives. We have heard from other witnesses proposals to enhance charitable incentives so that gifts of private security and real estate can also be made and receive a tax credit. We’ve heard from Mr. Don Johnson, who is the primary advocate for this change, that his estimate is that such an exemption would cost between $50 million and $64 million, while increasing annual donations by a full $200 million annually.
I wonder if you have done your own independent calculations of the fiscal impact of this change.
Mr. LeBlanc: Thank you for the question. Maybe I’ll start and then, Blaine, you can add.
The current government decided in 2016 that it was not going to go ahead with the proposal to implement this change. It stated a couple of reasons. One, I think when we met last time, we explained how generous the baseline system of tax incentives for charitable donations is, and this is significantly more generous than that already generous system. So that’s something that needs to be kept in mind.
We have a government for whom questions of income distribution and income inequality are quite important. What we know from the non-taxation of capital gains on the donation of publicly listed securities is that the use of this tax expenditure is very much concentrated at the very upper tail of the income distribution. We should also think of potential beneficiaries, but in terms of the direct tax assistance received from the measure.
One thing we would point out — and you mentioned the claims about the increase in charitable donations — in our last tax expenditure report, we published a study of the measure I was just talking about, which is the non-taxation of capital gains on the donations to publicly listed securities. To the best of our knowledge, based on the experience we looked at, it’s probably had some effect. It hasn’t had that big of an effect. We’d be glad to provide that study to you.
In other words, it looks like the effect might have been positive, but when you look at overall donations — because it’s not only a question of what people donate in publicly listed securities — you want to ask the question: What other donations would they have made? It’s not a very big effect.
The Chair: Could you share that report with us?
Mr. LeBlanc: We’d be glad to. We’ll certainly provide that to the clerk.
Taking all those things in mind, the decision the government announced in 2016 stands.
Blaine, do you want to add anything to that?
Mr. Langdon: The only thing I might add to that is that, as you know, this is a proposal that has been around for a number of years. It was previously proposed to be included by the previous government. We started our work on this measure in 2015. You can actually see that draft legislative proposals were released in 2015. They ended up being a fairly complex set of legislative proposals, because we were seeking to prevent donations of private company shares from being repurchased by the individual donor. In such a scenario, effectively you’re providing enhanced tax assistance for a donation that is, in substance, just cash. You’re donating the securities but immediately buying them back. Effectively, you’re providing the tax assistance for what is a cash donation to a charity.
So the rules were complex, and we were convinced we needed even more complex rules to capture some of the scenarios we were concerned about. It wasn’t great legislation that we were proposing. One of the concerns is how complex the legislation needs to be in order to facilitate such a proposal. That’s one thing I would add.
The other thing I might point to is that we did do our own internal work, and this goes back some time. The Parliamentary Budget Officer also looked at this proposal back in 2012 and did some costing associated with that. You can find that on their website. It’s dated May 18, 2012. It’s something to look at as well.
Senator Omidvar: In the interest of fairness, I’m going to give my spot to my colleagues. I’m all about fairness between big and small charities.
Senator R. Black: I’m excited and I continue to be excited about the Canada Service Corps. So thank you for your update on that.
What steps remain in getting it moving forward? You’ve told us what you’ve done in the last 18 months. What steps remain? That’s one question.
The other one goes to the success stories. Are you capturing those success stories, and do you have something in mind to share them broadly as time goes on?
Ms. Voisin: I’ll start with your second question, if that’s okay.
In terms of capturing the success stories, as you can imagine, youth are very vocal about posting their experiences and talking about the experiences they’re having. One of our national coalition partners, TakingITGlobal, acts as the convenor for all the national service delivery partners. They are collecting those stories, and we’re actually looking at an enhanced web presence for the Canada Service Corps coming your way soon, which will showcase more of those success stories on a rotating basis so that we have different aspects from across the country, youth speaking in different languages. It will be videos, testimonials and that kind of thing, with them talking about their experiences. That is coming your way soon.
In terms of next steps, we just got funding confirmed in the budget. Our next steps are talking with our national service delivery partners about their ability to scale up. A lot of them have told us that, in the design phase, demand exceeded supply. Essentially, a lot more youth were interested in participating, and already, they have found they have exceeded their expectations for the number of placements during the design phase.
So we’re talking to them about how much they can scale up those service experiences for youth. Then we’re approaching other partners that can help deliver service experiences for youth, and creating new partnerships and alliances with them as well.
Those are our next steps, as well as designing the program supports.
Youth have told us this summer what they’re interested in seeing in terms of program supports. So we need to co-design that with them and continue working with them as well on the design of the digital services. We’ve committed to make this program for youth, by youth, so it’s really about working with them.
Senator R. Black: Thanks very much. Did I hear you right that you will accept or look for additional partners, or you’re considering that?
Ms. Voisin: Yes. We will be talking to other partners who we think have the capacity to deliver meaningful service experiences for youth.
Senator R. Black: What are the various roles that your partners play?
Ms. Voisin: The partners usually already have a meaningful engagement with youth and so are able to provide a service delivery experience. We do want that service experience to be meaningful and what we call immersive, and that includes a learning component, a reflection component, an ability to develop skills and to have the right supports around it so that youth aren’t thrown into some placement where they don’t have the kinds of supports they need to really get the skills and experience out of that.
So we ask that the partners have that infrastructure to support the youth. Those are some of the things we’re looking for in terms of partners.
The Chair: Could you give some examples of who the sponsors are?
Ms. Voisin: We have 12 national coalition partners right now. Did you want me to list all of them?
The Chair: To avoid offending one, let’s offend them all.
Ms. Voisin: Sure. Canadian Wildlife Federation, Katimavik, 4-H Canada, Apathy is Boring, Boys and Girls Clubs of Canada, Chantiers jeunesse, Duke of Edinburgh, mindyourmind, Ocean Wise, 4Rs Youth Movement, YMCA, Canadian Roots Exchange. And, as I said, TakingITGlobal is the organization that acts as the coalition lead in bringing them all together and also delivers the micro-grants.
The Chair: Mr. Schaan, you spent a lot of time talking about not-for-profits. One of the not-for-profits that Canadians use every day — and they don’t know they do that — are airports. Canadian airports are now not-for-profit. One of the spinoffs of being a not-for-profit is you have to spend your money. Those of us who travel a lot, see that airports spend money all the time because they’re constantly under construction.
It would seem to me that — this is a pet peeve of some of us — instead of putting your airport constantly under construction, you might want to lower your landing fees or make it more convenient for people to use the airport.
I know you monitor that they’re doing the job of spending their money on what they’re supposed to, but at some point in time you might have achieved something and now you don’t need to spend anymore money right now. But because you’re a not-for-profit, you’re still forced to spend money. There’s a point when it’s counterproductive to spend money. I use airports as an example, but there may be other examples.
Do you monitor that? What kind of feedback can you give to the taxman to say, “Look, there is a limit to what ’not-for-profit’ means,” or should “not-for-profit” mean that when you achieve that, you lower your fees so that the public benefits, or, in the case of airports, the users of the airports, including airlines and customers, benefit as opposed to continue to have the place under construction?
Mr. Schaan: As a frequent traveller, I feel you and understand your concerns. In terms of the relationship between the Canada Not-for-profit Corporations Act and the actual use of capital, at the federal statute level we have a whole series of incorporation mechanisms available to entities, depending on what kind of status or structure they want to have. That can include the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act and the Canada Business Corporations Act. Then there is a panoply of statutes for which I’m responsible, many of which are quite archaic and haven’t been used in a very long time. Those range from the Boards of Trade Act, to the Trade Unions Act , to a whole host of other incorporating statutes.
That’s a long way of saying that our statutes, by and large, only set the rules for how those organizations are governed, not insofar as their income is treated, nor how they’re taxed. So the actual determination of how much capital an entity can hang on to, what its actual revolving capital needs to be, how much it’s allowed to use on a given basis, are all determinations set by my friends — not necessarily these friends but my general friends at the Department of Finance.
The Chair: So, gentlemen, you’ve heard the exchange with respect to not-for-profits, the need to monitor to say that if the not-for-profit’s objective is to build the bridge and the bridge is built, you can’t continue to paint the bridge because you have to let the bridge be used. And same in airports. I use airports as an example because I use them at least twice a week.
Senator Omidvar: I have a raft of questions. Perhaps I should get them all on the floor. You cut me off as you please, and we can see. At least I want to pose them.
I’ll go back to Finance. Are you monitoring the growth of donor-advised funds, and the influence on them in terms of disbursements? Because, as far as we have understood, a disbursement quota does not apply to individual donor-advised funds but, rather, to the aggregate amount. That’s my first question.
My second question is around recommendations that we have heard time and time again: that the relationship between charities and not-for-profits is an important one; there should be greater collaboration, but the rules currently do not make it easy for charities and not-for-profits to work together because not-for-profits are not qualified donees, and the regulations around all of that. If you could comment on that.
My second question is to ESDC. Let me come back to ESDC later.
From Public Procurement, I notice the preponderance of catering services. I will first make a comment on that. Small businesses in excluded groups cover the range, from engineering to digital to landscaping. I’m a little concerned about the preponderance of catering services.
My question would be specifically around the fact that you spend $16 billion annually, that you buy services on behalf of the people of Canada. Do you know if any of these services, or what amount of them, is purchased from the charitable and not-for-profit sector?
My next question is to the Treasury Board Secretariat, Mr. Lionais. In working, as you described, on your initiatives with grants and contributions, have you developed knowledge and new approaches on managing risk within the context of grants and contributions? Do you see a shift? Because we’ve heard time and time again that managing risk, on the one hand, is good; it provides accountability. On the other hand, it really limits the capacity of the agencies that are getting the grants and contributions.
From ESDC, you will forgive me, Ms. Scott, for being both enthused and a little confused — enthused because of all the decisions of the federal government in terms of social finance, but I’m a little confused about who will actually be accountable for action. Will it be your department? Will it be Innovation, Science and Economic Development?
I also understand that there is an advisory council at PCO as well that is dealing with this. So you will forgive my confusion. Perhaps you can clarify that for me.
And I’ve forgotten one question.
The Chair: Perhaps we can stop there, Senator Omidvar. I’m sure the panellists have kept the questions straight. Let’s start where she started.
Mr. Langdon: I’ll respond to what I think are two different questions, the first being on donor-advised funds and whether we are monitoring such organizations, particularly around the disbursement quota.
I would say, and I’ll preface this by saying this is internally within the Department of Finance, yes, we are aware of them. I do think that a little bit of work needs to be done around that part of the charitable sector, but that’s my own personal view, not vetted through the government, so I don’t want to cause any panic that this is an ongoing project.
I think in particular one thing I would point to, to the extent that my CRA colleagues are listening, is that there needs to be greater transparency around donor-advised funds. Right now there’s not a lot of information to the extent that for a donor-advised fund, how many accounts are in a particular organization that is one donor-advised fund or, to the extent that there is a registered charity that operates a donor-advised fund, as one component part. It’s almost impossible to separate that out from their activities to be able to measure what’s going on in those organizations. So I do think that would be helpful and more work does need to be done around that.
I am somewhat comforted by the fact that — and I believe this gentleman appeared as a witness before this committee — studies have been done on these. They do suggest that at least, as a whole, organizations that are operating donor-advised funds are meeting the disbursement quota at an organizational level, if not exceeding it. But you’re quite correct; it’s difficult to get down to the micro level and find out whether or not individual accounts are doing that.
To the second question, which is a bigger question, speaking to the rules around collaboration between charities and non-profit organizations, this is colloquially referred to as the own activities test, which basically says that a charity has to devote all of its resources to charitable activities carried on by the organization itself.
Basically, the purpose behind that rule, and it’s a long-standing rule that goes back to the 1950s, is to ensure that when charities spend their money, they’re spending their money on charitable things. The way we do that in the Income Tax Act is that we require the organization to be carrying on the activity or, if they’re going to give away their money, they give it away to other organizations that are qualified donees, which are socially beneficial organizations recognized by the government as being worthy of tax assistance.
There’s a whole administrative set of rules around that, which basically are there to facilitate the ability of charities, when they do work with non-profit organizations, to make a grant, for example, and exercise sufficient control and direction over a non-profit organization such that that organization is considered to be carrying on an activity on behalf of the charity. I think you’ve heard a sufficient amount about that over the course of this study, so I won’t go too far into that.
I would say that those rules could benefit from improvement. I do recognize that they are restrictive. I do think that there is a need to strike the balance between ensuring that the rules appropriately ensure the tax-assisted resources are dedicated to charitable activities and preventing things like fraud and simple waste within the sector. But at the same time ensuring that charities are able to carry on socially innovative activities, working in collaboration are non-profit organizations. I absolutely agree there is room for some improvement to those rules.
I would point to the recently formed Advisory Committee on the Charitable Sector as being a good place to discuss this and work on coming up with a better framework. Again, recognize that these are my particular points of view as opposed to necessarily being the views of everyone at the Department of Finance.
The Chair: Who is next in the line of questioning of Senator Omidvar?
Mr. Ieraci: I think I was next.
Thank you for your question. Of the $16 billion that is procured by our department, both for ourselves and other federal departments and agencies, it breaks down as roughly 41 per cent of goods, 40 per cent of services and 19 per cent falls into construction. You asked whether we know how much of that is going to the charitable or not-for-profit organizations and the short answer is no, we don’t know that. Part of the reason we are running these pilots is to be able to help us determine how we can get information on the companies who are obtaining government contracts, to learn more about them in terms of their status and the type of organizations they are, including whether they are women owned or owned by visible minorities, so on and so forth.
One of the reasons we’re doing that is we recognize from a data capture perspective and from an indicators perspective that we need to have better granularity on the companies that are getting procurement or contracts with the Government of Canada. Part of that will be done through our electronic procurement solution, which is something we’re working on right now that will digitize the way that we do procurement. And as part of that, we’re currently reviewing all the information that needs to be provided for us for the purposes of registering with the Government of Canada in order to obtain government contracts. We’re looking at what indicators we need to capture, balancing off between knowing as much as we can about the industries but making sure we keep the burden on suppliers, in terms of information provided to us, to a reasonable amount because we recognize the vast majority of companies we deal with are small- and medium-sized enterprises.
Senator Omidvar: And could be the proxy for small- and medium-sized charities and non-profits. That’s where my question is going, because we heard previously that the donations are dropping and predicted to drop even more; that one of the strongest indicators for charities and not-for-profits is developing sources of earned revenue if the regulations from Finance change. I just wanted to alert you to that.
Mr. Lionais: I believe it’s my turn now.
You asked about the burden on recipients in terms of the reporting back to government. We’ve been looking at that for several years now and we’ve come to the conclusion that the stewardship requirements of departments drive the recipient reporting burden. So it is how they’re tracking the disbursement of public money and what the value for money is in the equation that recipients are providing Canada and citizens.
We’ve looked at it and said, “Okay, so why are things happening the way they are?” There is a risk assessment that’s done, but then the application of it is inconsistent within the department. So then there’s an uneven reporting burden on recipients by different programs within the department and also across departments.
We said, “Okay, let’s try to get at this from a couple of angles.” We’re considering the institution or adoption of a management framework. The point of the management framework would be the accounting officer, so the deputy minister, setting the framework or the rule set within the department about how risk is managed with recipients and what the acceptable practices are within the department to ensure consistency. Through that, we can then leverage consistency across departments as we get departments functioning in a consistent manner.
That led us to another element, and that’s the concept of a “grantribution,” a coined phrase of one of the CFOs in town. It is when they blend a grant and a contribution — not the authorities, but the reporting requirements. We looked at this funding instrument continuum of at what is a grant and what is a contribution and how do the reporting requirements align to these different instruments?
So we are creating or proposing a funding instrument continuum that would have two types of grant and two types of contribution. The idea is that we’re trying to set the expectations of calibration around user experience or recipient reporting. So at the far end of the left, there’s absolutely no reporting. And at the far end of the contribution scale, there are all sorts of milestones and scheduling reporting and what you’ve done with the money. For example, if you received funding for a light-rail project, there will be a great deal of resource reporting. If you’re doing a micro-funding, there should be no reporting. You prove that you’re eligible, you have a bank account, we can deposit the money, you do what you do. Normally they will say if you want to give us a picture of what you did with the money or a little brief description on social media, and that’s essentially what we’re looking at. We’re trying to calibrate what the burden on recipients reporting is and where financial reporting is acceptable under reporting burden, and where we want to focus on performance reporting.
Catherine Scott, Director General, Community Development and Homelessness Partnerships Directorate, Employment and Social Development Canada:: Your question was around who will be accountable for action.
The Fall Economic Statement and then the budget announced the creation of a social finance fund and an associated investment and readiness stream. Both of those will be implemented by Employment and Social Development Canada. The budget a couple of weeks ago provided further details on the design of the social finance fund, so indicated it will be a fund-to-fund model and that government will undertake a transparent selection process probably towards the end of 2019 to select either one or several fund managers. Those fund managers will in turn invest in social finance intermediaries across the country, and there are some leveraging requirements that go along with that.
And then the associated investment and readiness stream, which is a grants and contributions program over 24 months. I think this is based on some of the lessons learned from other jurisdictions that have created fund models who have learned that there needs to be an upfront investment so that there is a pipeline of projects that are ready to go.
So the investment and readiness stream is really to prepare the groundwork and to support organizations that are looking to become investment ready and working along a continuum. So whether that be funding to do some early stage innovation, to look at governance within their organization, to look at their funding requirements and sources of revenue or to be preparing a new business plan. So the idea with this short-term funding is to really prepare that groundwork and also to bolster the capacity of the social finance intermediary sector before the social finance fund comes into existence. So both of those initiatives are being led by Employment and Social Development.
The Chair: Thank you very much for that.
Senator Martin: I’m going to direct my question first to Mr. LeBlanc. You mentioned Bill C-86 and the changes to the rules. The fact that now charities could engage 100 per cent of their activities so long as it promotes the objective of their charity to public policy dialogue and development activities. I know there were concerns from the last election and we are in an election year. We are going from 10 per cent to 100 per cent, so I can’t help but question how this is going to impact the activities and some of the concerns raised previously now that it’s opened. It’s probably not under your purview to talk about monitoring and whatnot. Have you had conversations or been part of intergovernmental discussions with those that will be overseeing the application of all of the new changes as a result of Bill C-86?
Mr. LeBlanc: Thank you for the question. Again I’ll start and, Blaine, please add or correct as necessary. I think when we talked about it basically what Bill C-86 does and what charities now have the ability to do is to act without limit in nonpartisan public policy activities and development. I think an important aspect of this is that limitations that already existed, restrictions on both direct and indirect partisan activity remain. There are no changes to that.
I think our colleagues from the CRA in the last panel were telling you about the guidance they posted for comment. One of the things we heard both at the House of Commons and Senate Finance Committee, when we talked about Bill C-86, were questions about what that means, especially indirect partisan activity. So it puts some of the detail around that. I think that limitation continues to be an important part of that framework.
The second point I would make is that you mentioned interdepartmental work and it would be others in government who would be responsible for this. But in terms of restrictions on activity around elections that will affect charities as much as other organizations. It’s really for others. But those limits and restrictions will continue to apply, so we just made a specific change in regard to the Income Tax Act.
Senator Martin: I know I need to be talking to others about this but there were issues before, so I understand that those limits, those restrictions haven’t changed but there were issues before with those limitations. I continue to have some of those concerns and there are others who have spoken to me about it. I think that’s for another study. For now thank you for giving me some clarification on that.
The other question I had was to the Innovation, Science and Economic Development Canada representatives. Your department is described as working with Canadians in all areas of the economy and all parts of the country. That’s a pretty big territory. And enhancing Canada’s innovation performance is one of its goals. I was curious about what you do specifically for charities and non-profits to be able to access the services and programs you have. You did mention that in your remarks but if you could expand on that, that would be helpful.
Mr. Schaan: I’ll start at the outset by indicating, as I did in my remarks, that those are the aspects of the department that live outside of my domain. My responsibility primarily is laws of general application of an economic nature that are not sector specific. I do marketplace framework laws and my colleagues in other parts of the department do services and programs and various other innovation things. That said, I can say on their behalf that that landscape includes a number of different program streams. There was a program consolidation and streamlining and simplification that happened at the beginning of the innovation and skills plan, three budgets ago, that tried to set core platforms to make for ease of use by recipients of the various business innovation programs that are part of our department.
It is worth noting that the department’s portfolio includes all of the regional development agencies and they have programing streams, which they are better able to speak to, that highlights the degree to which they are active in their various communities across the country and have charitable organizations as grant recipients and the program recipients within their purview.
Senator Martin: Thinking about the charities and non-profits that are competing with everybody else and knowing that they have such limited resources and limited personnel, I hope that the department officials that are front line individuals working on the ground in the regions keep in mind that these are the challenges of the charities and non-profit sector and that any sort of consideration — not special consideration but just that lens — would be very helpful.
Mr. Schaan: Absolutely. Two things I would add. It’s not necessarily my domain but one is, obviously, that we have dedicated programs that not-for-profits and charitable organizations are eligible for. The second is that our regional offices are often co-located with a number of other government partners. This makes a whole-of-government approach — one that ensures that when we are delivering services and making those connections between community, business and other partners within the community — a lot easier because they are often in the same spot.
Senator Martin: Thank you. Last question to Jocelyne Voisin. It’s exciting to hear about what youth are doing across our country. You listed the partners. I don’t know if you mentioned how they were selected. I know they needed to have a certain level of expertise and infrastructure ready, but there are so many organizations. I know you said you are also open to working with other partners as well. Would you explain a bit about your selection process.
Ms. Voisin: In terms of the design phase we looked for organizations that had the capacity to move right away. Some of the criteria we looked at, as I said, the experience in delivering service placements for youth. The ability to scale up quickly. In the design phase we wanted organizations that could help us. That they could implement a collective impact model. That means working collaboratively together. That they had different elements of recognizing skills, offering some placements in two or more provinces, having exposure to a second official language, and addressing diversity issues, as well as having some in-depth knowledge of youth. We also had a sense from youth about what themes they were interested in. For example, mindyourmind is a mental health specific organization, so we did want to have some projects that were in line with the themes that youth were interested in. So environment, reconciliation, mental health. Those are some of the themes that we wanted to make sure we had organizations for.
Those were the design phase. We are working on criteria to assess which partners we would look to work for an expansion.
Senator Martin: Did you say the organizations have to be able to operate in both official languages or just one?
Ms. Voisin: They need to be able to provide service experiences in both official languages. Whether the organization itself has the capacity or they get support to provide those service experiences.
Senator Martin: Thank you.
Senator Omidvar: I have two questions and I will put them on the table. One is for Mr. Schaan. I would like you to respond to recommendations that we have heard from witnesses. This deals with not-for-profits. We have focused quite a bit on not-for-profits and understanding they too receive a certain amount of benefits, but appear not to have the same level of accountability as charities. The proposal was made that not-for-profits are not all the same, that there are public interest not-for-profits and private interest not-for-profits. Think about the airports, public interest, I would imagine. The auto dealers association selling Subarus in Ajax I would suggest is a private interest not-for-profit. You mentioned that 30,000 not-for-profits are within your purview. Do you have a sense of how many are public versus private interest?
Mr. Schaan: The closest we can come is cross-referencing those that are registered charities, which is not a perfect picture. As per my remarks, about just over 40 per cent of those 30,000 are registered charities, and the others are a mix of things. As between our various statutes, because they are general purpose and their laws have general application they are enabling statutes that try and provide a frame work for people to enter into the societal marketplace. On the CBCA side, that’s just over 400,000 roughly, and on the not-for-profit side that’s 30,000. Our ability to monitor all of those and know exactly who they are is limited depending on the scope and size.
Senator Omidvar: Are you able to change your questionnaires or your fact gathering to ask whether they are public interest or private interest? Or does that concept simply not exist in Canada at this point?
Mr. Schaan: Right now under the statute it doesn’t exist. When the Canada Not-for-profit Act was brought into force in 2011 its aim in moving away from part two of the old Canada Corporations Act was to move away from this administratively burdensome, hand over your letters patent and your incorporation documents to the minister themselves and the minister would need to agree on your social purpose and sign off on them. The goal was, similar to the CBCA, let’s not make incorporation the barrier. Let’s make other aspects like should you have tax deductible status the burden. If you’re engaged in particular types of activity, there might be activity-based regulation for the type of thing you do. Depending on if you are acting in a particular way in the marketplace we may have a sector-specific obligation. Right now the only thing that we would have on the books would be the degree to which the director of the not-for-profits Act has the capacity to go to the corporate office and review things like bylaws.
Senator Omidvar: I think my next question is for Ms. Scott, but correct me if it’s your colleague. We’ve heard almost unanimous calls that the human capital in the charitable and not-for-profit sector, as big as it is, it’s fraying at the edges. What they have called for is a robust human capital strategy. I think that’s what ESDC would understand. Can we learn from other sector-specific human capital strategies? Is there one for STEM? Is there one for technology, digital? Artificial intelligence? I don’t know. I’m just looking for a proxy here.
Ms. Scott: That’s not my area of expertise, so I won’t be able to provide you with a detailed response. Some of our initiatives in our skills and employment branch look at the needs within specific sectors. There is definitely potential there. I would turn to my colleagues at ISED who have done similar initiatives in specific sectors. I can’t provide you a specific example or initiative that would be parallel to that.
Senator Omidvar: Can you give an example of which sectors the government has chosen to focus on in terms of developing human capital?
Ms. Scott: In STEM, in looking at all of the initiatives around skilled trades and apprenticeships, there has been significant investment over the years in both encouraging individuals into apprenticeship programs and incentives for completion, as well as looking at where labour market shortages are in those areas. That would be one example.
Senator Omidvar: Thank you.
The Chair: Ladies and gentlemen, thank you very much for your appearance today. It was a challenge to put this many bright people on one panel and to try to discipline ourselves both from your side and our side to get testimony, questions and answers. I think we have done a good job. It’s only 20 after four, so that’s not bad. I think we are all to be congratulated.
I would like to thank you for your input and also encourage you, as you monitor procedures in the few weeks we have left of hearings, et cetera, that if you see something that comes along — I should have told them this or forgot to tell them that, or maybe you have heard something you want to comment on, don’t hesitate to communicate to us through the clerk. It will be taken into consideration as well. Thank you very much. We appreciate your hard work on behalf of Canadians. Thank you.
(The committee adjourned.)