Canada has just turned 152, and with July 1st Canada Day celebrations complete, for many, the next two months will be focused on taking advantage of that brief window of time we call “summer.”
Like every country, Canada has its peculiarities, like our appointed (unelected) Senate, modeled after the British House of Lords but without the bishops, dukes, and other complications of that system. This is not a history lesson about parliamentary democracy, but for those who can’t fathom an unelected upper chamber of government, the concept owes at least in part to the notions offered by Canada’s first Prime Minister Sir John A. MacDonald. He saw the Senate as a place for “sober second thought” and “regional representation,” appointed rather than elected so that it can—theoretically—do its work without the “democratic excesses” associated with seeking public popularity and re-election.
This experiment in democratic governance has proven less than perfect, of course, given that for most of Canada’s history, Senate appointments (being made by the governing party) were partisan from day one. The frustration of partisan governing officials that cannot be held directly accountable by the populace is a part of our ongoing history. Proposals for an elected Senate (or abolishing it altogether) have come and gone many times. The current experiment with improving the objectivity of the upper chamber is the Independent Advisory Board for Senate Appointments (established January 2016).
Whether this change has any direct link to results or not, it can be said that of late the Senate has delivered some admirable examples of what Sir John A. had hoped for, in terms of improving legislation and/or advocating for legislative reform. NPQ North covered one such example last month, when after the Senate suggested many significant amendments supported by disability advocates, nonprofit organizations, and independent research, MPs voted unanimous consent for Bill C-81, the Accessible Canada Act: An Act to Ensure a Barrier-free Canada (ACA).
Although celebrated extensively by Minister Qualtrough, other (unusually bipartisan) government sources, and several disability organizations, overall media coverage was minimal and fleeting. We expect the ACA to be back in the news now that it has become law and it is sure to be tested—put your money on airports or airlines as the likely first battleground.
If the many years of work on the ACA by Members of Parliament, Senators, individual advocates, and disability organizations escaped the notice of the average Canadian, the attention paid to the ACA was like July 1st fireworks compared to the June 20th release of the Senate of Canada’s 190-page report, “Catalyst for Change: A Roadmap to a Stronger Charitable Sector.”
As contributors like Imagine Canada (one of the largest umbrella groups representing the sector) have pointed out with somewhat colorful language, reforms are desperately needed:
Charities operate in the 21st century, but the rules that govern them are based on 19th century interpretations of a law dating from the early 1600s! No other sector in the economy operates under such outdated rules and regulations and we are striving to change that!
The Mowat Centre’s submission, “Turning a Corner: Laying the Groundwork for Charity Regulatory Reform in Canada,” broke down the issues in a succinct 25 pages, including key points like this one:
The Income Tax Act does not define charitable purpose, instead adopting the common law definition. The common law definition takes its classification scheme from Pemsel, an 1891 English case. Some charities or applicants for charitable status want to move beyond the Pemsel scheme, or at least expand its interpretation. Some charities, for example, want to prevent poverty, rather than just alleviate it.
Although Canadian government and legal structures may be unique, the Senate news release of “Catalyst for Change” mentioned themes and concerns that are frequently cited in NPQ articles from the United States and other countries:
Organizations expressed concern about recruiting the next generation of volunteers to meet the growing demands and retaining paid staff as other sectors compete for the same talent pool. Canadians’ giving patterns have shifted, and the federal funding for programs and services delivered by charities, nonprofits and volunteer organizations continue to be short-term and precarious. The legal framework governing the sector is out of date and can sometimes impede organizations’ work. And the relationship between the sector and the federal government should be strengthened by identifying a home for the sector within a specific department or agency.
The report’s 42 recommendations (derived from 24 public hearings, 160 witnesses, and e-consultation) cover a lot of ground. The response from the sector has been positive if not enthusiastic—no doubt charitable organizations and their representative umbrellas are well aware that there is no guarantee that “Catalyst for Change” will ever do more than fill up space in the Senate archives.
That said, as the report itself details, with some 86,000 registered charities (and another 85,000 nonprofit organizations) engaged in public benefit activities that touch every aspect of Canadian life, more than 2 million employees, and generates more than seven percent of Canada’s gross domestic product, the needs of the sector are becoming increasingly difficult to ignore.
Some of the recommendations that have generated a positive response from the sector include:
- Lawyer Mark Blumberg writes in his Canadian Charity Law blog, “My favorite recommendation relates to transparency of nonprofits that are not registered charities—for which there is almost none.” Blumberg is referencing Recommendation 39, which would require nonprofits to publicly disclose information similar to what is required of registered charities. (Blumberg is a champion of sector transparency.)
- Among several responses, Imagine Canada focused on inefficient and disconnected relationships between charitable regulation, relevant data collection and dissemination, and the lack of a “home” for the charitable sector in government (currently the Canada Revenue Agency Charities Directorate has the most significant role). Recommendation 22 calls for the Government of Canada, through the Minister of Innovation, Science and Economic Development, to “create a secretariat on the charitable and non-profit sector in a coordinating and convening role.”
- The Association of Fundraising Professionals was particularly effusive in their praise, stating, “The report is incredibly comprehensive and ambitious, and many thanks go to Senators Mercer and Omidvar, who headed up the committee, along with many other Senators who participated in various hearings…They have put together an amazing report covering every aspect of the sector and philanthropy.” Understandably, AFP would love to see advancement on a number of helpful improvements, including Recommendation 16, that would support vastly improved data collection and evidence-based decisions.
- The Ontario Nonprofit Sector had something to say about 16 of the recommendations, with a major theme being that of “decent work” and related ONN themes for sector sustainability.
Other than the worry that it will just sit on the shelf, a concern shared by all of the above, there has been limited criticism of the report. A notable exception is concern that the report took a pass on addressing one aspect of Canada’s archaic charitable law—the extent of financial support provided by the state to religious groups through the granting of charitable status. With charitable status, religious groups in Canada are exempt from tax, can issue tax receipts for donations received, and are reimbursed for a portion of the provincial and federal taxes.
Unlike other charities, however, the act of being a religious organization is in itself a qualifier for charitable status. The rest of the sector must propose specific purposes and adhere to them, with their spending subject to audit and potential revocation of their status if they stray from those purposes.
Unlike the many issues that the senators took head-on in “Catalyst for Change,” there is evidence of some obfuscation with respect to the religion issue, which is barely mentioned in the report, save for a footnote on page 74 that references a submission by the British Columbia Humanist Association.
Senator Mercer and Senator Omidvar, responding to questions in Le Devoir, both made similar arguments to explain that because religious organizations and churches are usually “engagés dans des activités visant le bien commun” (engaged in activities for the common good) that their charitable status should be preserved.
Luc Grenon, professor of taxation law at the University of Sherbrooke, questioned why a 21st-century liberal democracy is “financing religion” with public dollars, to the tune of more than $1.5 billion in lost federal revenues alone (noting that municipal and provincial exemptions also apply).
Ultimately, the Senate of Canada is deserving of praise for “Catalyst for Change,” which demonstrates significant effort in listening to the sector and creating a report that reflects their hopes and concerns. If they failed to fully address the thorny issue of existing charities or charity categories (e.g., religious organizations) that should be changed or eliminated, they didn’t close the door to the idea, if and when the recommendations start coming to life through legislative action and bureaucratic reform.
Indeed, Recommendation 33—“That the Government of Canada consider which activities registered charities should not be allowed to carry out and proscribe them through precisely defined statutory prohibitions”—is right on point for addressing the issue, and no doubt will be a part of future NPQ North discussions.—Keenan Wellar