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The State of the Charitable Sector Today

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Published by Senator Robert Peterson (retired) on 30 May 2012

Charitable work is an issue that is close to my heart. Having been involved with the John Howard Society in my hometown of Regina, as well as serving as a member of the City of Regina Planning Commission, I understand some of the difficulties that charitable organizations face when trying to obtain funding and when attracting volunteers.

Now as a Senator, I realize the important role that charities play in advocating for policy initiatives and, in contributing to the decision making process when policy alternatives are being considered. Recent changes to the CRA, as well as government rhetoric aimed at environmental charities, have left many worried about the future of the charitable sector as a whole. It is imperative that charitable work not be stifled, as their contribution to policy creation and to service delivery is far too important.

Charities have championed a number of causes, including: successfully advocating for smoke-free work environments, substantially reducing tobacco consumption amongst Canadians, as well as contributing to the creation of the Registered Disability Savings Plan. Charities have also been instrumental in promoting the Canadian Initiative for Maternal, Newborn and Child Health, and in efforts to reduce drinking and driving.

Having been part of some of the most important Canadian policy initiatives to date, charitable advocacy work and policy creation should continue to be a crucial part of charities’ work. With so many organizations operating in Canada, it is important that they be able to conduct legitimate political advocacy without being impeded by government rhetoric or by undue regulatory oversight. Not doing so could also have critical implications for an important sector of the Canadian economy.

The Charitable Sector represents almost seven per cent of Canada’s overall Gross Domestic Product (GDP) or more than $86.9 billion. This is more than the retail trade industry and close to the overall value of the mining, oil and gas extraction industry. There are roughly 160, 000 charities and non-profit organizations operating in Canada, with charities accounting for almost half that number, around 85, 000. Canadians are very involved in the charitable and non-profit sector, with 46% of the population aged 15 and over providing annual volunteer hours (12.5 million Canadians). Moreover, 84% of Canadians aged 15 and over (22.8 million) make an annual contribution to a charity or NGO.

With so many people involved with non-profits and charities either as volunteers or as donors, it is alarming that experts are noting that a ‘chill’ or ‘freeze’ is descending upon the sector as a whole. Foreign and domestic donors as well as the charities receiving the donations are worried that their activities may be deemed ‘political’ and that their organizations may be found on the wrong side of the Canadian Revenue Agency’s (CRA) increasingly stringent rules. As a result, donations by domestic and foreign donors are declining, and advocacy work is being curtailed.

President and CEO of Imagine Canada, Marcel Lauzière, recently penned an open letter to the Minister of the Environment, Peter Kent. Mr. Lauzière expressed serious concerns regarding “comments [Minister Kent] made that would suggest that charities are ‘laundering’ funds and engaging in improper activity”. He also noted that “on the broader issue of public policy engagement, charities have a long and proud tradition of advocacy that has resulted in significant public policy gains”. Moreover, he reminded the Minister that “there is nothing illegitimate about charities receiving donations and other revenues from foreign sources”. He went on to argue that “Good public policy and decisions can only occur when all viewpoints are considered in a dispassionate and respectful manner”. Mr. Lauzière concluded by suggesting that if Mr. Kent had specific knowledge of fraudulent behaviour, that he should address those concerns through the proper channels.

Imagine Canada is the national umbrella for charities and public benefit nonprofits. They act as a watchdog and as a source of research and information for the sector as a whole. Their concerns echo those voiced by another umbrella organization, Philanthropic Foundations Canada. Philanthropic Foundations has attempted to inform charities about the impacts of changes to the CRA regulations. They also voiced concerns that charities should expect a ‘chill’ on charitable giving due to recent rhetoric surrounding environmental charities involved in advocacy work related to pipelines.

CRA rules regarding political activities and foreign funding have been in place for many years. The application of their rules is not new to the charitable sector.  However, charitable sector experts note that many of the concerns that have arisen in the past, and may arise in the future, will be due to the fact that charities tax returns are self-reported and therefore the margin for error is high. In many cases the person filling out the tax returns is not aware of what constitutes a political activity and therefore will not report the activity. This is especially true for small and medium sized charities with less access to resources and expertise.

My colleague, Senator Cowan, has asked for an enquiry so that “the Standing Senate Committee on National Finance [can] be authorized to examine and report on the tax consequences of various public and private advocacy activities undertaken by charitable and non-charitable entities in Canada and abroad.” It is my hope that the Senate allows the enquiry to proceed. Doing so would provide a fulsome opportunity to study the matter in greater detail and determine what is defined as ‘political activity’ and legitimate ‘charitable donations.’  It is also my hope that a large portion of the 8$ million being provided to the CRA be used for informative and education purposes for charities, so that small and medium sized charities are not unduly hit with new regulations.

St. Francis of Assisi wrote “where there is charity and wisdom, there is neither fear nor ignorance”. Removing fear and ignorance will be a vital step towards resuming confidence in the sector. Wrongfully accusing charities of criminal activities is not helpful. It is my hope that trust is restored; that charities be allowed to conduct legitimate political advocacy which contributes to policy formulation; and that charities continue to provide crucial services which also contribute to the Canadian economy. Allowing charities to conduct their operations within a reasonable regulatory framework will provide charities with the ability to carry on with legitimate philanthropic work.

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