The Senate Report on the Charitable Sector: What You Need to Know, Finances and Miscellany

We’re completing our look at the Special Senate Committee on the Charitable Sector’s report, Catalyst for Change: A Roadmap to a Stronger Charitable Sector with today’s post. This installment will look at financial and miscellaneous recommendations.

In Part One, we looked at the context of uncertainty surrounding the report; there is no guarantee the recommendations will be pursued. In Part Two, we looked at recommendations about donations and legislation. Part Three considered potential reporting requirements for charities, and Part Four discussed policies and guidance that may be reviewed.

Charities face operational challenges that the for-profit sector does not experience, or at least not to the same degree. Examples include workforce retention and the challenge of offering competitive compensation and benefits, particularly for employees with skills and training that are in high demand.[1] A few recommendations came out of this discussion, including the development of a human resources renewal plan through Labour Canada, reinstatement of the Human Resources Council for the Voluntary Sector, and pensions for the charitable and non-profit sectors.[2]

Employee retention is essential but so too is volunteer recruitment. Statistics presented to the Committee show that in 2013 Canadians provided almost 2 billion hours of volunteer time, with older volunteers accounting for more hours and individuals than younger Canadians. In response, the Committee recommended a variety of actions: a national strategy to encourage volunteerism, including volunteer recruitment/retention costs in government contribution agreements; recognition programs for volunteers delivering government services; and reducing or eliminating police check costs.[3]

For Christians, service should be part of our everyday lives, and aside from challenges inherent in an aging population, and thus the volunteer pool, faith-based charities aren’t limited to government-led recruitment initiatives. Faith-based charities have recourse to the spiritual and Biblical call on believers to actively engage in serving the poor, the unreached, the orphaned, the marginalized. As regulated entities, all charities must necessarily be mindful of government actions, but faith-based charities don’t –and shouldn’t – look to government to solve what are, at core, heart issues impacting the desire and willingness to sacrificially give personal time, money and resources.[4]

Speaking of money and resources, the Report covers a wide variety of initiatives and recommendations with the aim of improving and enhancing the financial stability of charities: government funding agreements that include administrative costs, minimum 2-year timeframe for government grants, encouraging innovation through the Social Finance Fund, opening up procurement opportunities, funding to develop shared technologies for administration, and studying restrictions on accessing other forms of capital.[5]

Charities currently rely heavily on donors for funding, which necessitate frequent communication with donors and potential donors. Canada’s Anti-Spam Legislation (CASL) has clouded the waters somewhat for charities and their communication strategies.[6] Without making specific recommendations for reform, the Committee suggested that the Advisory Committee on the Charitable Sector (ACCS) review CASL and its impact on charities.[7]

But before charities concern themselves with CASL, they must navigate the process of becoming a charity, which is not always a straightforward path. Sometimes charities’ registrations are rejected. Rather than launch appeals to the Federal Court of Appeal on a written record provided by the Canada Revenue Agency, the Committee recommended that the Income Tax Act be amended to provide that “all appeals from decisions of the Charities Directorate of the Canada Revenue Agency proceed to the Tax Court of Canada.”[8] These would be hearings de novo, which means charities can adduce evidence and the matter is heard anew or over again. The Committee also recommended a right of appeal to the Tax Court where the CRA’s Tax and Charities Appeals Directorate has not made a decision on rejected applications or revoked registrations within six months of the appeal.[9]

Recognizing that appeals can be too costly for charities, the Committee also recommended establishing some sort of financial assistance program,[10] much like the recently revived Court Challenges Program. At the risk of becoming a resounding gong, any time the government sets up a funding program there will be strings attached. How likely is it that a new pregnancy care centre – that would be rejected for Canada Summer Jobs funding – would be approved for Tax Court appeal funding? And if only charities (or potential charities, more accurately) with certain viewpoints are financially capable of appealing, and by virtue of the appeal, developing the common law of charity, what impact could that have on the very definition of charity? Accountability and clarity are desirable, and a court process may enhance both; however, to the extent that a political element is introduced into the process, the level of transparency, accountability and neutrality is attenuated.

Even though we’ve taken five blog posts to discuss various aspects of the Report, it has not been an exhaustive discussion. I’ve attempted to point out what I see as concerning, encouraging, and relevant sections in the Report. But I end where I began, and that is with a measure of restraint. The Report is not binding, and many recommendations hinge on the not yet appointed ACCS. If and when action is taken on the Report, you can be sure we’ll keep you in the loop on any noteworthy developments.

[1] Report, pp.33-35

[2] Recommendations 6, 7, 5, respectively. CCCC offers a Pension Plan to Affiliate and Certified members. For more information, see https://www.cccc.org/pension

[3] Recommendations 1-4, pp.26-33

[4] 3 John 5-8

[5] Recommendations 10/11, 12, 14, 15, 18, 19 respectively

[6] For more information on CASL compliance, see CCCC Bulletin Articles CASL for Charities: An Update and Complying with the New Anti-spam Law: A How To Guide for Charities

[7] Recommendation 41, pp 122-123

[8] Recommendation 23, pp 74-77

[9] For more information on the current process, see CRA’s website Objections and Appeals and the links contained therein

[10] Recommendation 24, p 77