Monthly Archives: April 2018

It’s past time to improve our charity laws.

by  Burkhard Mausberg

I have managed charities for 25 years.  Not quite as along as the Leafs haven’t won the Cup, but long enough to make a few observations.

Like the Leafs, there is a huge support for charities: Canadians donated almost $13 billion to charities and non-profits in 2013.  We love what they do: charities provide services to the needy, help youth, advance health care, and improve the environment.  

Since the Leafs last won the Cup, charities have worked to end acid rain, reduce drinking and driving, and end smoking in the workplace, to name just a few.  All these were the result of non-profits bringing public attention to issues that required changes in policy.

Yet charities are also consistently underfunded, their staff is paid way less than equivalent positions in the private sector or government, and charities require the volunteer labour of thousands.  Having to operate under these circumstances, it’s simply amazing what they get done.

So it’s also difficult to believe that with all those accomplishments, the sector is still governed by laws little changed since the 19th century.  This is like regulating the aviation industry with horse-and-buggy rules.

This old legal framework exists despite the tremendous economic impact the non-profit and charitable sector has on the country: it employs over 2 million people and accounts for 8% of the GDP.   We would never accept such an outdated regulatory framework for any industrial sector of that size.

What’s more, when charities want to fulfil their missions they are often stifled.  Consider:

  • The Harper government launched public attacks when it pursued audits with the aim to take away tax-deductible donations. The 50 charities suffering from these politically-motivated threats simply disagreed on some policy issues with Harper.
  • Charities operate under onerous rules that stifle their efforts to be creative in generating revenue other than fundraising. “Business activities” have to be related to the charity’s purposes, and what counts as, and how to determine what is, a “related business” is difficult to discern, and there is little substantive guidance the Canada Revenue Agency (the regulator of charities). If charities get this wrong, then face deregistration
  • Charities that spend more than 15% on fundraising are often poohpad. But this is not the age of bake-sales anymore.  Fundraising is difficult, expensive and takes a effort.  Businesses often use 50% of their funds for business development.  Why should charities function under different expectations?
  • Accumulating capital (past surpluses) is viewed with suspicion by the CRA as indicative of a profit motive, even if the accumulated capital is intended to be put to good use in the future.

Then consider the unworkable rules charities have to follow if they want to help with changing public policy.  To meet their policy goals, charities have to use political tools.  At no time should they ever be partisan and support a political party or their agenda.  Yet, charities are facing outdated rules because of red-herring definitions of “political activities.” 

Or fake news in today’s lingo. 

The definition of political activities is completely nonsensical. Lobbying politicians or their staff isn’t “political” under the charitable rules.  Speaking at political events is not considered “political.”  Providing in-depth commentary on law reform is not considered “political.”  Beats me what is.

The Trudeau Government promised to step in and clean up this mess.  They suspended all the unfair audits on the 50 charities.  Then they appointed a credible panel of experts to recommend changes on “political activities.”  And finally, they promised to reform the whole sector, both during the election and again in the recent federal budget. But little has happened.

What charities need now is action.  It’s only 19 months until the next federal election.  Trudeau promised to remake the legal framework.  I ask the Prime Minister: what are you waiting for?

So what will happen first?  The Leafs winning the Stanley Cup, or charities finally getting the legal tools they need to accomplish even more benefits for all Canadians?  I wish for both.

Burkhard Mausberg is a big Maple Leafs fan and served as the CEO for the Greenbelt Foundation, Environmental Defence, and Great Lakes United.