Canada's Charitable Sector - Opportunities for Growth & Change

Thank you to Nadine Riopel, Bob McInnis, Derek Brechtholdt and the others who tweeted out the draft of this brief, and most especially provided valuable feedback.

This brief was developed in response to a call from the House of Commons Finance Committee as they undergo a review process of Canada's charitable sector and the tax laws that govern the sector.  Recommendations range from the creation of a government appointed Ambassador of Philanthropy, creating clearer legislation around "reasonable profit" and social enterprise, and addressing the inconsistencies in the T3010 tax filing that do not address the critical information that donors need in order to make informed charitable decisions.

Other legislation that could be addressed by this document include the Stretch Tax Credit. I have chosen not to discuss this topic for a few reasons, most especially because I don't think they fundamentally address the critical issue facing our charitable sector.  The issue being, that the sector itself is fundamentally broken.

I invite you to consider these points. I would love to hear your thoughts and opinions on this. What I present is probably somewhat contentious, but we have to start addressing these very difficult topics, because throwing money at the problem, and focusing on tax-related solutions will not address the fundamental issues.

1. Tax incentives do not motivate giving; they are a nice to have.  Research by the Association of Fundraising Professionals, the Harvard Business Review, the Stanford Social Innovation Review and the Chronicle of Philanthropy over the past several years have reinforced this point.  In fact, approximately 25% of Canadians actually attach their charitable tax receipts to the income tax filing.  With over 80% of the population making charitable donations annually, the number of those who don't bother with tax receipts speaks to the level of importance... VERY LOW.
2. I believe that the government should not be in the business of driving donation dollars to charities from the private sector. The role of government should be in assisting tax payers by facilitating smart philanthropy.  This means that the government should be investing time and resources in qualifying charities (managing duplication in the sector); identifying board members who have a pattern of sitting on boards of charities that loose charitable status, or are flagged; but most importantly, working with charities to measure the impact of their donations in order to better represent their activities and indicate how these agencies are actually addressing the social issue upon which they are mandated.
3. The rules that govern charities do not reflect the way that technology, social networks, giving habits, and program implementation styles are changing the charitable landscape. Our government needs to review all the rules that affect the way that people can apply for status, how they can solicit funds, how they report on the issue that they are mandated to address, how transact the funds that are raised but most importantly what Canadians determine to be charitable in nature.
4. Charities are area experts. They should be the go-to source on a specific social issue (multiple perspectives can be found on the same issue so that a balanced account could be sourced). By threatening organizations that they will lose their charitable status because they are lobbying the government on their mandated issue puts them at odds around the very issue that they are mandated to solve.
5. Finally, expectations around charitable giving have evolved. The expectation of the "hand-out" model of year-over-year fundraising in the hopes of meeting operating budgets is no longer a reasonable revenue model. Charities and government need to be working together to develop legislation that allows for profit-driven activities to offset fundraising shortfalls.