Time to Take Necessary Steps for a More Inclusive Charitable Sector
This op-ed, published in the Hill Times, discusses raising the disbursement quota, the Effective and Accountable Charities Act, and the diversity deficit on charitable boards.
The pandemic has proven how essential the charitable sector is to the health and well-being of all Canadians. But it is sorely in need of new money—an argument that is gaining receptivity in cash-strapped Ottawa.
The federal government launched consultations last year on whether it should raise the disbursement quota (DQ) for charities and foundations. The DQ is the minimum annual amount that a foundation or charity is required to disburse—either on their own activities, or through grants to other charities and qualified donees. An increase in the DQ would increase the amount of money that charities, especially foundations, spend on charitable activities.
I believe that the DQ should be increased in a prudent way that increases charitable spending but also allows for foundations to maintain fiscal cushions for the future. However, this measure alone will not have the desired impact of disbursing more money to communities on the margin, especially Indigenous and racial minority communities. Yes, it will increase the amount of donated money spent on causes, but it will continue the unequal distribution of money being spent. Indigenous and racialized organizations will continue to be left behind. For example, a study showed that Indigenous groups only received half a per cent of all giving in Canada.
We need to bring these communities into the philanthropic life of this country and raising the DQ alone will not suffice. More changes are needed.
First, the Income Tax Act, which was enacted in the 1950s, needs to be amended because it’s a form of systemic racism that limits the participation of BIPOC organizations. The act requires charities to devote their resources exclusively to charitable activities that are “carried on by the organization itself.” In interpreting this wording, the Canada Revenue Agency (CRA) requires charities who work with non-charities—such as not for profits, civil society groups, or citizen movements—to exercise “direction and control” over them.
Think of what the two words “direction” and “control” mean to Indigenous organizations and Indigenous peoples who have lived under decades of colonialism. Translated into real terms, it allows the charity to exercise granular control and authority over a partner non-charity. Any intellectual property is solely owned by the charity and not the organization. All public statements, including press releases, need approval from the funding charity. No other country has this type of requirement for charities.
We need to change this expression of systemic racism. To that end, I have tabled Bill S-216 in the Senate to amend the Income Tax Act, move it away from “own activities” and the resultant “direction and control” regime, to “resource accountability.” Charities and non-charities must be able to work together, but safeguards must be in place to prevent nefarious activities. With resource accountability, charities and non-charities can both be empowered here in Canada and overseas to work in partnership within a framework of accountability and transparency. This approach will shift a charity’s focus from ongoing operational control of activities to an approach focused on taking reasonable and appropriate steps to ensure the charity’s resources are devoted to achieving charitable outcomes. It would, in this way, dismantle the deeply embedded systemic racism inherent in the Income Tax Act.
Next, Canada must turn its eyes on who makes the decisions in the charitable and philanthropic sectors. The boards of directors of Canada’s 80,000 charities are not representative of the population of the country. A survey by Statistics Canada earlier this year found that there is a significant diversity deficit in the sector. The survey showed that outside of gender, the boards of charities were not yet inclusive of Indigenous Peoples, racial minorities, LGBTQ2+ persons, and the disabled.
This survey was a first step to gain a snapshot into the diversity of the sector. But it was a one off, with no plans for annual data collection. The government must make the collection of diversity data an annual initiative. I have, therefore, tabled a motion in the Senate, calling on the Canada Revenue Agency to include questions on diversity representation on boards of directors in the T3010 and the T1044 tax forms.
By doing so, the data would be annual, fulsome, disaggregated, and show an accurate picture of diversity in the sector. Based on ongoing evidence, Canada and the sector could see if progress is being made over time.
The charitable and philanthropic sectors need to become more inclusive. These measures will bring them closer to that goal.