Ottawa looks at rewriting rules on charitable giving
TheGlobeandMail.com – life/giving/giving-news – Philanthropy
Published Friday, Oct. 28, 2011. Bill Curry, Ottawa
This is part of The Globe and Mail’s in-depth look at the evolution of philanthropy that launches Saturday at tgam.ca/giving.
Ottawa is conducting a sweeping overhaul of the way it finances charities and non-profit organizations, pledging a new era of accountability in which businesses and citizens shoulder more of the cost of giving.
The government’s lead minister for the changes said financing will come with more strings attached in an effort to ensure that organizations deliver promised social gains.
While the first steps will be small, the government’s ultimate goal is a shift in public expectations as to the role of government in assisting social causes.
The plan is inspired by British Prime Minister David Cameron’s Big Society experiment, in which social responsibilities that traditionally fell to the state are put in the hands of the citizenry and private sector.
Policies being considered include new tax rules to allow charities and non-profits to raise money through side businesses, and boosting personal tax credits for charitable giving. The first step will be changes to traditional grants.
“Right now, we ask [charities and non-profits] to take on these jobs. We give them money to do it. They receive the money whether they achieve their objectives or not,” Diane Finley, Minister for Human Resources and Skills Development, told The Globe and Mail. “Now we’re saying, ‘All right, we still want you to do this, but you get more money if you actually achieve the objectives.’ ”
While Ms. Finley does not describe this as a savings exercise, she and all other federal ministers must find ways to cut their budgets as part of a government-wide restraint effort. Such an atmosphere leads to nervous times for cash-strapped social organizations across the country that depend on grants or contracts from Ottawa.
Approved charities in Canada work on a wide range of issues – homelessness, immigrant support and animal protection, to name a few – and Ms. Finley is looking to Britain for ideas on how the federal government can help social groups become more effective. She recently travelled to London for a first-hand look at Big Society projects that aim to boost volunteerism and corporate support of social goals.
In addition to meeting with think tanks, foundations and government officials, Ms. Finley spoke with Sir Ronald Cohen, chair of the bank-like social investment fund called Big Society Capital, and David Hutchison, CEO of Social Finance UK, which focuses on research and advice in the burgeoning field.
The concept of social investing, as it is called, has a growing number of advocates worldwide. But its implementation in the UK at a time of drastic cuts in government spending is also the subject of considerable controversy and confusion.
At its core, Britain’s Big Society asks local volunteers and the private sector to provide some of the services that government used to finance, in areas including schools, libraries and hospitals. Mr. Cameron says it will empower communities, but critics call it a public-relations effort to put a positive spin on deep cuts.
Ms. Finley hopes to test some of those ideas in Canada very soon.
“This is a high priority for me,” she said. “The same old ways aren’t going to fix the problems.”
What would this mean in practice? Ms. Finley said the government plans to start off small with a few pilot projects. The most likely would be to replace some traditional grants with a hybrid version – a defined amount that recipients could increase by meeting agreed-upon targets.
But charities say their work is hard to measure. They are open to new ways, but aren’t clear what the government has in mind, said Marcel Lauzière, president and CEO of Imagine Canada, the national umbrella group for charities and non-profits.
“Everyone wants new partnerships, new ways of looking at things,” he said. “If it’s code for, ‘We’re getting out of it, and we’re going to let other people deal with it,’ then I think that’s a bit of a problem.”
With the government’s blessing, MPs on the House of Commons finance committee will soon embark on a broad round of hearings on reforming the rules related to charities. Peter Braid, the Kitchener-Waterloo Conservative MP who proposed the study, said he was concerned by the “double whammy” of declining charitable donations and greater need for services because of the recession.
“It’s good conservative philosophy as well,” he said. “It’s not the role of government necessarily to solve all of society’s challenges on its own.”
Mr. Braid won opposition support for what he describes as a non-partisan study, but there is hesitation. Concerns have been expressed that, unless the criteria for charities are tightened, corporations like oil and tobacco companies could end up with more generous tax breaks for contributing to think tanks that support their messages.
MP Peggy Nash of the New Democratic Party said that boosting the credit for charitable giving raises questions about how much government revenue might be lost. Ms. Nash said elected officials could lose their say over what services government supports through tax cuts.
“That’s what I think we need to look at,” she said. “Is this the direction we want to go? Who benefits? Who loses? What does it mean for overall tax revenue?”
Many of the ideas the government is looking at are inspired by a report that was released last December and received little public attention. The 37-page National Task Force on Social Finance contained several recommendations on what Ottawa could do to mobilize “private capital for public good.”
Internal briefing notes obtained by The Globe and Mail under access to information legislation show that Finance Minister Jim Flaherty met with the task force a month before the report’s release. The tone of the notes suggests strong support inside government for moving further in this area.
As a concrete example of social-investment partnerships, Ms. Finley points to Habitat for Humanity. By working with private-sector companies like Home Depot, the low-income housing charity and its volunteers can achieve far more social good than they could otherwise.
“The really successful ones have one thing in common,” she said. “They’ve been developing partnerships with other organizations that really enhance the outcomes for both parties.”
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