Do we have too many registered charities in Canada?

December 06, 2008 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: What's New from the Charities Directorate of CRA, Canadian Charity Law

So, Are there enough charities in Canada?

According to the CRA website there are currently 83,500 registered charities in Canada.  There are probably something in the range of 160,000 non-profit organizations but as many are not even registered it is difficult to know exactly.  I often hear the refrain that there are so many registered charities and we don’t need any more registered charities. 

This note is some very tentative thoughts and I would really appreciate comments (which can be left below) so that I can update the note.


In Registered Charities Newsletter 31 the Director General of the Charities Directorate of the Canada Revenue Agency Terry De March noted:


If the pace of the first six months of this fiscal year continues, this year we will receive about 4,500 applications for charitable status. That’s one application every two hours, 24 hours a day, 365 days a year. The majority of these applications will be approved, pushing the total number of registered charities towards 84,000.

At the same time, as many as 2,200 charities will lose their registered charity status by either asking us to revoke their status because they have ceased to operate, or by failing to file their annual returns. Every four hours, 24 hours a day, 365 days a year, a registered charity ceases operation.

The fact that so many charities cease to operate each year raises some important questions. Why do so many registered charities, set up with the best of intentions, request to have their status revoked, or fail to meet their obligations? Were they set up for short?term objectives that have now been completed? Did they not have the capacity to operate effectively? Did they fail to anticipate the competition for donations and volunteers? Were they duplicating programs and services that already exist? And ultimately, should all of these organizations be applying for registered status?


Some of the arguments for there being too many are just that 83,500 is a big number. I have tried to break down the numbers below to make it a little more manageable using the CRA category codes.

Many charities are organized so that every province is a different registration or every parish is a different registration.  For example there are 750 registrations listed that include the word “Anglican”, 985 that have the world Catholic in their title.  4432 listed by Catholic


Code Category
01 3259 Organizations Providing Care Other than Treatment
02 98 Disaster Funds
03 3392 (Welfare) Charitable Corporations
05 804 (Welfare) Charitable Trusts
09 9580 Welfare Organizations (not elsewhere classified)
10 527 Hospitals
11 2997 Services Other Than Hospitals
13 1084 (Health) Charitable Corporations
15 218 (Health) Charitable Trusts
19 826 Health Organizations, (not elsewhere classified)
20 3067 Teaching Institutions or Institutions of Learning
21 3962 Support of Schools and Education
22 4070 Cultural Activities and Promotion of the Arts
23 1059 (Education) Charitable Corporations
25 379 (Education) Charitable Trusts
29 979 Education Organizations, (not elsewhere classified)
30 2069 Anglican Parishes
31 2115 Baptist Congregations
32 1013 Lutheran Congregations
33 269 Baha’ is Religious Groups
34 656 Mennonite Congregations
35 259 Buddhist Religious Groups
36 1381 Pentecostal Assemblies (Pentecostal Assemblies) of Canada only
37 1096 Presbyterian Congregations
38 4432 Roman Catholic Parishes and Chapels
39 8946 Other Denominations’ Congregations or Parishes, (not elsewhere classified)
40 328 Salvation Army Temples
41 375 Seventh Day Adventist Congregations
42 273 Synagogues
43 394 (Religion) Charitable Organizations
44 2866 United Church Congregations
45 170 (Religion) Charitable Trusts
46 517 Convents and Monasteries
47 2047 Missionary Organizations and Propagation of Gospel
48 118 Hindu Religious Groups
49 1871 Religious Organizations, (not elsewhere classified)
50 2283 Libraries, Museums and Other Repositories
51 117 Military Units
52 1279 Preservation of Sites, Beauty and Historical
53 581 (Community) Charitable Corporations
54 687 Protection of Animals
55 191 (Community) Charitable Trusts (Other than Service Clubs and Fraternal Societies Projects)
56 2902 Recreation, Playgrounds and Vacation Camps
57 440 Temperance Associations
59 4252 Community Organizations, (not elsewhere classified)
60 197 Islamic Religious Groups
61 1503 Jehovah’s Witnesses Congregations
62 133 Sikh Religious Groups
63 187 Service Clubs and Fraternal Societies’ Charitable Corporations
65 616 Service Clubs and Fraternal Societies’ Projects
75 256 Employees’ Charity Trusts
81 16 Registered National Arts Service Organization (RNASO’s)
83 1 Corporation Funding Registered Canadian Amateur Athletic Association
85 n/a Trust Funding Registered Canadian Amateur Athletic Association
99 107 Miscellaneous Charitable Organizations, (not elsewhere classified)

WHY WE MAY HAVE TOO MANY CHARITIES.

Some would argue that it is too easy to register as a charity and too many have done so.

Having lots of charities means at times duplication of services, duplication of governance structures etc.

Having 83,500 charities makes it very difficult for the regulator to monitor whether charities are doing a good job.  After all CRA only has enough resources to audit 700 -1000 of the 83,500 charities every year.  When there are even a few bad charities that are not weeded out it compromises the whole charitable sector.

The world we live in is increasingly complicated.  Charities are increasingly being forced to deal with that complexity.  It is not just about handing out cans of food.  To be effective many charities need resources, capital, structure, governance, standards of practice etc.  They often need employees and payroll.  They need audited financial statements.  They need to communicate to stakeholders.  Many smaller charities don’t have these and many of the other resources one needs for certain charities to be effective.  They cannot raise the funds to carry on the activities they wanted to do.  Some of them do a rather shoddy job of the charitable activities.  Although paradoxically some of the small charities that are performing poorly may seem more efficient in the delivery of the services or goods, but they are perhaps delivering the wrong goods to the wrong people or not actually understanding the root cause of the problem and tackling it.  Many charities often give up in frustration not realizing that running a small charity can be a lot more complicated than running a small business.

Some are concerned that with the plethora of charities, many dealing with the same issue, that instead of creating healthy competition it is creating unhealthy competition.  Admittedly having intense competition causes more and more funds to be spent on the fundraising component and more and more time is spent from a marketing perspective differentiate yourself from the other charities. More and more effort may be spent justifying that you are doing a fantastic job rather than actually doing a fantastic job.

One thing many people can agree on is that we have too many “copycat” charities.  Their name sounds similar to a major charity.  This can create confusion and distrust amongst donors when they end up giving to a different charity than the one they thought they were giving to.


WHY WE CAN USE MORE GOOD CHARITIES IN CANADA

In many countries it is difficult to obtain charitable status and in some countries there are only 100 or 200 public institutions that receive tax recognition.  Is it necessary to have 400 cancer charities?  Perhaps not but how about having only one cancer charity?  Having many charities encourages innovation and competition.

Does anyone ever ask the question “do we have too many businesses?”  Well, why would one ask that question, business is good for our society, creates job and wealth.  Perhaps, but some businesses do bad things like pollute, evade taxes, sell dangerous items etc.  There has always been a movement calling for some business to lose their charters like tobacco, but it almost never happens unless a business stops filing its tax returns.  Charities, at least in theory, provide public goods and benefits.  I think in general the more the better, as most people would say more business and more economy is better.

Perhaps instead of having 2069 Anglican parishes issuing receipts it would be better to have 1 Anglican Church issuing receipts.  There may even be some people in the Anglican church who would like that.  If we went with this idea we could have one Roman Catholic church, not 4432 different groups.  From a regulators point of view it may make things simpler, perhaps it would reduced by 30 or 40,000 the number of charities which would make it seem like we have less charities in Canada.  I think however it would also result in a concentration of power which may be unhealthy.  It also results in less transparency about operations.  When every parish that is separately registered files its T3010 then you get to see what that parish spent, how much it took in etc.  Also Canada is a big country geographically and the cost of running one large national organization may be greater, and that one organization may achieve far less, than ten regional organizations. 

YIMBY - yes in my backyard.  I thought I was smart and invented this word.  But someone else is a lot smarter and quicker than me coined this term many years ago. (http://en.wikipedia.org/wiki/YIMBY)  YIMBY is the opposite of NIMBY. Basically everyone and their cat and dog wants a vibrant plethora of charities and services in their community.  If you ask an atheist - do we need any religious groups registered as charity the answer may be no.  If you ask a RC whether you need any Pentecostal churches, you may not get a wildly enthusiastic yes.  Why do we need a group in Scarborough that helps women who are in abusive relationships.  I think many people in Saskatchewan may not even know where Scarborough is.  But for women, perhaps not their abusive partners, who require help in Scarborough I think they know the answer.  If you care about animals the 687 charities dealing with “Protection of Animals” is not enough in this big country.  So if you care about a particular issue relating to a particular geographic area you may see a big number and say - well that is fine, but there is no organization in my community dealing with this important issue and I want to create one.  Also you may only notice the inadequacy of what established charities provide when you, a friend, or loved one, actually needs help.

If you ask a major charity in a particular sectoral area, like cancer, whether there are too many charities in that area you will almost invariably here a resounding yes.  After all if you worked at that charity you are not looking forward to competition from other charities.  You are also not necessarily looking forward to other charities being more innovative and doing a better job than your charity.  However, if you live in Thunder Bay you may want support in your local community and an organization based in Toronto may, or may not, be able or interested in providing the service. 

If you are a person who is a highly motivated volunteer and you wants to change the way a particular charitable concern is dealt with in Canada sometimes there is not a easy and hospitable place in some of the bigger charities.  Some newspapers have written about how 20 or 30 year olds are often turned away from large Canadian charities which is a shame as volunteers can offer a huge amount to charities.  Now admittedly some of these young guys want to volunteer but they want to be parachuted onto the board of directors and perhaps be the chairperson 2 weeks into their volunteering stint!  They may have egos and be enthusiastic without fully realizing the complexity of the issues and stakeholders.  On the other hand I have seen some well established charities that could probably benefit from that youthful enthusiasm.  And lets face it - not every major charity is so well run.  Furthermore, not every employee of a charity, is such a find.  Big charities and big business often have one thing in common - they are good at hiding people who don’t perform at all.  In a big organization if you are nice to the right people even if you are incompetent you may do just fine.  In a small organization or charity if you don’t have the skills it usually shows a lot more quickly.  Many of the charities I help set up are established by people who want to make a real difference, they are very bright and capable and they have tried to volunteer with established charities and they have found it be genuinely difficult. 


Some concluding personal thoughts.

If we have would have 5000 less of certain charities it would be no great loss but if we would have 5000 more good public interest, good, legitimate, effective charities then this would make a huge difference.  If we do not allow more charities to be registered, or we make it exceedingly difficult, then we are relying on the current registered charities to reinvent themselves.  If they do not then the charitable sector may become increasingly stodgy, out of touch, bureaucratic, “profesionalized” (ie. high paid staff and no volunteers) etc.

I think another question we should be asking which is probably more important is ‘should all charities be able to provide official donation receipts?’  Perhaps it does not matter if we have 100,000 charities if only 25,000 can issue donation receipts. 


I think it is fair to say that many charities do not think adequately about what they are trying to achieve and whether setting up a new independent charity is the best way to achieve that goal.  One might find this article below of use if you are thinking of establishing a charity in Canada:

http://www.globalphilanthropy.ca/index.php/articles/should_we_set_up_a_canadian_charity/

 

Mark Blumberg is a lawyer at Blumberg Segal LLP in Toronto, Ontario.  He can be contacted at or at 416-361-1982 x. 237. To find out more about legal services that Blumbergs provides to Canadian charities and non-profits please visit the Blumbergs’ Non-Profit and Charities page at http://www.blumbergs.ca/non_profit.php or http://www.globalphilanthropy.ca

 

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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

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