Modernizing charity law in Canada is for now a Pandora’s box

September 15, 2016 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, What's New from the Charities Directorate of CRA, Canadian Charity Law, Top Resources, Global Giving, Ethics and Canadian Charities

The Liberal Government has made some noises about modernizing charity law.  Who could be opposed to modernization?  As there is no idea as to what "modernization" means, it has opened up all sorts of calls for changes to charity law in Canada - many of the ideas would be expensive, counterproductive, stifling, or ultimately destroy the positive reputation of the charity sector.  Wikipedia defines a Pandora's box as "a process that generates many complicated problems as the result of unwise interference in something."  Although only time will tell, it appears that "modernizing charity law" has a small upside and a very large downside.  

My concerns about the issue of having politicians discussing "modernization" of charity law were largely confirmed when I read this piece "Tony Clement Wants To Monitor All Canadian Charities For Terror Activity".  Tony Clement relied on a terrible Senate report from 2015 in coming to some of his conclusion which is quite unfortunate.  Also his suggestion of "An independent agency to oversee and monitor all charities in order to ensure they do not contribute to terrorism or radicalization" sounds like a really expensive duplication of the work of the Review and Analysis Division of the Legislative Policy & Regulatory Affairs Branch of the Charities Directorate, not to mention RCMP, etc.  By the way you can read Tony Clements op ed here and I think it would be fair to say that almost all the criticisms being levelled are actually criticisms of the previous Harper government.   "In spite of the fact that we have had 180 Canadians supporting jihadist movements abroad, 60 who have returned and are on the streets and over 93 who have been seeking to leave since 2014, we have had very few convictions. At the same time, we have had 683 cases of terrorism financing flagged by Fintrac and not one charge. Canadian charities that are linked to terrorism have also gotten away without criminal repercussions."  Just wondering who was running the Federal government in the 10 years before Trudeau got elected. 

After having been in meetings with Canadian governmental agencies, it is clear to me that those agencies either have little idea what the Liberals mean when they refer to modernization or are certainly are not sharing.   The Liberals had very little to say about charity regulation before the election except that CRA should not harass charities for political reasons.  Then after the election came some rumblings in certain ministerial mandate letters about modernizing charity law.  Trudeau wrote to the Minister of Revenue in the mandate letter that one of the priorities was to "Allow charities to do their work on behalf of Canadians free from political harassment, and modernize the rules governing the charitable and not-for-profit sectors, working with the Minister of Finance.  This will include clarifying the rules governing “political activity,” with an understanding that charities make an important contribution to public debate and public policy.  A new legislative framework to strengthen the sector will emerge from this process.  This should also include work with the Minister of Families, Children and Social Development to develop a Social Finance and Social Enterprise strategy." 

When I first heard about modernizing charity law my initial reaction was that almost every year there have been tweaks to charity law and therefore promising "modernization" is not that difficult because any changes or improvements is modernization. After all, the CRA's Charities Directorate is spending about $25 million on a modernization program to have charity applications and T3010s be able to be filed electronically. Then I saw the Liberal budget and its ambitious agenda for many important problems, especially those that affect Aboriginal communities in Canada.   Then I really became convinced that the Liberals have adopted a very ambitious agenda as a government and that "modernizing charity law" is more of a throwaway line that sounds good.  

I think that much of the discussion about modernizing charity law is a huge distraction from the real issues facing the charitable sector such as stable long-term government funding and foundation funding, poor capacity and financial management in many charities, the need for government to reengage in certain areas instead of dumping them on charities like affordable housing, the need for better and more effective governance, poor HR practices, etc. After 10 years of distraction, red herrings etc I would prefer that we focus on real issues.  

Needless to say, my views are probably not going to dominate in this case.   There are too many groups who view "modernizing charity law" as a great way to seem relevant and engage in 'important' issues.  Alternatively, some of these organizations are probably worried that if they don't jump on the bandwagon that they may be perceived as irrelevant.  

Also it is easier to focus on governmental action like changes in legislation than internal issues within the charity sector.  Yes eliminating the 10% restriction on resources used for political activities will help a small number of charities who regularly exceed that limit - but what about the other 86,000 charities who say they don't even do any political activities and even if they do political activities they are allocating very little resources to it.  

It is easier to open up a discussion on modernizing charity law than it is to "conclude" it in a positive fashion.  We just need to look at the modernization of Ontario non-profit corporate law with the passing of the Ontario's Not-for-Profit Corporations Act (ONCA) in 2010 by the Ontario Liberal government.  It has still not been implemented and it does not look like it will be implemented until 2019 at the earliest.  How much time and effort has been wasted on fruitless ONCA discussions.   As well one can look to England and see changes over the last few years to the Charity Commission and the regulation of charities that has not been helpful.  

Another concern that I have is that these type of discussions can take years.  There may be a government in power in 5 years that has a questionable view of the charitable sector and they may be the ones finalizing the legislative and other changes!  

Remember that it is ultimately Federal MPs who will be voting on any changes.  In my experience these MPs often have very limited understanding of the regulation of Canadian charities and the charity issue may become either a political football or a place to reflect the 'common mans' understanding of charity i.e. let's have people working for charities rather be volunteers than employees.   

After the modernization has taken place in 5 or 10 years charities we may look back in a positive way on the time before "modernization" and aghast at the time, effort, money spent and results of the initiative.  

Here is just a sampling of some of the ideas (good, bad and ugly) that I have seen floated around:  

If you think I should add to the list just let me know.   At the moment anyone's guess is as good as mine as to what modernizing charity law really means.   Perhaps it would be helpful if the Liberals shared their plans with the public so people could understand what they intend to do and there could be an informed discussion. 

Do you require legal advice with respect to Canadian or Ontario non-profits or charities?


Charity Lawyer Mark Blumberg

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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