Do Canada’s internationally focused charities operate in an enabling environment?

This article is the fourth in a series on Canadian Charities Working Internationally.

SUMMARY: Julia Sanchez, president and CEO of the Canadian Council for International Cooperation, outlines the three basic elements of an enabling environment for international charities: dialogue to include organizations in designing and implementing development processes; funding to allow them to play diverse and legitimate roles; and a regulatory and legal framework that protects and promotes civil society and civil society organizations. While the first has improved recently, there are steps that must be taken with regard to predictable, transparent funding sources, and how charity regulations and tax law are interpreted and applied. An important concern is the expensive and time-consuming corporate continuance process that all federally registered nonprofits have been undergoing. Specifically, the focus on what political activities are and are not admissible and the amount of political activity that charities are doing has an added shade of complexity and concern.

RÉSUMÉ : Julia Sanchez, présidente-directrice générale du Conseil canadien pour la coopération internationale, expose les trois éléments fondamentaux d’un environnement propice au développement des organismes de bienfaisance internationaux : le dialogue pour inclure les organisations dans la conception et la mise en œuvre des processus de développement; le financement qui leur permettra de jouer divers rôles légitimes; et un cadre réglementaire et juridique qui protège la société civile et ses organisations, et en fait la promotion. Bien que le premier de ces éléments ait été amélioré récemment, des mesures doivent être prises en ce qui a trait aux sources de financement prévisibles et transparentes, et à la manière d’interpréter et d’appliquer la réglementation et la loi fiscale qui touchent les organismes de bienfaisance. Tous les organismes de bienfaisance enregistrés auprès du gouvernement fédéral sont soumis à un processus de prorogation (ou transition) coûteux et long, ce qui constitue une préoccupation importante. En particulier, c’est l’accent sur les activités politiques qui sont ou non permises, ainsi que sur la quantité d’activités politiques des organismes de bienfaisance, qui renforce la complexité et la préoccupation.

Interview by Juniper Glass

Introduction

Julia Sánchez is the President-CEO of the Canadian Council for International Co-operation (CCIC), a coalition of 75 of Canada’s most well-established organizations dedicated to humanitarian relief, poverty reduction, and social justice internationally. CCIC is also recognized as the key “voice of the sector” for the numerous other international civil society organizations (CSOs) in our country.

Despite regulatory barriers that have made the work of some Canadian CSOs difficult, Ms Sánchez speaks with a voice that reflects the maturity of the sector itself, calm yet committed, clear about goals, and firmly rooted in the global movement for accountability and good development practice, in which Canadians have been very active. She begins the conversation by reframing the topic of the regulation of Canadian international charities within the wider question of how to create an enabling environment for civil society to properly fulfill its purposes.

Interview

What does an “enabling environment” mean for organizations engaged in international development?

In global discussion of the importance of civil society and the conditions for civil society to play out its full potential, we look at three basic elements that make up an enabling environment. The first of the three key aspects is dialogue: making sure that CSOs are included meaningfully in the design and implementation of development processes. In the case of Canadian international organizations, we are working with partner CSOs in the global South, so dialogue takes two forms. One is supporting our global South partners so that they can actively participate in policy and other processes that determine development priorities in their countries. In order to play that support role, we also need to be able to engage in dialogue with our own government as it sets out Canadian priorities for international development programming. So it is a bit of a circle, if you will.

A second important aspect of the enabling environment is funding: how important it is to allow CSOs to have access to financial resources to play out their diverse and legitimate roles. An underlying requirement for this is the acknowledgement that CSOs play a whole host of roles. In addition to alleviating and reducing poverty or responding in humanitarian crises, they bring forward the voices of citizens, have an advocacy role, hold governments to account by acting as watchdogs, innovate, and channel citizen participation. Once those many roles are acknowledged, then we also have to acknowledge that an enabling environment has to play a part in funding those roles. Are there reasonable processes in place for organizations to be able to finance their activities with both foreign and domestic funding? What kind of incentives are there for philanthropists to give to civil society groups? What is the role of government in supporting development work financially?

The third aspect of an enabling environment is the regulatory and legal framework. Are there laws that protect and promote civil society and civil society actors, including development workers and human rights defenders in their own countries? Are these laws in line with internationally recognized principles? How easy is it for organizations to register, to even exist? What are the requirements for organizations to maintain their status as registered legal entities? Are there regulations that are blocking organizations not only from accessing funding but also from doing certain kinds of work?

It sounds as if this framework for an enabling environment can be equally applied to civil society in countries of the global North and global South. Exactly. I find that the international development sector is very sensitized to the need for adequate dialogue, funding, and legal frameworks, first, because we have been participating in these discussions globally with our Southern partners, and second because this is so much a part of the work that we do. Organizations in the international cooperation sector regularly work with civil society groups in the South to strengthen their capacity to empower and mobilize their citizens, to support them to be heard, to hold their governments to account, and so on. We are very attuned to these matters when we look at home. How is our enabling environment in Canada? Do we have the conditions in place, the tax regulations, the relations with the Canada Revenue Agency (CRA), our relationship with Department of Foreign Affairs, Trade and Development and other government bodies and is that all where it should be? Is that really enabling us? Or are there obstacles or complications or gaps that are not helping us play out our role in the most effective and efficient way possible?

What are some of the current obstacles or complications in achieving an enabling environment for Canadian international CSOs?

We have concerns on each of these three main fronts. In the past with the Canadian International Development Agency (CIDA) and other relevant government bodies, the tradition of engaged dialogue with government was quite vibrant. We had an important place as a key stakeholder in international development and foreign policy. Over the last ten years, that has really changed, and I would say we reached a low point between 2010 and 2013. The whole practice of consultation with CSOs on international development priorities completely disappeared. I am glad to say that this situation has changed dramatically over the last year. It has been like learning to walk again after a traumatic accident. There is currently strong political will on the part of the Department of Foreign Affairs, Trade and Development and the Minister of International Development, and a new civil society policy is now being created to inform how the Department works with partners in civil society.

Related to funding, Canadian international CSOs want acknowledgement of the important role that NGOs play and the fact that they play different roles. In our sector, we have faith-based organizations, humanitarian organizations, organizations that are more focused on development, organizations that are very small, and so on. The mechanisms to fund development have to respond to that diversity. Because development is a long-term process and needs to be planned out, it is important to have predictable, transparent funding sources with diverse mechanisms.

In terms of the regulatory framework, our members and our sector also have concerns about, for example, how charity regulations and tax law are interpreted and applied. More than anything else, it is the lack of clarity in this area that is challenging.

Tell me more about the regulatory challenges facing Canadian international CSOs.

One recent concern has been about the corporate continuance process that all federally registered nonprofits have been undergoing. It has been a huge undertaking in terms of hours and legal fees, and CCIC has tried to share tools to help people do it well. For the most part there have been few problems; however, as part of the process, organizations have to present their charitable objects to CRA. Organizations had the choice to leave them as is or to propose renewed, updated objects. What some organizations have found is that, if they present objects that make total sense within the current understanding of good practice in international cooperation, they may clash with what the Charities Directorate has as a mandate.

There is a sense in our sector that there is a bit of a misfit. The conversations globally about what development means and how to do it have moved forward significantly, but Canadian legislation has not kept pace. At some point, as a country, we need to look at this again. Canada has an old framework for defining what is a charity, and we probably have to give ourselves a date, sooner rather than later, to take a hard look at this and update it to fit the current realities.

Policy work has been another real concern in the broader charitable sector, especially since the budget announcement of funds for CRA to do special audits on political activities of charities. For us, in the international cooperation sector, this focus on what political activities are and are not admissible and the amount of political activity that charities are doing has an added shade of complexity and concern. The added challenge is because it also applies to the political activities of our partners overseas, not just our direct activities. There are new, more detailed, reporting requirements specifically for international development organizations to describe the political activities of our partners in the global South. It can be very tricky because we are not talking about working in a Canadian context with Canadian regulations, laws, and Charter of Human Rights. We are often working in countries that are very fragile, with very fragile legislative frameworks, whose local CSOs are definitely advocating for legal reform and respect for internationally accepted human rights legislation. Even if you have a Canadian organization working, for example, on water and sanitation issues, they can very easily find themselves in a situation where their Southern partners need to be pushing for changes to local laws in order to protect the health of communities.

The current CRA rules require that Canadian organizations retain “direction and control” of their resources. How is this principle understood by Canadian international CSOs?

I think our sector understands that we are fully accountable for those funds that we raise and disburse. We are accountable not only to the CRA but to our donors, the thousands of individuals who donate to international development charities. We are accountable for the good stewardship and the programmatic impact of those funds. It is not a question of not wanting to be accountable.

There is a general sense that regulations based on “direction and control” are problematic for our sector. First, it is problematic for practical reasons. There is the fact that all or most of our partners are not “qualified donees” by definition because they are not Canadian charities. We do work with organizations overseas. That creates a different situation from how most Canadian charities probably relate to their partners.

But I would say that, more importantly, the approach that international development organizations use in working with their partners on the ground is a misfit with terms such as “direction and control.” We don’t direct and we don’t control. We would never use that language or concepts like that with our partners. It is not how we do development. On the contrary, we use terms like solidarity, empowerment, and support. So there is a bit of a clash, if you will, of underlying motivators. We need to acknowledge it and hopefully see if there is anything we can do about that.

Tell me more about the collaborative way that international organizations “do development.” Partnerships are very important in what we do and how we work with communities, local groups, and local and national governments in the countries where we work. At CCIC, we have a Code of Ethics that includes a chapter on partnerships (Canadian Council for International Co-operation, 2009). If you read that, it becomes quickly obvious that this is not easily compatible with strict and un-nuanced requirements for direction and control.

There has also been a worldwide effort to enhance the effectiveness of international development at large, in which civil society groups globally have come up with eight guiding principles. One of them is “equitable partnerships” (Open Forum for CSO Development Effectiveness, 2011). The whole field, the whole undertaking of development has shifted towards recognizing the need to have local ownership and equitable relationships with our partners in developing countries. This includes government actors. The Canadian government is not going to be directing or controlling the government in Colombia or Peru or Malawi if it enters a relationship for international development. It doesn’t work like that. Rather, our government partnered with them as autonomous actors that need to have ownership and lead their development processes.

The importance of empowering our partner organizations certainly does not preclude the need for accountability. Of course we develop and sign detailed agreements with partners. We follow closely what they are doing and their outcomes, especially because partnerships are usually very long-term relationships. If a donor has a question such as, “What happened with the $1000 or $50,000 that we sent?,” then we are able to report on what happened, who took part, what the outcomes were, and what follow-up is planned. We are able to account for that. This is how we see accountability.

Do current regulations about direction and control ever inhibit international development work? Can you give an example? A top-of-mind example is the case of CoDevelopment Canada, which is a small organization based in B.C. and which has existed for several decades and has been working in Latin America on capacity-building in different fields like education and women’s rights. They have just been through an audit by CRA that highlighted these tensions that exist between current regulations and good development practice.

I understand that questions came up during the audit that seemed to try to fault the organization for not having predetermined to a great level of detail some of the activities that were to be co-funded by funds raised by CoDev in Canada. It seemed that the audit would zoom in on one activity in a project of, say, 50 activities, such as a workshop to be lead by a Southern partner organization, and ask, “Did you establish two years in advance the exact date, venue, agenda, menu, and list of who would be invited?” For most Canadian international CSOs, the answer would be no. Instead, we might answer, “We agreed to undertake a project, for example, to train women on new legislation covering violence against women, and we have supported the partner to achieve this objective.”

Predetermining activities for your international partner is very different than having to report on those activities once they have taken place. The CRA’s current interpretation of direction and control seems to be that we need to know all of the details in advance, to a level of detail that is very surprising, and this clashes with the kind of relationship that we need to have with our partners in order for development to happen.

Hopefully this is an example of an extreme case. We know that through time, CRA does change the way it interprets regulations. It is not black and white. There are shifts depending on circumstances. If we’re currently moving in a direction of micro-management as an expectation, then that raises a red flag for the sector. We are concerned about this becoming the norm. If there isn’t clear guidance, depending on who audits your organization, you may get a very different result. We are not comfortable with leaving the regulations wide open, subject to interpretation by the CRA of the day or even individual auditors within the agency. This is definitely not contributing to an “enabling environment.”

What do you see as the way to move forward, with regard to the regulation of Canadian international CSOs?

I’ve had many discussions with members and charity lawyers, trying to get my head around the current state of the regulatory framework. If I had to choose just one thing we want and need with respect to direction and control and related issues, it would be more clarity. I think lack of clarity is what needs to be tackled first. At the end of the day, organizations do not have enough guidance to feel they are on solid ground on this issue. We would want to be part of a conversation with the CRA leading up to a final product, which is guidance on this issue that really spells out for international development organizations how the requirements of CRA translate into concrete actionable requirements for our sector. And the guidance needs to take into account the collaborative way that our sector does international cooperation.

We do understand that we need to reconcile. We can’t just ignore regulations because they exist for a good reason. I guess the challenge is: is there a way to bring the application of regulations closer together with the way that international development works?

What would you say to the charge that, if organizations have trouble operating within such regulations, then they could do their work without being a registered charity? What is the value to Canadian society of having Canadian CSOs working internationally?

I totally understand that some organizations – and there are some in our field – when faced with all these complexities that seem to be impeding their work rather than facilitating it, throw their hands up in the air and say, “we’re going to look at doing this in a different way, we’re going to look at how we can move our mission forward without being a charity.” It’s understandable how some organizations can reach that point. I have talked with some organizations that fear that they may soon be in a conversation with the CRA about losing charitable status. They are already starting to think very proactively: “If this happens, what do we do? How do we continue to function? How do we raise funds from the public without charitable receipting? What kind of business model can we envision?” It is an interesting process, but very challenging for organizations going through it.

At a broader level, the question is: do we as a society justify or value supporting organizations that do development work overseas? And therefore, should our tax system support that through deductions for charitable donations and so on, in the way that this system supports other public goods?

My response to that is absolutely, for many reasons. I will highlight one reason in particular: how globalized our world is. A lot of the motivation for international cooperation efforts is underwritten by the recognition that we live in a very interconnected world. If Canada wants to continue succeeding as a wealthy and vibrant society in harmony, then we cannot live as an island surrounded by countries and populations that are not doing well, whose children are dying, who have do not have good education systems, don’t have functioning economies, are not respecting human rights, are experiencing conflict and insecurity. We are living in a very small, globalized world, and so Canada needs to engage — as a country, as citizens, as a government — in international development.

Juniper Glass, MPNL, is principal of Lumiere Consulting, supporting funders, national non-profits and Indigenous organizations with strategy, research and evaluation. Juniper is a frequent contributor to the discourse on systems change philanthropy in Canada and a research associate with PhiLab, the Canadian Philanthropy Partnership Research Network.