Improved Indigenous relations, more data, modernized legal definitions: Sector advisory committee issues second report

An advisory committee on the future of the charitable sector has released far-reaching recommendations it believes could help Indigenous organizations better serve their communities and improve diversity within the sector’s own ranks.

The second of three scheduled reports by the Advisory Committee on the Charitable Sector (ACCS) highlights a spring in which the energy for change in the charitable and non-profit sector appears to be growing. The report, which includes eight recommendations, comes after the release of the government response to a 2019 Senate committee report seeking change in the sector and a federal budget that showed that charities and non-profits had landed on the government’s radar.

The report also calls for a sector data strategy to drive more evidence-based policy-making and assist non-profits and charities in areas like administration and HR. This proposal coincides with the release last week of a new Statistics Canada survey of sector labour force trends from 2010 to 2019 and responds to repeated warnings from non-profit leaders about the “data deficit.”

While the budget received a tentative thumbs-up from the sector, reaction to the government response to the Senate report was mixed. Disappointment that little movement appeared imminent on some fundamental issues was tempered by the view that the government recognizes that changes are required.

“There does seem to be a recognition that there are a lot of areas where reform is needed,” said Andrew Valentine, a charities lawyer at Toronto’s Miller Thomson LLP.

The ACCS, which began its work as a permanent consultative forum in late 2019, says all but one of its recommendations could be enacted with policy and regulatory change, without legislative amendments. The recommendations go to Minister of National Revenue Diane Lebouthillier and Bob Hamilton, the commissioner of the Canada Revenue Agency. Any substantive legislative changes would rest with Finance Minister Chrystia Freeland; the level of engagement in finance is unclear.

In seeking fundamental change in the “colonial” relationship between the CRA and Indigenous organizations, the ACCS is ambitiously taking on a history of mistrust that has left numerous organizations without charitable status.

The calls for reform stem from a baked-in suspicion of the Crown and long-standing Indigenous distrust of the Canada Revenue Agency. But committee members say this problem has been exacerbated by a long list of factors, including the lack of Indigenous representation among CRA employees, language difficulties, a colonial mindset in the department, a European vision of charity foreign to Indigenous communities, overly complex regulatory language, problems with digital connectivity, and the need for costly legal counsel to navigate cumbersome regulations and geographic barriers.

The working group has called on the CRA to hire Indigenous employees as part of the over-arching spirit of reconciliation so the department can properly serve its Indigenous client base. The ACCS also urged the Charities Directorate, in consultation with Indigenous representatives, to create a reconciliation guidance document and bring in Indigenous representatives to explain the benefits of qualified donee status to communities.

YMCA Canada president and CEO Peter Dinsdale, who headed the Indigenous working group, says the committee reached out to 13 different Indigenous entities, many of whom had never before been asked about their dealings with the Charities Directorate. “The relationship the CRA has with Indigenous communities is seen as very confrontational, as it is with many charities,” says Dinsdale, who is the former CEO of the Assembly of First Nations, “but you add in the lens of colonialization and the need for reconciliation and you can see the mistrust.”

He adds that the mistrust is often coupled with a lack of understanding of the benefits of qualified donee status.

The CRA needs a better realization of the history of colonization and the relationship between bureaucracy and Indigenous Peoples, while Indigenous organizations must have an improved understanding of the benefits of working with the CRA. “We have work to do on both sides,” Dinsdale says. He adds that no one knows what may be lost from the paucity of Indigenous qualified donees, but the impact cannot be overstated.

The ACCS’s calls for a national charitable-sector data strategy will allow charities and non-profits to identify gaps in labour force diversity, which will allow organizations to better serve those in need. As Cathy Barr of Imagine Canada wrote in The Philanthropist this week, Statistics Canada provides better data on pigs and lentils than it does on the non-profit sector.

The advisory committee recommends that government departments that collect information on the charitable sector – including Employment and Social Development, Statistics Canada, Canadian Heritage and Corporations Canada – work with a sector advisory group to determine the best ways to collect information on diversity in charities.

Arlene MacDonald, the former executive director of the Community Sector Council of Nova Scotia, who heads the data working group, says the government can improve its diversity data across all business and industry groups. But she notes that the charitable sector is unique because of its focus on human rights and helping vulnerable populations. “Our sector would like to think we’re heading in a direction where we look more like the people we serve.”

A recent Statistics Canada voluntary survey, undertaken in response to an open letter published by Senator Ratna Omidvar, showed a lack of diversity at the governance level. But the sector is aiming for a deeper, and more consistent, dive into diversity data. The StatsCan labour force survey released last week showed a narrowing (but still present) gender wage gap and found that only small strides have been made in hiring Indigenous, immigrant and racialized employees from 2010 to 2019.

MacDonald welcomed that report but says StatsCan has neither the mandate nor the dedicated resources to produce these reports on a regular basis. With no “home” in government, she adds, the sector lacks the ability to advocate for regular reports. “It’s important to acknowledge that knowing who is making decisions has an impact on what decisions are made.”

As the ACCS was working to its second report, the government responded to the 2019 Senate committee on March 30. The federal Liberals’ much-anticipated budget included significant allocations to the charitable sector and a pledge to review the controversial 3.5% disbursement quota for foundations.

Included in the government’s 21-page response to the Senate report:

  • a pledge to account for the cost of recruiting and managing volunteers in contribution agreements, and easing the financial burden associated with police checks;
  • promises to ask the advisory committee to study changes in donation incentive policies in the tax code;
  • a commitment to cover the full administrative cost incurred by non-profits and charities that deliver services funded by transfers to provincial governments; and
  • the creation of a “single window” into government for the charitable sector, like within Employment and Social Development Canada.

But Lebouthillier’s officials also punted many of the Senate’s recommendations over to the advisory committee, prompting some sector insiders to grumble privately about the absence of major policy reforms.

Despite those reservations, all this activity has created a sense of momentum for change in the sector.

“In my time in the sector, this is a high-water mark in energy from the government,” Valentine says. “It appears to be taking a real look at the sector to see whether there is need for change. The question, of course, will be whether it follows through with this change.”

“There is a bit of the energy of the moment, having the Senate report and the [government] follow-up and having a government attuned to the issues,” Dinsdale adds.

However, others warn that a looming federal election could slow the reform process. “You could end up with a new government, or a new minister with a new mandate letter,” warns Don McRae, who spent three decades in government working with charities.

In its response to the 42 Senate recommendations, Ottawa acknowledged there is room for improvement in a number of areas.

Valentine says he is still worried the sector might see only nibbling around the edges in areas where substantive reform is needed. On proposals to reform the direction-and-control provisions of the Income Tax Act, for example, the government was lukewarm at best. The government also rejected a pilot program to assess the feasibility of granting registered charities greater latitude in undertaking revenue-generating activities.

Expanding and modernizing the legal definition of “charity,” by changing the current appeals process, also received a disappointing response. Specifically, the Senate committee and the ACCS, in its first report, urged that appeals to charitable status be shifted to the Tax Court from the Federal Court of Appeal, thereby allowing the definition to evolve through precedent. The government would say only that it would review the process to see if it could be improved.

The government agreed to ask the ACCS to review the common law definition of a charity with an eye to broadening it, as recommended by the Senate.

Senator Omidvar, vice-chair of the 2019 Senate committee, says she will soldier on even as the government defends the need for charities to control and direct the use of donated funds for their “own activities.”

McRae says that without a change in the direction-and-control provisions of the Income Tax Act, change in Indigenous engagement will remain elusive. “Charities have to operate within the framework of the ITA, which forces them into a top-down relationship with Indigenous organizations, preventing the two parties from being equal partners.”

Lebouthillier’s officials did acknowledge concerns about cumbersome regulations that can be colonial in nature, and committed to reviewing the rules.

Are those just words? Omidvar isn’t sure, but she says her more immediate goal is getting the issue on the radar of all parties heading into the next federal election. Rebuilding the sector’s relationship with Ottawa will be “a marathon and not a sprint,” she adds. “Is this music or is this just noise? It may be the beginning of some music. I’m an optimist.”

Tim Harper is a Toronto-based writer. He is a former Washington correspondent and national affairs columnist with The Toronto Star.

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