Bill S-216 would amend the contentious language in the Income Tax Act that requires registered charities to exercise “full direction and control” over their “own activities” when they work with partners that don’t have formal charitable status. In the second part of an ongoing series – exploring a range of views, experiences, and concerns – we examine the concern that the sector may be hiding behind direction-and-control to “mask a more deeply rooted issue in a white-led philanthropic sector.”
For too long, Nanaimo’s Kwꞌumut Lelum Child and Family Services bristled under the “insulting” conditions imposed on it by the so-called direction and control provisions needed for it to access funding.
Under Canada Revenue Agency regulations, programs were directed by a white-led third party, but Kwꞌumut Lelum was not allowed to direct the money in a way that respected the Coast Salish culture and tradition. There was the frustrating inability of an Indigenous organization to lead itself.
“It was so insulting. That partnership solidified the need to become our own foundation,” says Sharon Hobenshield, the executive director of the newly named Kwꞌumut Lelum Foundation, a community foundation led by nine Coast Salish nations that aims to expand cultural, recreational, economic, and educational programs for Indigenous youth and their families in British Columbia.
There are so many small Indigenous grassroots communities, but they are disadvantaged because they do not have qualified donee status.Sharon Hobenshield, Kw’umut Lelum Foundation
“We can issue tax receipts. That’s one big hurdle. In becoming a foundation, we become self-determining in setting our vision, our purpose, the programs we want to deliver, and how we want to grant and provide services to the community,” Hobenshield says. “We can engage in the Indigenous ways, the Coast Salish ways, of granting and being a service to communities. It is grounded in tradition and culture, and it’s self-determining, and the programs are where the communities want to see investment for Indigenous youth.”
That direction-and-control third-party stewardship exposed the systemic racism in the philanthropic sector, Hobenshield says, leading to the creation of a foundation that exemplifies a changing face of Canadian philanthropy.
But would the elimination of direction-and-control ease the well-documented funding gap in the sector that leaves so many Black, Indigenous, and other equity-seeking groups behind?
There is so much need for self-examination within this sector when it comes to white privilege.Sharon Hobenshield
There is a range of answers to that question. Some surveyed by The Philanthropist Journal believe that removing direction-and-control is a necessary first step to address the funding gap. Others believe the sector is hiding behind the direction-and-control excuse to mask a more deeply rooted issue in a white-led philanthropic sector.
“There are so many small Indigenous grassroots communities, which want to serve all their relations, but they are disadvantaged because they do not have qualified donee status,” Hobenshield says. “Elimination of direction-and-control is the biggest hurdle to start with, but then there is so much need for self-examination within this sector when it comes to white privilege.”
Legislation to eliminate direction-and-control awaits second reading in the House of Commons.
It would amend the language in the Income Tax Act that requires registered charities to spend dollars on their “own activities,” using an intermediary rather than allowing autonomy to organizations on the ground that can be expected to have greater knowledge of community need and the most efficient way to spend donations.
But many believe a reckoning within the sector is urgently needed regardless of the legislation.
We’re more comfortable transacting with organizations that look like us.Andrew Chunilall, Community Foundations of Canada
Andrew Chunilall, the CEO of Community Foundations of Canada, says that if direction-and control is eliminated and underfunding persists, it will be confirmation that the problem in the charitable sector is more fundamental.
“We’re more comfortable transacting with organizations that look like us,” Chunilall says. “Philanthropy had been insulated from having a conversation about racism until we were in a pandemic and George Floyd and Breonna Taylor were killed. There are a number of data points that show that our governance and our leadership don’t reflect our communities. And if they don’t, we don’t understand our communities. And if we don’t understand our communities, who do we understand? People who look and act like us.”
Studies have documented the underfunding of organizations led by or serving Indigenous, Black, and other marginalized populations in this country.
In May 2021, an analysis done by charity lawyer Mark Blumberg and philanthropic fundraiser Sharon Redsky found there were 284 grants to Indigenous groups out of 28,164 grants over $30,000 in 2018. That meant just over 1% of grants went to Indigenous groups. Registered charities gave $8.3 billion in grants over $30,000 that year, less than $47 million of it to Indigenous groups, 0.5% of the total. (Indigenous Peoples comprise 4.9% of the Canadian population.)
A landmark 2020 study, Unfunded: Black Communities Overlooked by Canadian Philanthropy by the Network for the Advancement of Black Communities and the Carleton University Philanthropy and Nonprofit Leadership program, came to the same conclusions in regard to Black-led and Black-serving organizations during a similar time frame.
It’s a good move and it will help … but I wouldn’t go so far as to say that [eliminating direction-and-control] alone would resolve the underfunding issues.Rickesh Lakhani, Future Possibilities for Kids
It found that Canada’s top 10 foundations, representing more than $10 billion in assets, disbursed 0.03% of funds to Black-led organizations in the 2017 and 2018 fiscal years, and 0.13% of funds to Black-serving organizations in the same time frame. Fifteen other foundations it surveyed did not fund any Black-led or Black-serving organizations during that time frame.
Blumberg says the push to end direction-and-control is a red herring put forward by a sector that has every opportunity to fund qualified BIPOC organizations today, but doesn’t.
“It’s a good move and it will help, but it is not a long-term solution,” says Rickesh Lakhani, executive director of the Toronto-based Future Possibilities for Kids. “I think it’s one of the solutions, but I wouldn’t go so far as to say that alone would resolve the underfunding issues. It goes back to the question of who is currently trusted to run organizations and who is seen as worthy of receiving and stewarding donations?”
Senator Ratna Omidvar, whose legislation replacing direction-and-control passed the Senate before moving to the Commons, puts the issue more succinctly: “Philanthropy is the purview of the privileged few … it exists in a bubble of privilege,” she told a webinar sponsored by the Toronto Foundation. “Less than 1% of charitable dollars flow to Indigenous causes. Less than 1% of charitable dollars flow to Black people.”
Philanthropy has to engage in self-reflection and move funds to organizations where Black and Indigenous leaders have decision-making power.Justin Wiebe, Mastercard Foundation
Justin Wiebe, a program partner at the Mastercard Foundation and a leading Métis voice in the philanthropic sector, doesn’t believe the lifting of direction-and-control would address the underfunding problem.
“It’s an important part of a bigger and broader transformation in the sector that needs to happen,” he says. “It will create a more enabling environment for foundations to fund non-qualified donees and ideally [lead to] a more trust-based, more equitable, more relationship-driven sector. But in and of itself there is no guarantee a foundation will tomorrow – just because it can – start funding differently.”
“It needs to be paired with the education of the sector,” he adds. “It’s important, a critical change, but philanthropy has to engage in self-reflection and move funds to organizations where Black and Indigenous leaders have decision-making power.”
Margaret Mason, a veteran charity lawyer with Vancouver’s Norton, Rose, Fulbright, sees small Indigenous organizations in British Columbia, those with the knowledge of what works on the ground, hurt by direction-and-control all the time.
I think the floodgates would open if [foundations] could grant out as opposed to having to enter into collaborative contracts and all the other requirements.Margaret Mason, Norton, Rose, Fulbright
“Primarily, it is Indigenous groups that we see here [who do not get funded],” she says. “They don’t have the capacity, the funding, or the help needed to get qualified donee status. Unless the charity is willing to take on a bigger administrative burden, it’s hard, and not everyone is willing to do that.” She believes the removal of direction-and-control would narrow the underfunding gap.
“It would have to, because organizations are right now trying to figure out how to get money to them, so if you could simply grant to those organizations, that would open the door. I think the floodgates would open if they could grant out as opposed to having to enter into collaborative contracts and all the other requirements.”
Gail Picco, editor of The Charity Report, agrees there are positives to the elimination of direction-and-control but says that is no reason there is such obvious underfunding of marginalized groups now.
“There have been ample opportunities for private and public foundations to give to Indigenous or Black organizations over the years. Ample opportunity,” she says.
She says that loosely organized non-qualified donees in marginalized communities could be more easily funded with the elimination of direction-and-control but warns that the end of such regulation doesn’t just apply to BIPOC groups. It could also mean that efforts like the one mounted by the so-called truckers’ convoy, which occupied Ottawa, or a group that runs counter to the environmental goals of the sector, could also be more easily funded.
It’s 2022, and the dialogue around inequality has become more robust.Andrew Chunilall
Chunilall is trying to make change from the inside.
“Change has been difficult. I began my career in philanthropy in 2007, and at that time we did not talk about reconciliation, racism, climate change, or inequality at the board level,” he says. “It was considered impolite conversation. If someone tried to put it on the agenda, there was quick deflection. It’s 2022, and the dialogue around inequality has become more robust.”
The rise of the Foundation for Black Communities (whose leadership team includes Liban Abokor, one of the authors of Unfunded) and the Indigenous Peoples Resilience Fund are both a reaction to underfunding by white-led foundations.
Ottawa has earmarked $200 million for a Black-led Philanthropic Endowment Fund, which must be governed to reflect the diversity of Black communities and be accountable to those communities while supporting diverse social and economic projects.
This is the second in a series of articles in which The Philanthropist Journal will focus on this 70-year-old burden on the sector, comparing Canadian rules to those of other countries, probing how “direction and control” has made the sector risk-averse, looking at how it may have contributed to underfunding of Indigenous and other equity-seeking organizations, and analyzing its implications for local and international partnerships.