Here is the Blumbergs’ Pre-Budget Submission for the 2024 Canadian Federal Budget. For those who have been following our law firm’s submissions over the last ten or more years, they have focused on transparency and accountability in the non-profit and charity sector.
Unfortunately, we have less transparency today than we had 15 years ago. Both the Conservative and Liberal Federal governments have whittled away at transparency in the non-profit and charity sector. We have not learned from the multitude of scandals in the non-profit and charity sector that those who abuse the system are adept at taking advantage of weaknesses in the rules and enforcement as well as blind spots in transparency. If you are a normal person, you probably don’t pay much attention to non-profit and charity regulations or what exactly is available publicly or not and when information will become publicly available and how.
But I promise you that there are some people who are very well aware of our system and how to game it. As we have noted elsewhere, even if CRA, which regulates registered charities, finds out that a charity is abusing the system, it typically takes 10-15 years for the public to know that. Think of all the money donated over that 10-15 year period to the organization that perhaps would not have been donated if the public knew. Think of all the government agencies, who typically have very little skills and training in due diligence on grantees, and how much funding was provided to that organization that would not have been provided. Think of the poor governance that is allowed to continue. Think of the beneficiaries who in some cases were abused or just did not receive the assistance they were supposed to receive.
Interest in transparency ebbs and flows. If we only knew how much lack of transparency costs our country, we would be more interested. The Australian government last week proposed a number of changes to ‘lift the veil of secrecy’ on Australian charities. We are already far behind the Australians and with these changes we will be even further behind. We are even further behind the US and England. Not a great place to be and not surprising that public confidence in the charity sector in Canada is very low.
We need more transparency in the non-profit and charity sector, and we need it now!
In our summary in the submission, we note:
We are concerned that there are not adequate measures in place to ensure the efficient use of charitable assets, prevent the misappropriation of charitable assets and prevent non-profits and charities from engaging in egregious conduct. We will provide some recommendations to improve transparency in the non-profit and charitable sector as well as other recommendations to improve regulation and impact of the charity sector.
Here are our recommendations in our submission:
List of Recommendations
Primary Recommendations
- Recommendation 1: That the Federal government amend Section 241 of the Income Tax Act in order to allow the CRA to disclose serious non-compliance with legal requirements by a registered charity, Registered Canadian Amateur Athletic Associations or certain other qualified donees.
- Recommendation 2: That the Federal government amend Section 241 of the Income Tax Act in order to allow the CRA to disclose to the public information contained on the T1044 Non-Profit Organization (NPO) Information Return.
Secondary Recommendations
- Recommendation 3: That the Federal government provide funding to CRA to improve the transparency of the T3010 Registered Charity Information Return.
- Recommendation 4: That the Federal government further increase the disbursement quota payout from the slight increase from 3.5% to 5% beginning in 2023 to a higher number such as 8-10% per year to deal with the $130 billion of accumulations held by private and public foundations.
- Recommendation 5: That the Federal government ensure that each donor advised fund is required to disburse a certain percentage per year per fund.
- Recommendation 6: That the Federal government and specifically the Charities Directorate of CRA roll out additional educational programs to assist Canadian charities and non-profits understand their compliance obligations or alternatively the Federal government reinstate the Charities Partnership Outreach Program which provided funds to Canadian charities to fund educational initiatives within the sector to increase compliance.
- Recommendation 7: That the Federal government require charities to demonstrate annually in their reporting that they actually have a “public benefit”, rather than this being assumed.
- Recommendation 8: That the Federal government consider a system where the ability to issue tax receipts is not based on being a “registered charity” but rather a narrower category of deductible gift recipients as is currently in Australia.
- Recommendation 9: That the Federal government establish a unit within the RCMP, or other police force, tasked with the responsibility of reviewing large, serious and complicated schemes that abuse registered charities and provide inappropriate official donation receipts or inappropriate private benefits.
- Recommendation 10: As the Federal Government as an important funder, either directly or indirectly, of the charity sector in Canada, that the Federal government maintain and increase funding to this important sector.
If you or your organization is interested in filing a pre-budget submissions for the 2024 budget with the House of Commons Standing Committee on Finance (FINA) keep in mind that the deadline for filings is Friday, August 4, 2023, at 11:59 p.m. Eastern Standard Time.