The Toronto Star recently had an article, “Pride Toronto to pay back more than $505,000 to the federal government for misuse of grant money”.
The article is scant on details and raises more questions than it probably answers. We don’t know the details of the agreements. We don’t know what controls were in place and were not in place, etc.
The simple takeaway is don’t ask for money if you cannot handle the deliverables. Also, if you don’t have good internal controls and spend funds appropriately, you may have to give back funds, which can, in some cases, destroy an organization from both a reputation and financial perspective. This will probably not sink Pride Toronto but it would sink other organizations. Also, the problem of not complying with grant requirements happens a lot more than one would think – it is just not always covered by the Toronto Star!
What is more interesting is the probably questionable due diligence that the federal government did when it provided the funds. I don’t know whether any questions were asked about internal controls and capacity, but in most cases, when funders ask questions, they are not necessarily asking the right questions anyway and in some cases, they may not have the knowledge to even to understand the implications of the answers.
The Federal government gives out about $13.3 billion a year to Canadian registered charities, and I don’t know how much to for-profits and nonprofits. When it comes to charities and nonprofits, they often do not have an understanding of how these organizations operate and whether they are well-run or not. Consequently, the due diligence is extremely ineffective.
Doesn’t anyone think that if the Federal government is giving out tens of billions of dollars to thousands of organizations, there must be an effective process for due diligence? I certainly do.
Let us be clear that doing due diligence is not easy, and many large foundations and for-profit corporations do a pitiful job of it. One of the central problems is that there is very limited transparency on registered charities and almost none on non-profit organizations. But whose fault is that? Oh well, that is the Federal government’s fault! They could amend the ITA to provide more information that will be publicly available.
So sorry if I don’t have much sympathy for the Federal government on this point. You would think that it is pretty straightforward that we should have transparency in the non-profit and charity sectors. After all, the two sectors may have revenue of over $450 billion. Why don’t we have transparency in these two sectors? I don’t know, as I am not privy to the conversations at the Ministry of Finance, but I have a sneaking suspicion that some people don’t want it. We already know Hockey Canada did everything it could to avoid providing information to the public, including ignoring legal requirements to disclose certain information. Are they the only group trying to be secretive? Those who prefer secrecy seem to have more friends in the Department of Finance than I do.