McLeod Group Blog

Modernizing the regulation of Canadian charities

Modernizing the regulation of Canadian charities

McLeod Group blog, March 4, 2019 

After years of pressure from civil society organizations, the Canadian government finally adopted new legislation on December 13, 2018, that removes restrictions on charities’ ability to undertake policy advocacy. This is a welcome step, but more efforts are required to modernize how charities are regulated.

The McLeod Group had expressed its concerns about charity policy in previous blogs. The adoption of this new legislation follows an Ontario court decision in July 2018 that struck down the government’s 10% limit on charities’ political advocacy activities directly linked to their charitable purpose.

The new charity law is based on the report of the Consultation Panel on the Political Activities of Charities, which recommended abolishing the arbitrary 10% limit. The panel said that “the ability of registered charities to engage in political activities in support of their charitable purposes, while maintaining an absolute prohibition on partisan political activities”, should be clarified and even increased.

It suggested, among other things, using the term “public policy dialogue and development activities (PPDA)” to replace “political activities”, as it more accurately reflects the range of activities now permitted. The proposed new directives on PPDA are available on the Canada Revenue Agency’s (CRA) website for consultation.

Under the Harper government, many charities were subject to CRA political and financial audits if there were complaints about their policy advocacy. These audits have now all been closed, but their cost and reputational damage continue to injure many charities. Many charities have not invested in policy research or policy advocacy in the past years, which is strongly needed.

Under the new law, charities should be able to address the causes of the issues they deal with rather than being limited to Band-Aid solutions. For example, in the past, the Canadian Council for International Co-operation food policy group successfully advocated untying Canadian food aid. Now, in famine situations, culturally appropriate food available in local or regional markets can be bought more quickly and cheaply than shipping Canadian food.

The new legislation can also encourage charities to learn more from their service delivery to benefit their clients and to invest in research that is more closely linked to policy improvements. It could also encourage advocacy organizations, previously unable to register as charities, to establish charitable trusts.

A next step in modernizing Canada’s charity law will be to revise the “direct and control” guidance that prevents charities from establishing more equitable partnerships with development country organizations for achieving their purposes, and keeps local NGOs in a master-servant relationship with Canadian funding organizations. Until recently, funding agreements with trusted partners allowed a charity to delegate some of its work to local partners, including partner capacity to make necessary adjustments to achieve the results set out in the agreements. But a rigid interpretation of the “direct and control” guidelines has brought this practice into question.

For example, in 2014, CRA instructed CoDevelopment Canada Association (CoDev) to translate into either English or French every single receipt it received from partner organizations in Latin America, including receipts for all taxi and bus rides. CRA made this demand after an audit found CoDev in compliance with existing advocacy guidelines, but required more details on transfers to partners.

Another needed change will be to modernize the very concept of a charity. The clearest example of this comes from Oxfam Canada being forced to change its official mandate. CRA judged that “preventing poverty” was not a charitable purpose, while “relieving poverty” was acceptable. The idea that poverty can be prevented is different from the belief that it is the duty of the rich to give alms to the poor. The latter concept, however, is the only one allowed in CRA’s current interpretation of allowable charitable purpose.

It will also be important to monitor the impact of changes in the policy advocacy laws. The changes could result in larger charities becoming more prominent for the quality and impact of their policy dialogue, or in local charities gaining more leverage because they are better able to reach local and national decision-makers.

The changes may also affect some kinds of charities more than others. For example, the charities that advocate better local support for people with disabilities may gain greater traction compared to charities funding research for cures.

If CRA ensures that advocacy activities are reported accurately, it will generate a very useful database that all charities can benefit from. There is, however, a risk that some registered charities may advocate against issues like LGBTQ rights, immigration or vaccination, so setting standards for the evidence base of advocacy will become more important.

Charities themselves will have an important learning curve on gathering evidence, formulating policy changes, and building the broad support required to make them a reality. Canada can only benefit from their efforts.

Photo: Sean Kilpatrick, Canadian Press