Opinion: The Advisory Committee on the Charitable Sector let down charities and communities by not recommending a disbursement quota hike
Why It Matters
Forty percent of charities are still seeing their revenues decline following COVID-19’s onset. Almost 1 in 4 charity leaders say they don’t think their organizations will be able to stay open for another year. Communities rely on the services these organizations provide, and demand for many such services will only increase post-pandemic.
Canada’s vital charitable sector is hurting. Our 86,000 charities, which make up nearly 8.5 percent of Canada’s gross domestic product, have spent the past two years dealing with a variety of crises exacerbated by the COVID-19 pandemic. As a recent Imagine Canada survey concluded, “Almost 1 in 4 charity leaders believe their organizations will not be able to operate for more than a year” due to worsening of their financial health.
These are statistics that leaders in the philanthropic sector are well versed in, which is why I am so frustrated that 14 members of the Federal Government of Canada’s Advisory Committee to the Charitable Sector (ACCS) decided to submit a recommendation to the government that does a disservice to 13 million volunteers and two million Canadians that are employed in the charitable and non-profit sector. The ACCS was created to “engage in meaningful dialogue with the charitable sector, to advance emerging issues relating to charities”.
Recently, Finance Canada announced a call for submissions around whether or not there should be changes to the disbursement quota — the amount “charities are required to spend a minimum amount on their charitable programs or gifts to qualified donees.”
Collectively, the Canadian philanthropic community has amassed over $85 billion in charitable assets — assets that doubled between 2012 and 2017 alone. “This represents an average of 12 [percent] growth per year, which is well above inflation and the growth of Canada’s GDP,” the folks at Increase the Grants point out. Making a change from one of the lowest disbursement quotas in the world at 3.5 percent would seem reasonable action to implement and would free up billions in tax-payer philanthropic assets at a time in which the nonprofits desperately need access to funds.
Unfortunately, the Advisory Committee to the Charitable Sector (ACCS) has not recommended a change to the disbursement quota from the current 3.5 percent, citing that they need more data and the issue is too complicated to make the call without it.
There is nothing complicated about increasing the disbursement quota, those with power and privilege are attempting to convince the charitable sector otherwise. There is nothing complicated about increasing the disbursement quota, but those with power and privilege are attempting to convince the charitable sector otherwise. The ACCS believes “compliance with the DQ provisions is complicated and requires consideration of many factors.” I disagree with their assessment, but if that were the case, should we even have a disbursement quota? The status quo is unacceptable.
We don’t need more studies, we don’t need more consultations, we don’t need more gradual legislative reviews. We need action by those who have engaged in performative allyship. The Federal Government of Canada needs to stop being apathetic to implementing the recommendations of the Special Senate Committee on the Charitable Sector, that include suggestions on simplifying charitable law. There is no reason why the rules that govern the charitable sector should be so complicated, nor should the government burden the non-profit sector with becoming more educated on how to maneuver around these rules, rather than removing the barriers in the first place.
As philanthropy lawyer Mark Blumberg recently wrote, “If those ostensibly representing the sector don’t believe there is any compelling reason to ensure more funds move from foundation investments to operating charities, then it completely undercuts the notion that the Federal government should provide additional funding to the charity sector during COVID.”
It’s telling that a committee made up of a majority-white led, white serving, white consensus (what we call the W3s) use social justice narratives as a justification on why we shouldn’t make a change to the disbursement quota right now. The ACCS committees attempt to pivot the discussion from the disbursement quota to qualified donees, on a consultation process for the disbursement quota is manipulative. As the committee highlighted themselves, “organizations led by or serving vulnerable populations (Indigenous, Black, and Women serving for example) report the lowest number of assets” and the “disbursement quota is, therefore, as a policy most relevant to private and public foundations because they hold the bulk of the sector’s investment assets.” It’s frustrating to read that the committee understands that, and still refrains from recommending that changes should be made to the disbursement quota.
I agree the Canadian charitable sector needs comprehensive philanthropic reform, something we’ve been calling for at Justice Fund, but it’s not surprising that a committee composition in favour of foundation interests, maintaining their tax-payer assets, power and influence over the sector, would advocate for incrementalism and sustained virtue signalling.
Finance Canada has opened the consultation process to the general public, and the ACCS submission is part of this feedback process. However, releasing a public consultation with such significant ramifications to frontline communities amid election, pandemic and back-to-school season is beneficial to those that have power and privilege in this sector. Power in the philanthropy sector is centred on those wield enormous influence, decision making and legal understanding of how charitable law functions — often executives of foundations, those that manage community foundations, philanthropy advisors and lawyers. I want to encourage folks in the sector, frontline workers and volunteers to make their own submissions. The deadline for submissions is September 30th.
No changes or minimal changes to the disbursement quote will financially harm our ability recover by not introducing a influx of charitable resources to a sector that is battling lack of affordable housing, food insecurity, the gun violence health crisis, a climate crisis, lack of economic mobility for Black, Indigenous and People of Color communities and the tremendous mental health pressures on a whole generation of youth. We need to build better, especially at a time when “40 percent of charities report they continue to face a decline in revenues” and “at least a third (34[percent]) are seeing demand grow faster than their organizational capacity.”
The unfortunate reality is the majority of submissions to Finance Canada’s call for feedback on the disbursement quota will be submitted by investment bankers, family offices, fund managers, wealth advisors and private/public foundations — those with significant financial incentives to maintain the status quo. I hope I am wrong.
The moment of white philanthropic consensus is over.
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This story was updated Oct. 1 following an ACCS member’s clarification that the Committee did not explicitly recommend that the disbursement quota remain the same.
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