If the Mastercard Foundation ever wanted to give a million dollars in scholarship money to McGill University, a major Canadian post-secondary institution, arguably the most complicated task on its to-do list would be writing the cheque. 

McGill is a registered charity recognized by the Canada Revenue Agency. As a qualified donee, it is considered to be capable of appropriately handling gifts and donations for charitable purposes. Jennifer Brennan, head of Canada programs at the Mastercard Foundation, says the grantmaker could simply give over the money in a variety of ways. 

Running the exact same program at Ashesi University, a prestigious university in Ghana’s capital city of Accra, would mean mountains of red tape. The Mastercard Foundation would have to, under Canadian law, collect receipts for all expenses paid by Ashesi University to administer its program — from personnel costs to program administration. “Essentially, we’re contracting them to act on our behalf in delivering these scholarships,” Brennan explains. “It’s a very complex arrangement, not a partnership at all.” That’s because Ashesi University is not a registered charity with the CRA, and therefore not a qualified donee.

Canadian charities have long complained about these legal hurdles whenever they try to work together with non-profits, charities, and grassroots organizations who aren’t considered qualified donees by the CRA, both at home and abroad. Bill S-222, a Senate bill quietly making its way through Parliament could flatten them if passed. 

Bill S-222, tabled by Independent Senator Ratna Omidvar earlier in 2021, would amend the Income Tax Act to allow Canadian charities to give resources (including grants) to a non-qualified donee so long as they take “reasonable steps” to ensure said resources are only used for charitable purposes. Under current CRA rules, charities who work through an intermediary organization, either in Canada or overseas, must prove that they exercise “direction and control” over its activities as an accountability measure. 

“You actually have to prove to the CRA that when you, as a charity, grant money to a non-charity, you are directing and controlling it,” Omidvar says. “It is your project, not their project. It is your voice, not their voice. It is your intellectual property, not their intellectual property.” To her, these laws force Canada’s charitable sector to engage in colonial practices. 

In an era when humanitarian organizations are increasingly open about the colonial history of their sector in everything from the deployment of Global North professionals overseas to the undignified depiction of Global South residents in fundraising campaigns, a bill that would allow Canadian charities to work with grassroots and intermediary organizations with less red tape is welcome news to some major charities. But a critic argues the bill (barring any major amendments) could make Canadian charities less accountable — and doesn’t prevent charities from continuing to engage in the colonial granting practices it strives to prevent. 

Following the money

One of the bill’s highlights is expanding the definition of charitable activities to include grants, gifts, or money transfers to a non-qualified donee so long as it takes “reasonable steps” to ensure its resources are used entirely for a charitable purpose. What does that entail? According to the bill, it means a Canadian charity needs to collect information on “the identity, experience and activities of the person who is not a qualified donee” and also “establishes measures, imposes restrictions or conditions, or otherwise takes actions necessary” to ensure the resources are being used for charitable purposes only. 

Under Canadian law, a qualified donee (about 90,000 in total) can include domestic or internationally-based registered charities, as well as Canadian municipalities, the Canadian government itself, and even the United Nations. Qualified donees can issue official donation receipts for gifts they receive from individuals and corporations. Every other organization, including charities who may be registered in other countries, but not in Canada, is considered a non-qualified donee. Expanding the Income Tax Act to allow charities to give resources to non-qualified donees for charitable purposes without the “direction and control” required by the CRA could be a significant shift. 

“In a time of crisis — and really, at any time when we’re spending development dollars — should our chief concern be ‘have we checked all the boxes?’” says Julia Anderson, CEO of the Canadian Partnership for Women and Children’s Health (CanWaCH). “Or should we be worried about ‘have we checked the boxes of serving the needs of the communities which these funds are intended to go to’?” She is all for an accountable and transparent charitable system, but says the Canadian government’s current approach simply requires organizations to spend a lot of money accounting for every charitable dollar, rather than working with local partners in a responsible way. 

Musu Taylor-Lewis, director of resources and public engagement at Canadian Foodgrains Bank (CFB), says whenever her network’s 15 churches and church-based agencies work with a local partner on program design, it is the CFB member — not the local partner — that negotiates with the CFB directly on its proposal. This is frustrating for them. “Partners are constantly wanting to have more input and to provide more feedback that is used in the design and the delivery of our programs,” she says. “Anything we can do as Canadian partners to make the partnerships more meaningful and more equitable is something that we want to pursue.” 

However, Bill S-222 doesn’t require charities to pursue more meaningful program design with local partners. It simply gives them the option to do so. Mark Blumberg, a Toronto-based charity lawyer, says requiring Global Affairs Canada to fund smaller charities or grassroots organizations in the Global South would be a far more effective way of promoting equitable partnerships than loosening Canada’s current charity rules. 

“If governments were to put aside hundreds of millions of dollars for ‘local capacity building, ownership and participation and collaborative decision-making when working with communities in Canada, such as [Indigenous] communities and with communities abroad as part of their charitable activities’, then that would be great,” Blumberg writes in an analysis of Bill S-222 posted to his website. “But this legislation does not call for that.” 

Humanitarian red tape

One of the chief complaints made by Brennan and Omidvar is that many grassroots organizations, even those in Canada, are not registered charities. This includes movements like Black Lives Matter, most Indigenous land defender groups, even Kw’umut Lelum Child and Family Services — an organization Mastercard Foundation worked with during the pandemic to offer laptops for school children. “We can’t have direct relationships in these cases,” Brennan explains. Instead, they tend to work through other registered charities who must, under Canadian law, exercise “direction and control” over their activities.

“That is a very, very onerous process administratively,” says Barbara Grantham, president and CEO of CARE Canada. “It leads to all kinds of added cycles in terms of getting clarification, receiving interpretations or receiving guidance. It is a very cumbersome burden that costs money and time, but more importantly, I think, it doesn’t speak to a relationship of trust and equality between parties.” Gloria Novovic, policy lead at Cooperation Canada, says Canadian charities that do try and share funding with grassroots organizations without adhering to the CRA guidelines risk losing their charitable status entirely. 

If a Canadian charity wanted to work with a non-qualified donee domestically — say, an Indigenous-led youth group — Novovic says it would have to get the group to sign an agreement giving the charity full control over their activities for their particular project. “Imagine how painful that is to equity-seeking groups that have been systematically marginalized, systematically stripped of their agency, and undermined throughout the sector’s existence,” she says. 

Omidvar and the social impact professionals interviewed for this story all stressed their desire for strict financial accountability for Canada’s charitable sector. Some of them pointed to anti-terrorism legislation and other legal mechanisms used by the Canadian government to ensure humanitarian money doesn’t end up in the wrong hands. However, Blumberg points out that Bill S-222, as written, could allow charities (or a small number of wealthy Canadians looking for charitable tax breaks) to move money to non-qualified donees in countries where the CRA has no way of knowing how it was used. In turn, he says, this scenario could weaken public trust in Canadian INGOs. 

“I am an advocate for having more international philanthropy and especially increasing the funds going from Canada to the Global South and to be provided to groups that are locally established and having local legitimacy,” he writes. “This proposal, unfortunately, will do nothing to increase that — but after some wealthy people have moved their money out of Canada and saved tens of billions in taxes, it is the poor who will suffer as Canada cracks down on international activities!”

Racing against a federal election?

At the moment, Bill S-222 is still working its way through Parliament. Philip Lawrence, a Conservative MP, is sponsoring the bill through the House of Commons. So far, Omidvar says, the NDP and Conservatives both approve of Bill S-222, with Conservative Party Leader Erin O’Toole supporting it publicly. But it isn’t clear if Bill S-222 will even make it to newly appointed Governor-General Mary Simon’s desk for royal assent. 

Rumours of an impending federal election have been swirling for months, with Prime Minister Justin Trudeau expected to call one anytime between the summer and fall of 2021. If that happens, all bills working their way through the House, including Bill S-222, will die. They’ll have to be re-introduced when a new government is formed. 

In the meantime, Omidvar and the bill’s supporters are having conversations with policymakers in all of the major political parties to get them on side — and perhaps have them include a loosening of “direction and control” in their platforms. “That is, frankly, the aspiration here,” Omidvar says. “Get it into the policy platforms that whichever party’s elected — they implement the change in the law.” 

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