At a time when charities need funds and private foundations alone are sitting on $95 billion dollars, the Advisory Committee to the Charitable Sector (ACCS) has prepared a submission to Finance Canada stating that the disbursement quota (DQ) issue is complicated and not recommending any increase to the current 3.5% requirement.  Although this is shocking it is not surprising as I believe both chairs of the committee have previously indicated their opposition to increasing the DQ.

I am only going to comment on a few things and I will put up a more extensive piece in the future dealing with the DQ issue.

  1. If you look at the ACCS webpage there is no mention of this submission.  Instead for some reason, it is posted on a law firm’s website. You would think that with the millions of taxpayer dollars being spent by the ACCS, the ACCS could post their own letters and submissions in English and French on the CRA’s website. [Update September 16, 2021]
  2. 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.    Why should the Feds incur greater debt and sacrifice funding for other programs when $95 plus billion is sitting largely idle in private foundation investments and could be used to increase funding of operating charities?  If charities with large amounts of assets are not prepared to do more to fund operating charities, why should the Federal government do it?
  3. While this submission certainly discusses the DQ it also goes on many tangents and discusses other proposals that the ACCS has supported.   In other words, it is 10 pages long but much of it is the repetition of the ACCS views on other matters.
  4. On page 3 they say “The ACCS agrees with the goal of supporting organizations who are providing service to the most vulnerable. However, the DQ is but one tool in the policy toolbox. We do not believe that there is clear evidence that raising the disbursement quota alone, without making other legislative changes and using other policy tools, will achieve that goal.”  I am not sure what clear evidence they want.  If you increased the DQ from 3.5% to say 7% it might result in about $3 billion in additional funding for the sector.  Imagine Canada has been asking the federal government for billions in additional funding – is Federal money better than foundation money? Later in the report, the ACCS makes it clear that they do not support the Federal government “regulating the destination or direction of grants to specific communities and causes.”  I agree that the DQ is not THE solution to all the charity sector problems, but it is certainly one simple and important step that can be taken to complement other initiatives.
  5. The ACCS has a rant on “direction and control” and then the ACCS notes: “Indeed, we heard from stakeholders that the federal government’s Emergency Community Support Fund, administered by Community Foundations of Canada, United Way/Centraide Canada and the Canadian Red Cross in the first year of the pandemic, was available only to qualified donees or those organizations that could access a financial intermediary to flow funds. This meant that the emergency grants may not have delivered support to some of the most vulnerable members of society where it was most needed” [my emphasis]  I would love to know who told them this.    This is absolutely false and incredible that they could say this.   While the Community Foundations of Canada (CFC) and the United Way Canada (UW) were focussed on funding registered charities, the Canadian Red Cross (CRC) was exclusively funding non-profits who were not registered charities.   The CRC was telling qualified donees that they would not fund them and that they could go to the CFC and UW for funding as the CRC was only funding non-profits that were not charities.   The CRC notes on its website, “Non-profits are defined in this Guideline as community organizations, associations, societies or trusts that are (whether incorporated or unincorporated) organized and operated exclusively for social welfare, civic improvement, pleasure, recreation, or any other purpose except profit and exclude registered charities, other qualified donees, and for-profit businesses.”  The CRC has funded over 1000 non-qualified donees and you can see the details of their funding program and even a list of the groups that they funded in Round 1 and Round 2.   Perhaps if they reviewed our blog, or many other places on the internet, they would have seen the difference between the CRC and CFC/UWC granting programs.  Next to the We Charity funding, the Emergency Community Support Fund at $350 million was the largest granting program to the voluntary sector to focus on vulnerable Canadians and COVID so it is confusing that the ACCS did not understand this.
  6. The submission notes, “Foundations on average are already disbursing above 6.8%, if a rate increase was the only policy or lever deployed, a rate would have to be set above this average for a substantive increase in grants to happen.”  That does not make sense to me.  The only reason that the amount being disbursed on average is 6.8%, if that is correct, is that there are some groups disbursing 10 or 20% or even 100% per year.   We have written about this before.    Clearly, changes to the DQ will not affect such groups.  It is large foundations sitting on hundreds of millions or even tens of billions of dollars and disbursing 1, 2 or 3.5.% that are dragging down the foundation sector and the operating charities they are supposed to be in part supporting.
  7. The submission notes “It is important to recognize that much of the sector reports increased demand at the same time reporting challenges in maintaining their workforce; the capacity of Foundations to rapidly increase their granting processes would have to be considered, especially if the expectation is rapid relief and recovery.”  This is a little bit funny – foundations with hundreds of millions or billions are having trouble keeping staff and would have trouble increasing disbursements?   Maybe some foundations need to look at simplifying their processes and perhaps hire extra staff if they cannot increase disbursements.
  8. The submission notes “Some established charities, such as hospitals, universities and colleges and religious institutions may benefit from additional funding with a higher DQ. But the underfunded charities, the charities working on long-term systemic policy changes and the organizations that cannot or do not want charitable status will not be guaranteed to benefit.”  I don’t agree with this.  If the DQ was raised to twice the current rate or higher, significantly greater amounts of funds would move mainly to operating charities.  BIPOC groups currently receive a trivial amount of funds.  So BIPOC groups could be expected to receive twice the trivial amount of funds they are currently getting.  Twice is better than nothing especially since the ACCS is not really suggesting mandatory ways to ensure that foundations actually fund based on actual need.  Also to extent that hospitals, universities, colleges and religious groups receive more funding, this may allow governments and others to rather focus some of their funds on BIPOC groups.

The Conservative Party has suggested in their election platform that the DQ be increased to 7.5%.   When the Conservative Party in Canada is suggesting that wealthy foundations give more to operating charities than a group advising on the charitable sector, then you just want to sit down and cry.

I realize that the charity sector, and everyone else, is exhausted after dealing with COVID but I hope that some will take the time to write to the Department of Finance or put in a submission.  It would be sad for the future of the charity sector if the only submission they receive is from the ACCS.