On Friday, December 11, 2020 I gave testimony to the Standing Committee on Access to Information, Privacy and Ethics (ETHI) on the CSSG and We Charity scandal.   Here is the video of the testimony.   The part dealing with procurements and the WE Charity scandal is at 14:07, I present at 14:13:30.  Lots of great questions. There is also some heated exchanges later on whether a public inquiry is necessary, whether there are other charities who could have done the project and whether WE Charity would have received $543 million.  In fairness to Nathaniel Erskine-Smith who was asking some of the questions, he admitted that the WE Charity scandal was a mistake, which is a lot more than some Liberal supporters.

Here are my opening comments to the committee:

 

 

Introductory Remarks by Mark Blumberg – December 11, 2020 to the Standing Committee on Access to Information, Privacy and Ethics (ETHI)

 

Thank you for the opportunity to speak to this committee today.  My name is Mark Blumberg.  I am a lawyer at a small firm of 10 lawyers in Toronto who focus exclusively on non-profits, registered charities and philanthropy.

 

The scandal involving the Canada Student Service Grant (CSSG) and WE Charity is not over.  These comments are a point in time and the saga is continuing.  There is lots we don’t know about the scandal.  Having various committees of the House of Commons looking at these issues is helpful but quite inefficient.  Also there are lots of complicated issues – such as charity compliance and these committees are not really ideally equipped to deal with.  That is why I have suggested in the past that a public inquiry be launched into this particular scandal and then the various committees can go back to focusing on their regular work in these difficult times dealing with COVID.

 

There are essentially three components to the scandal:

1) The Design of the CSSG Program itself which was problematic

2) Federal government decision making process that appears to be conflicted

3) Many concerns about the choice of WE Charity to deliver this program

 

This is not just about $543 million – it is about a Federal government during COVID when the charity sector is under tremendous strain giving almost nothing to the charity sector – certainly almost nothing when one thinks of the tens billions being spent and then the gov proposes to give $543 million to one organization who has a checkered past.   So it is the contrast of the way this one charity was treated with a 543 million grant compared to how the Federal government dealt with the rest of the charity sector – which has largely been silence and providing absolutely nothing to most charities.

 

Another big issue.  Was there tremendous influence by the Finance Department on Employment and Social Development Canada (ESDC)? – or did ESDC think that We Charity was a great charity and uniquely able to deliver this program?  If it is the first (finances pressure) then Mr. Morneau has resigned and perhaps that influence will stop.  If it is second, the possibility that ESDC actually thought WE Charity was a great charity then it is a much more serious issue – it would really call into question the capacity of ESDC to undertake due diligence on charities and their decision making.  If this is really an ESDC decision as many Liberals have claimed then significant changes may be needed at ESDC or tens of billions of funds could be equally poorly allocated over the next few years.   Assuming Finance was not pressuring ESDC, how ESDC could have gotten this so wrong is mindboggling.  That is one of many reasons why I think a public inquiry into the CSSG/WE Scandal is worthwhile.

 

There are many compliance issues that have been raised by WE Charity including but not limited to:

 

  • Using multiple corporations (some of which are Canadian registered charities) and lack of clarity between them
  • Treatment of employees during employment and post-employment
  • Reporting and transparency
  • Lobbying of government officials without registering
  • Partisan activities
  • Social enterprise and business activities
  • Government grantmaking, processes and fairness
  • Owning large amounts of real estate
  • Corporate sponsorships and access to children
  • Compensation of Founders
  • Governance and having “founders” involved in a charity for a long period of time

 

Trust in the charity sector is vital.  Public trust is like oxygen, you only really notice a problem when it is in short supply.

Will Canadians trust charities less because of the WE Charity scandal?  Will they think that the problems of WE Charity are reflective of the broader charity sector and trust the sector less?

WE Charity was quite unique but not completely unique –  therefore their indiscretions may affect the reputation of the charity sector.

It may take years to see full impact of the scandal but we are already seeing significant declines in public trust of charities despite huge gains in public trust at the beginning of COVID in response to the heroic work by some in the charity sector to respond to COVID.

The biggest concern for the charity sector is that the WE Charity scandal will hurt the reputation of the sector, undercut donations and government funding.

 

Transparency is vital for maintaining public trust.  We are concerned that there is not nearly enough transparency in the Canadian charity sector.  Over the last ten years the CRA, under pressure from certain special interest groups, has actually been reducing the amount of information they publicly collect and provide about charities.  Other countries meanwhile have been increasing transparency on charities.

 

Having inadequate transparency on registered charities in Canada meant that there is not enough information on WE Charity available and very little on ME to WE – it is hard to understand full picture when only can see half (?) of the story.

I have submitted to the Finance Committee 10 recommendations on improving the regulation of charities in Canada.

I will just mention 3 ideas:

  • Currently if CRA was aware that a charity was involved in very problematic activities they are not allowed to disclose that information. Not to the public or even to MPs. The Federal government should amend the confidentiality provisions of the Income Tax Act in order to allow the CRA at its discretion to disclose serious non-compliance of registered charities.
  • For registered charities the CRA discloses the public portion of the T3010 – but when it comes to non-profits that are not charities the CRA discloses nothing. We have proposed that already many non-profits file the CRA form T1044 every year – they are filed with CRA and inputted by CRA, -these should be disclosed – it is no extra effort or burden but it would give us an idea of at least part of the non-profit sector.
  • We have also proposed that the federal government provide funding to the Charities Directorate to increase the amount of information collected and distributed on charities.

 

We want a balanced regulatory approach to charities – which is appropriate to the importance and tax subsidy provided to charities.

The WE Charity scandal raised a number of very important questions about the regulation of registered charities.  Either regulation of the charity sector will be enhanced or the reputation of the sector and public trust in the sector may decline.

 

I have publicly provided detailed comments on different aspects of the WE Charity scandal – I look forward to questions and can certainly provide more information to the committee if it is helpful.

 

 

Here is my recent submission to the Finance Committee.