After my very disappointing first read of the “Report #1 of the Advisory Committee on the Charitable Sector” which was just released last Friday here are some further thoughts.


This is the first report. The Advisory Committee on the Charitable Sector (“ACCS”) has been around for almost two years. It was originally announced in the 2018 Fall Economic Statement. The budget for the cost of running the ACCS was $4.6m over 5 years.   3 of those years have already been completed.  I had very low expectations of this committee, but this first report is below those expectations.

It is not clear to me how speaking to 14 people is a key mechanism by which the minister can engage with civil society which includes about 200,000 organizations and over 20 million volunteers.  The charity sector alone has over 250 categories according to CRA in terms of how they divide up organizations, let alone the many different nonprofit organizations that out there.

These are the 5 working groups of the ACCS:

  1. Examining the regulatory approach to charitable purposes and activities
  2. Modernizing the regulatory framework in Government as it relates to the charitable sector
  3. Supporting the work of charities serving vulnerable populations
  4. Exploring charity-related regulatory and legislative issues faced by Indigenous Peoples and organizations
  5. Improving data collection and analysis related to the charitable sector

The first 2 reported here and the remaining 3 are still consulting.

All of these priorities were considered equally important. Each of the working groups was asked to review the issues and make recommendations to the full ACCS where appropriate and when ready. The working groups met frequently over the course of the summer and fall of 2020. The two groups focusing on vulnerable and Indigenous populations agreed that it was important to take the time to consult with organizations and individuals who are close to the issues and experiences of these populations and of the charities and nonprofits working with them. The working group on data also wanted to undertake extensive consultations with data experts in and outside the federal government, and with leaders in the charitable and nonprofit sector working on data infrastructure and strategies. The two working groups focusing specifically on the regulatory and legal framework for charities held some consultations but were able to draw on the previous work of many advisors, analysts and legal experts as well as the evidence presented in 2019 to the Senate Committee. [my emphasis]


The report notes:

The pandemic put a spotlight on the consequences of the financial fragility of many charities, including lack of reserve funds, insufficient investments in technology and digital infrastructure, dependence on older volunteers and lack of data capacity. Charities serving vulnerable populations such as marginalized youth, victims of domestic violence, Indigenous communities, and communities of people of colour are being particularly hard-hit. This is a gendered crisis. The workforce of the charitable sector is up to 80 percent female. Women have been particularly disadvantaged by the pandemic through lack of childcare, school closures, and layoffs of contract or part-time workers.

Yes lots of great points in the above paragraph. How are your 3 proposals being made and discussed below actually going to deal with that?  There seems to be no correlation.


Anyway if you are expecting calls for better childcare as 80% of the work force is female you are going to be disappointed. If you are expecting a call for more funds for vulnerable and marginalized populations you are not going to find it in this report.  Maybe in another report later this year.  If you are expecting a call for CRA to explain the importance of “reserve funds” for the continuity of a charity and its mission this is the wrong report.  If you think that there will be a call for the government to invest in digital infrastructure for the charity sector or help charities, some of which are either part of the digital divide or serving those who are part of the digital divide – I am sorry but that is not in here either.  If you think that the 3.5% disbursement quota should be increased to 5 or 6% so that foundations sitting on large amounts of money can grant funds to help deal with the “financial fragility of many charities” – again I am sorry.  There might have been a space constraint and they just could not fit that in.  If you are thinking that it would be helpful if the Charities Directorate provide the public with their guidances on religion and their environment that they have been working on for a very long time, also that was not there.


Please read the 3 recommendations from this committee below and ask yourself if you were going to spending millions on this process and looking at the devastation caused by COVID is that what you would have come up with.


The report notes:


This is at least in part because the sector is not “seen” outside of the CRA and Charities Directorate. There is no central federal policy unit or cross-cutting ministerial mandate for the charitable and nonprofit sector.


I’m not sure what media the ACCS members have seen over the past year but the charity sector is certainly “seen” outside of the CRA and the Charities Directorate. In fact, I’d argue that since June 2020 and the WE Charity scandal it is seen almost on a daily basis on national TV.  It would be interesting to see if you had a central place in government what it would have said about the WE Charity scandal.  Certainly, the main umbrella organization of the charity sector, Imagine Canada, had very little to say about the scandal for about a month and we later found out that its CEO was sitting apparently on an advisory committee for the WE Charity CSSG program.


It is interesting in this report there is not one mention of the WE Charity scandal. Perhaps it is not “seen“ by the committee.  Some might say that WE Charity scandal, in addition to COVID, was one of the biggest challenges of the sector over the last year.  It might have resulted in a significant decline in public trust.   Why not even a reference to it and whether it will have an impact on the sector?  Perhaps discussing the problems of WE Charity, or numerous other charities that have serious compliance issues, does not fit the narrative of less regulation by CRA?


After two years they only made three recommendations.  And it is amazing what 3 recommendations were made.


The sector members of the ACCS join together in presenting the following three recommendations to the Minister of National Revenue for her consideration. The ACCS sector members expect to make additional recommendations in a second Report expected in spring 2021.

The ACCS recommends that the Minister of National Revenue work with the Minister of Finance to remove the “own activities” test from the ITA, and require through this amendment a focus on resource accountability. This amendment will provide:

  • that the original regime and “own activity” test in the ITA that requires registered charities to devote all of their resources to charitable activities carried on by themselves be replaced with a regime that permits registered charities to operate in furtherance of their charitable purpose; and
  • the administrative requirements around direction and control be replaced with a requirement for registered charities to establish reasonable and practical parameters for ensuring resource accountability when working to achieve a charitable purpose through a third party that is not a qualified donee.

The ACCS recommends that the Minister of National Revenue formally request the Minister of Finance amend the ITA, to implement recommendation 23 from the Senate Special Committee Report, Catalyst for Change: A Roadmap to a Stronger Charitable Sector. This amendment will provide:

  • that all appeals from decisions of the Charities Directorate of the Canada Revenue Agency proceed to the Tax Court of Canada for a hearing de novo, following consideration by the CRA’s Tax and Charities Appeals Branch (the Appeals Branch); and
  • a right to appeal to the Tax Court of Canada for cases where the Appeals Branch has not rendered a decision on an appeal by an organization that has had its application for registered charity status refused, or an existing charity that has had its registration revoked, within six months of it having been referred to the Appeals Branch.

The ACCS recommends to the Minister of National Revenue that she work with Cabinet colleagues to create a permanent “home in government” for Canada’s charities and nonprofits, outside of the CRA. This home will:

  • provide a place within government for comprehensive policy development which will strengthen the relationship to ensure a more productive and effective partnership ; and

  • advocate on behalf of this sector when broader government policies and programs are being considered, acting as a connector and communicator with other government departments.



If after spending millions of dollars, this is what the committee came up with, my suggestion would be that the committee should be shut down and the funds that would have been spent on this committee should rather be used for capacity building activities in the charity sector. Alternatively, the composition and priorities of this committee requires a significant change.


Direction and Control

The first recommendation, I have discussed before relating to “own activities” and “direction and control” and won’t discuss it here. The only point I would make is that it has been over a month since the proposed legislation was introduced in the Senate and I have read a number of commentaries in favour of it and not one commentary opposed to it. This shows to some extent the current climate within the charity sector.  Either this is the best piece of legislation that has ever been proposed in Canada or we have a bit of a democratic deficit that no one is prepared to criticize this proposed change and legislation as it is supported by some powerful interest groups.  So much for having a plurality of opinion in the sector.


ITA Appeals

The second recommendation is to change the ITA so that instead of appeals for revocations or non-registrations going to the Federal court of Appeal there would instead be a hearing or trial in the Tax Court of Canada and then it would go to the Federal Court and perhaps Supreme Court.  CRA has revoked about four charities in the last year as a result of audit. That this could be one of three recommendations coming out of the ACCS really shows how removed the ACCS is from average charities and their challenges.   On December 5, 2020 we wrote “CRA revokes as a result of audit first 2 charities in over a year”.  Unfortunately, this change may add another year or two to the process of revocation which typically takes about 10-15 years from when CRA discovers major non-compliance.   I don’t think that most Canadian think that if CRA discovers serious non-compliance that it should take so long for the charity to lose its status.


In the appendices there is a statement that I discussed yesterday that just caused me consternation:


  1. Appeals of decisions of the Charities Directorate – Additional context

In all other aspects of Canadian life, the law is fully tested, discussed, debated and ultimately evolved to reflect the needs of society, but not as it relates to charities.


Home in Government

The third recommendation relating to creating a home in government outside of CRA is a more complicated issue. A long time ago I thought it might be a good idea but increasingly as I look across other countries it has a number of problems.


First, at the moment charities deal with many different government departments. So, for example, if you are a health charity you might deal with Health Canada. This makes a lot of sense as Health Canada would have tremendous expertise in the health area.  I’m very concerned that many government departments will no longer be interested in talking to charities on difficult topics and instead will suggest that those groups speak to the “home in government“.

Another concern that I have is that the closer the regulation of charities and the advocacy relating to charities gets to the cabinet the more political everything becomes. If there is a really good person heading up a department it could be advantageous for the charity sector. On the other hand, we’ve seen in some countries where a person is appointed to such an important position dealing with charities or civil society whose views are antithetical to that of the charity sector and this can result in many years of the charity sector essentially being removed from having any meaningful input into government policy.  So while this one proposal may be advantageous it also could be extraordinarily risky.

Funnily enough after many years of discussion, this report does not suggest what part of government the “home in government” should be situated.   Please, please, please don’t make it inside the Public Safety Counter Terrorism area.   I could see at least one unnamed politician doing that!

I would also point out that for the average charity this really achieves very little as they are never going to be significantly engaged with the home in government.

I would also just point out that it is amazing how expensive certain things can be done when they are done by the government. Just having a committee discussing the charitable sector is costing millions of dollars.  Having a home in government may result in expenditures in the tens or hundreds of millions of dollars as we’ve seen in some other countries and those funds can perhaps better deployed in the charity sector by spending the funds on capacity building especially on financial management, compliance, HR, etc.


Ultimately the charity sector is supposed to be about the beneficiaries of the charity sector.  I will leave it to the reader to think whether these proposals are focused on the beneficiaries or the desires of certain special interest groups.