I recently looked at a couple of ATIP documents from the Charities Directorate and I was quite surprised at the decline in the number of charity applications that CRA is accepting. These statistics go back to 2000.

What we see that generally, most charity applications are not successful – that is not surprising at all, as many of them are prepared by well-intentioned people (including professional advisors) who know little about charity and charity requirements and therefore their applications have one or more issues and are unsuccessful.  I don’t regret that we have a fulsome review process for new charities in Canada.  If you want to see exhibit “A” of what you get if you don’t have a fulsome review just look to the US where charities have proliferated including those who are “neo-Nazi” in orientation etc.

But we can see that the height of charity registrations was in 2003-2004 when it was about 3014 applications registered.  In 2017 and 2018 it had dropped to 1585.  When one considers that we lose about 2000 charities a year and our population is steadily growing it is worrisome.  Even more worrisome I just looked at the CRA Charities Listing to see how many charities were set up over the last year (Feb 16, 2019 to Feb 16, 2020) and the number is 1125!  When one considers that possibly 500 or 600 are charity re-registrations as a result of non-filing of the T3010 then you are actually left with only approximately 500 new applications.

 

Of those 1125, we see that 194 are private foundations (over 17%), 68 are public foundations (6%) and the remaining 857 are charitable organizations (76 percent).

We also see that the number of applications, not just registrations has gone down, from a high of 4740 in 2011-12 to a low of 3355 in 2017-18.

 

The world has changed since the year 2000 when these stats started.   Canada’s population was about 30m people in the year 2000 and today it is around 37m.  I know that there is quite a popular opinion at the moment that we have enough charities and we don’t need any more charities.   After all, we have 86,000 charities, actually now 85,773.  I used to be more sympathetic to the opinion that we have enough charities.  Unfortunately, the reality of the charity is much more complicated than a simple “we have too many charities”.  In this world particular of memes and sound bites simple to understand concepts often get a lot of acceptance – even though they may be simply wrong.

There are a number of reasons I am concerned with these developments.

  1. When one thinks that the country has expanded in population significantly and charity registrations are down by about 50% I think that this should be a cause for concern.
  2. Many charities are foundations and many of them don’t carry out charitable activities – they are essentially holding tanks for funds that will one day be transferred to charities.  About 32,000 charities are churches, synagogues and mosques and other religious institutions.  Thousands of charities are essentially dormant and CRA is trying to shut those down.  So an argument can be made that the number 86,000 is actually inflated, that there are far fewer charities that are actually available and doing work in Canada.
  3. This idea that we have too many charities has probably been around for almost as long as we have had charities.   What would the Canadian charity sector look like if in the year 2000 we stopped registering charities?  Or perhaps in 1990 if we stopped registering charities?  After all, if we had too many charities in 1990 then perhaps we should have stopped registering new ones.   You can actually search the CRA’s Charities Listing and look at the post-1990 or post-2000 charities and you might be surprised at how many important charities have been created since then.
  4. Through voluntary revocations, non-filing of the T3010, revocations as a result of audit etc we have about 2000 charities losing their charitable registration every year.    If the number of charity applications continues to increase and the number of registrations goes down, then in 20 or 30 years we may have a much smaller and less dynamic sector.
  5. There will be fewer opportunities for volunteers to volunteer with charities.  After all, no one is paying these volunteers – it is a personal decision and often involves many sacrifices – if there are few charities it may be harder for volunteers to become engaged in work that they find satisfying.  Yes you can do micro-volunteering using technology with a group halfway around the world – but in fact, most volunteers don’t do that – they work with a local group.   They want to actually have contact with people in their local communities.
  6. Canada is a big country geographically and many of the charities (especially outside of the religious realm) are concentrated in large cities.  Many of them were established decades ago and have existing power structures controlling them.  A recent Senate report highlighted the need for diversity in terms of those who run and control charities.  There is also a need for charities to serve an increasingly diverse and large country.  Don’t get me wrong – there are charities that provide services to everyone and who have diverse boards and there are national charities that operate across this country.  But there are just as many “national” charities that are not doing that much beyond the city they are located in or who have huge gaps in the “national” services they provide.  There are boards that lack diversity but I guess it depends on how one defines diversity.   I remember someone quipped that the senior judges in one province were all minorities – they almost all had Scottish descent.     If you think diversity is an all-male board but they have diversity in age – they range from 75-80 then you probably are not going to be worried about diversity in the governance of charities. By the way charities, unlike some other entities, generally don’t have to report or even keep track of diversity.  They are not required to have any diversity in their governance structure.   Personally, my interest in diversity on boards has less to do with a “social justice” or a fairness argument but rather it is quite clear that diverse boards tend to make better decisions and are more likely to see problems and deal with them.   Charities have an important role in Canada and we want charities to work well.  So how are we going to have more diversity – there is education, there is government action and there is the possibility that new charities will be established by new groups that might not be included in the current governance structures.  They are all possible.  Education could take decades and it is really up to the charity to decide to be more diverse.  Government action like mandating certain diversity could be controversial and I doubt it would happen across the charity sector, although some funders may require it.   I think the easiest path to having more diversity in charities is for groups that have not been embraced by existing charities or have been actively excluded from charities to set up their own charities.  I wish this was not necessary but should Jewish doctors in the 20s or 30s who were not being hired by hospitals just stayed home and been unemployed.  No, they set up Jewish hospitals and some of them are the best hospitals we have in Canada and they serve Jews and non-Jews.
  7. National organizations can be very expensive to run and for some types of programs or activities, it makes a lot of sense to have a national organization.   But with many services provided by charities, it makes more sense to provide it locally and the cost structure and efficiency/effectiveness may be greater.

 

I am going to anticipate that some will not agree with my concern about the decline of registrations and here are some of my thoughts on what I have heard already.

I acknowledge that in some areas we have too many charities.  For example, there are many religious institutions that have dwindled in size and it makes sense that they merge with others.  By some estimates about 1/3 of religious groups that exist today will not exist in 10-20 years.   There is duplication in some charitable areas such as fundraising or research for cancer and there could be and have been various recent mergers to bring organizations together.  I am a big fan of mergers when they make sense!  We have a directory of information on mergers if you are interested.

We also have some bad charities and honestly, if about 500 charities were to disappear we would have a better charity sector.  But most charities are not bad and the few bad apples covered by the media or blogged about may be an embarrassment to the sector but we should not generalize based on those charities.

 

Here is an excerpt from an article I wrote in 2008 in an article entitled Should We Establish another Canadian Charity?

In many countries, it is difficult to obtain charitable status and in some countries there are only 100 or 200 public institutions that receive tax recognition. Is it necessary to have 400 cancer charities? Perhaps not, but how about having only one cancer charity? Having many charities encourages innovation and competition. Does anyone ever ask the question “do we have too many businesses?” Well, why would one ask that question, business is good for our society, creates job and wealth. Perhaps, but some businesses do bad things like pollute, evade taxes, sell dangerous items etc. There has always been a movement calling for some business to
lose their charters like tobacco, but it almost never happens unless a business stops filing its tax returns. Charities, at least in theory, provide public goods and benefits. I think in general the more the better, as most people would say more business, more jobs and more economy is better.

Perhaps instead of having 2069 Anglican parishes issuing receipts it would be better to have 1 Anglican Church issuing receipts. There may even be some people in the Anglican church who would like that. If we went with this idea, we could have one Roman Catholic church, not 4432 different groups. From a regulators’ point of view it may make things simpler, perhaps it would reduce by 30,000 or 40,000 the number of charities which would make it seem like we have less charities in Canada. I think, however, it would also result in a concentration of power which may be unhealthy. It also results in less transparency about operations. When every parish that is separately registered files its T3010 then you get to see what that parish spent, how much it took in etc. Also, Canada is a big country geographically and the cost of running one large national organization may be greater, and that one organization may achieve far less, than ten regional organizations.

YIMBY – yes in my backyard. I thought I was smart and invented this word. But someone else who is a lot smarter and quicker than me coined this term many years ago. (http://en.wikipedia.org/wiki/YIMBY) YIMBY is the opposite of NIMBY. Basically everyone and their cat and dog wants a vibrant plethora of charities and services in their community. If you ask an atheist – do we need any religious groups registered as charity the answer may be no. If you ask an RC whether you need any Pentecostal churches, you may not get a wildly enthusiastic yes. Why do we need a group in Scarborough that helps women who are in abusive relationships? I think many people in Saskatchewan may not even know where Scarborough is. But for women, perhaps not their abusive partners, who require help in Scarborough I think they know the answer. If you care about animals the 687 charities dealing with “Protection of Animals” is not enough in this big country. So if you care about a particular issue relating to a particular geographic area you may see a big number and say – well that is fine, but there is no organization in my community dealing with this important issue and I want to create one. Also you may only notice the inadequacy of what established charities provide when you, a friend, or loved one, actually needs help.

If you ask a major charity in a particular sectoral area, like cancer, whether there are too many charities in that area you will almost invariably here a resounding yes. After all, if you worked at that charity you are not looking forward to competition from other charities. You are also not necessarily looking forward to other charities being more innovative and doing a better job than your charity. However, if you live in Thunder Bay you may want support in your local community and an organization based in Toronto may, or may not, be able or interested in providing the service.

 

I spend my life working with non-profits, charities and philanthropists.   While many groups approach us for legal advice on structures and think that establishing a charity is the right thing for them – I would say that we probably suggest to more people that a charity is not right for them than those who we suggest that it is the right approach.  Keep in mind here that these discussions are based on the particular facts of the person – they are not based on some preconceived idea that we have too many charities and therefore no one should apply or that we have too few charities and therefore everyone should apply!  The charity sector is too important to let it dwindle and stagnate because of the substantial decline in new charities.

Send us your thoughts and comments.

 

More detailed information from 2007 on the breakdown of charity applications in terms of complexity.