Thank you very much.
My name is Allyson Hewitt, and I am the director of social entrepreneurship at the MaRS Discovery District here in Toronto. It's one of the nodes of SIG, the Social Innovation Generation. SIG is a national network, a collaborative of the McConnell Foundation in Montreal, the PLAN Institute in Vancouver, the University of Waterloo, and MaRS. I'm very pleased to be here speaking on behalf of SIG.
Our mission is to promote the use of social innovation to address intractable social challenges, and much of our work is focused on the non-profit sector, so it's been a great learning for me to sit and listen to my colleagues here today.
Our objective in being here is to impress upon the committee the very important role federal public policy can play in stimulating and supporting social innovation in all parts of Canadian society, particularly in the charitable community non-profit sectors.
SIG is proposing to make Canada's non-profit sector more financially stable and less dependent on decreasing revenue streams from government and philanthropy in order to bring more innovative ideas, services, and products to meet the social needs of Canadians. In our work, SIG looks for ways to create environments where ideas can flourish, and the Government of Canada plays a major role in facilitating and encouraging the growth of this environment for those engaged in what we call social purpose work.
As outlined in our August brief to the committee, our proposal asks that the Government of Canada introduce a new optional legal structure under federal law that enables the creation of hybrid public benefit corporations, or community enterprises. A hybrid structure would encourage access to capital, a critical issue for the social purpose sector. The model we're suggesting has been successfully incubated in the United Kingdom and in a different form in the United States. We all know the importance of the non-profit and charitable sector, both in terms of the services it provides and the millions of people it employs, but we may not be aware of the revenue model that supports this work.
Overall revenue for core non-profit organizations in Canada can be broken down as follows: 36% from government, and--this is a number you may not be familiar with—43% from earned income, 17% from gifts and donations, and 4% from other sources. However, in the past 15 years we've seen significant shifts in the funding profile of this sector. The federal government expenditures as a percentage of GDP have decreased from 21.5% in 1992 to 17.1% in 2007. This has meant reductions in government funding for services and activities in the sector. Charitable donations as a percentage of core revenues also declined between 1994 and 2004.
I know previously you heard from the Wellesley Institute. In a report they published in May 2009 they said the most significant charitable issue--selected by 63% of the respondents--was that all of a charity's activities must be charitable. It's a requirement that is at odds with the funder expectations that charities be sustainable, be entrepreneurial. It's also at odds with reality; 43% of the income in this sector is being generated entrepreneurially. So if you take into account all of those issues, you'll see we're at a bit of a disconnect.
The existing legislative and regulatory regime was designed in a different era. Canada's community non-profit and social sectors have challenges accessing capital and diversifying their operating income because of restrictive tax regulations and capitalization options. These financial barriers are unnecessary obstacles for an emerging new breed of the people I work with, which is social entrepreneurs, and they limit the potential impact of their innovations. This sector needs the flexibility to explore new forms of social finance.
As part of our work at SIG, at MaRS we have advised hundreds of clients on their marketing strategy, business plans, funding options. Outlined here is just one example of a social enterprise that has encountered problems due to regulatory restrictions or lack of capital options.
In Toronto we have an organization called Eva's Phoenix. They run something called the Phoenix Print Shop. It's an award-winning print training program for homeless youth. It works with businesses to offer them an environmentally responsible print option. The challenge is that they are competing with others, but they are doing a training program. In order to stay competitive, they need to buy state-of-the-art equipment. They can't be competitive without access to capital. It's not something they're going to get grants and donations for.
The proposal outlined in this document represents an opportunity for the government to support the community non-profit sector in ways that build sustainability and resilience, language we hear all the time without the supporting structures behind it. It will demonstrate that the Government of Canada wants to unleash creative energies, to release previously unexploited financial resources and capacities to support this sector.
I'm going to stop right there. I thank you very much for your time and look forward to your questions.
Congratulations for getting through this part.