Thank you, Mr. Chair.
I would like to begin by thanking committee members for participating in the study of Bill C-470, which would bring about more transparency with regard to the salaries paid by charities.
Mr. Chairman, when I introduced Bill C-470 last fall, I genuinely believed it was a mere accessory to motherhood and apple pie. I doubted anyone would actually argue with the idea that Canadian charities should have the same type of salary disclosure that American charities already have, that all Canadian public corporations like Rogers and Bell have, and that most provincial governments already have. The fierce resistance made me wonder if I had innocently stumbled onto something.
I met with countless charities and with even more donors and started asking why transparency could be so frightening to so many. The small measure of transparency my bill seeks is the disclosure of the names, titles, and salaries of just the five highest-paid employees. Charities would still report ranges of the top ten, as they do now, but the top five would be fully disclosed.
A second prong of my bill adds to the minister's long list of rarely or never-used powers to actually regulate charities. It would allow the minister the discretionary ability to deregister a charity if it pays an executive more than a quarter-million dollars in a year. While lately the media are full of reports of abuses by charities, I should say at the outset that there are many excellent charities in this country.
One is the St. Peter's Parish Dominican Relief Fund. It delivers hundreds of thousands of dollars in aid every year to Haitians living in the bateyes, in the Dominican Republic. Father Michael Corcione, Dr. Dario Del Rizzo, and a team of volunteers set up medical clinics, provide medical care, medicine, and clothing, and handle fundraising, logistics, and program delivery without spending a single dime in administration or fundraising costs.
At the other end of the scale is World Vision. It collects over $350 million in donations annually, spends less than 20% on fundraising and administration, and pays its CEO $188,000. The largest issuer of tax receipts in Canada appears to pay far less than the discretionary cap suggested by this bill. Tiny charities and massive charities can both put the cause first and keep salaries in check.
In the middle are charities as small as 2% of the size of World Vision that pay much more to executives and spend twice or three times as much on administration and fundraising. Transparency itself will not cure self-interest and the temptation to take home more charity in pay and perks; however, it will provide some measure of restraint and donor awareness. Better-run charities may benefit from donations redirected from those that burn more than half of every dollar on fundraising companies and administrative salaries, where the president hires himself as a consultant, where nepotism pays six-figure salaries to spouses and children, where the executives pocket donated prizes, or where the charity helps facilitate a $2.5 billion tax fraud by issuing inflated tax receipts through gifting tax shelters.
To see why salary disclosure is so important to donors and so threatening to executives, let's look at the current state of disclosure. You will have read in The Toronto Star that the Oshawa Hospital Foundation paid its CEO $200,000, five-figure benefits, $10,000 a month in consulting fees, and more. All of this would have been a surprise to anyone looking at the return posted on the CRA website, which says the charity did not indicate that it incurred expenses for compensation of employees during the fiscal year. The Toronto Star total adds up to about $350,000. The CRA publishes “zero” for 2009 and previous years.
You can get classified Pentagon documents on WikiLeaks easier than you can find compensation information about charities.
I would argue that early compensation disclosure would have prevented the Oshawa situation from turning into a crisis, as there never would have been a need for an investigative reporter to dig out the truth.
Mr. Chair, with the current state of disclosure, 88% of donors don't bother to look at the CRA site and the confusing and misleading information posted there. They don't have the time to figure out the shell games. They rely on the only real regulators of charities, the media: the Toronto Star, The Globe and Mail, and CBC, to name a few.
The CRA was kind enough to provide data on donors, donations, fundraisers, and management/administration costs. I've circulated some tables for your perusal. You will see that since 2000, donors have remained flat, so high-priced fundraising talent is not attracting more donors. Charitable receipts are growing barely faster than the rate of inflation, barely more than 1% a year on average, but fundraising costs defy gravity. For every percentage point increase in donations, fundraising costs rose three and a half percentage points. Even after accounting for inflation, fundraising costs rose more than 50%, three and a half times as fast as donations.
Management and administration costs marched skyward as well, rising even faster than fundraising costs, so secrecy has certainly been a booming success for fundraisers and executives in terms of pay. It is not much of a success for frugal charities that have to spend more and more to maintain their revenue against competition that can spend 50¢ of every dollar on fundraising and administration, without sanction or salary disclosure.
Let's look at the situation from the perspective of people who need the money to reach the cause, people hoping for a cure or a helping hand. Putting a personal face on it, if you will permit me, let's take a look at the MS Society. I know that donors and sufferers are disappointed to find out that the MS Society is spending more on fundraising than research. Fundraising, management, and administration together exceed research by 75%, and exceed the total spent on all charitable programs by 20%, according to the CRA listing. Despite this, the MS Society is one of the better performers among medical charities and may just be a victim of the inflationary reality created by the fundraising industry, which you will hear from later.
Charities have become a filter that too often shrinks donations by half and leaves federal and provincial taxpayers paying for the bulk of actual programs through credits and deductions. The question my bill asks is whether secrecy is working. Are unlimited and undisclosed salaries for executives bringing down the costs or driving them up? Should Canadians continue to have to look to U.S. registrations to find out how much Canadian charities are paying themselves?
You will hear from charity executives themselves. You will hear from their lawyers and private fundraisers who rely on them. What do Canadians think? What do donors think?
I asked Pollara to ask 2,000 Canadians, and here is what they found. Only 12% said they had looked at the CRA website, so there needs to be another way to bring light to blind generosity.
When asked, do you agree or disagree that the five highest-paid executives from all Canadian charitable organizations should be required to disclose their salaries, 83% agreed and 11% disagreed.
When asked, are you aware that some charity executives earn more than $250,000 a year, 68% said no. Do they think there should be a limit? Sixty-eight per cent said yes; 22% said no.
What limit do they think is appropriate? Of those who supported a cap, 82% said it should be $100,000 or less. The median answer was $75,000. Only 3% of donors thought the cap should be higher than $250,000. So that is the best sense as to what donors are saying at large and might be saying to you. But alas, you will hear that the minister might deregister a hospital or someone might pay more than the limit for a brain surgeon. You might hear any number of other red herrings from people who know well that the minister already has the grounds to deregister countless charities on the basis of disproportionate private gain, and hasn't done so. He's hardly going to deregister a hospital, university, or orchestra for paying doctors, professors, or conductors.
Nonetheless, I have agreed to delete the part surrounding the cap, because I don't want that tangential debate to be the shield that keeps exorbitant salaries secret.
I have received assurance from the parliamentary secretary that the government will explore the murky issue of contract fundraisers and fundraising companies. Perhaps we will finally see full disclosure of all fundraising salaries earned from donations that never make it to the cause.
Moreover, I don't want anyone to be able to hide a $1 million salary behind a secretary's privacy concerns, as if they're worried about the privacy of low-paid workers. So I have offered another amendment to create a disclosure floor of $100,000.
In conclusion, we now have a bill with a single, unambiguous purpose of delivering transparency for high-paid executives. I believe that Bill C-470 can be a small first step to reforming the charities sector into a transparent and efficient funding vehicle for good causes. I know you will need to do more.
The salaries of fundraisers and the profits of fundraising companies need to be disclosed. Fundraising costs and CEO salaries need to be disclosed right on the tax receipt or other means, as Blaine Calkins suggested in the House of Commons. Tax receipts ought to be reduced by the amount that fundraising and admin costs exceed 25%. Donor reaction would bring fundraising costs down in a frantic hurry—to the benefit of every cause, cure, or vital need.
Finally, the minister should have the same powers as the securities regulator to ban executives who hide costs, funnel funds to related companies, or participate in scams like gifting tax shelters that robbed Canadian taxpayers of over $2 billion by inflating receipts. With these measures in place, the donor dollar would no longer go through more pockets than a dry cleaner, and perhaps charities would deliver a lot more charity.
Thank you.
