Evidence of meeting #49 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was charities.
A video is available from Parliament.
Managing Director, Charity Intelligence Canada
There was no additional information provided in the audited financial statements, but the bank had waived the covenants for the current period.
Conservative
Michael Cooper Conservative St. Albert—Edmonton, AB
It terms of ME to WE, versus WE, we have on the one hand money flowing from ME to WE, to WE, from the for-profit to the not-for-profit, but then we have money flowing from the not-for-profit to the for-profit. In your experience how common is that, and what do you say in response to the Kielburgers saying—and here I understand the issue between contributions and donations—WE still comes out on top. Do you see some red flags just in terms of the volume of transactions or the flow that is going from WE, the not-for-profit, to the for-profit ? It seems like a substantial amount has been flowing in that direction, as opposed to from the for-profit to the charitable entity.
Managing Director, Charity Intelligence Canada
On that point about social enterprises, as Mr. Julian would be aware from his social enterprise, social enterprises are a sort of new and innovative way for charities to work today. The WE situation is different, not so much because of its relationship with a social enterprise but because the social enterprise is private and the social enterprise is owned by a different entity. Typically the social enterprise is owned by the same charity. It is an operating subsidiary rather than a separate entity.
I think in every other case where we have seen charities that have social enterprises, that social enterprise is public. It wouldn't be privately controlled by individuals.
Liberal
The Chair Liberal Wayne Easter
You can ask one very quick question, Michael. I was loose on time before, but now I have to be tight on it.
Go ahead.
Conservative
Michael Cooper Conservative St. Albert—Edmonton, AB
Okay.
Just to pick up on that point, I guess what you would be talking about would be a flow-through, so to speak, as opposed to the set-up we have with WE and ME to WE, where there is no flow-through and you have instead a charity controlling a social enterprise by a handful of individuals. Do I have that right?
Managing Director, Charity Intelligence Canada
Yes, you have that right. There was so much confusion by Canadians—there has been since we began research coverage—about the relationship between WE Charity and ME to WE. It was just very blurry. Our role was to write the information in common English so that donors could understand how much of their donation was going to the private business.
Liberal
The Chair Liberal Wayne Easter
Thank you, both.
Ms. Koutrakis will be followed by Mr. Fortin.
Ms. Koutrakis.
Liberal
Annie Koutrakis Liberal Vimy, QC
Thank you, Mr. Chair.
Thank you, Ms. Bahen and Mr. Thomson, for your testimony before our committee this morning.
Prior to having the privilege of serving my constituents and Canadians, I was in retail financial services and the investment profession for many years in a supervisory and leadership position. If one of my investment advisers had told me that he or she had bought their client a country's or company's bonds that were paying a good return and fitted with the client's investment strategy, a key indicator that I would ask the adviser to confirm would be what the Standard & Poor's and Moody's ratings were on that bond.
Much like I would look at the ratings of a bond, I would imagine the federal government and its civil servants would have, and may have, turned to Charity Intelligence to look at the ratings of charities being considered to administer its programs. Looking at your rating system for WE Charity, based on your own metrics available at the time that WE Charity was being considered and not the updated info you put out three weeks ago on July 10, and the fact that the public service recommended them for a specific task, was it not reasonable to conclude that WE Charity was in good standing, based on your own ratings at the time?
Managing Director, Charity Intelligence Canada
That's an excellent point. That's a point our research team will be going through: Was there anything else we could have reported?
Yes, we had the ratings. They looked at, we said, those objective measures like overhead costs and balance sheet items. Those show the three-star rating. That report was done in August 2019. But we also wrote in the report....
We always hope that donors don't just look at the star rating and move on but that they take that three minutes to read the report and get a better understanding of a charity's programs in terms of their results and impact, the financial review, and the charity's comments. I would really hope, if someone were making an investment of this size...that the government would have felt confident to ask questions and pick up the phone and seek clarification on anything they were unclear about.
Liberal
Annie Koutrakis Liberal Vimy, QC
Thank you for that.
I also want to talk about the “demonstrated impact" metric. Can you please provide the committee with more depth on your process methodology? I think we need to have more clarity on how that is measured.
Director of Research, Charity Intelligence Canada
In our demonstrated impact assessment, as I mentioned before, we go through every program the charity offers and look at the results that they have reported. We then clarify with the charity if there are additional results that they have not publicly reported so that we can get as deep an understanding as possible of what the programs do.
When it comes to WE Charity in particular, we looked at their international programs, and the level of reporting is weak when it comes to understanding what impact they've had. They talk about how over the last 20 years, since they've been in business, they've built 1,500 schools and they've helped a million people get access to water. These are all very vague statements that provide very little demonstrated impact over what happened in the last year.
When we look at their domestic programs, we see that they supplied 10.8 million pounds of food collected and they raised $8.3 million in funds, so there's more specific data from last year. If it was just based on their international programs, they would have been in the “low” category, because the demonstrated data was of very poor quality. It was their domestic programs that had somewhat better-quality data, with more specific, actionable, understandable metrics that we could actually value.
Liberal
Annie Koutrakis Liberal Vimy, QC
Thank you.
Have you done an analysis of WE Charity compared to other organizations considered to administer the Canada student service grant? How do these organizations compare and contrast, based on your analysis?
Director of Research, Charity Intelligence Canada
We can compare WE Charity generally to the organizations across the board, and on all metrics they rate relatively highly, except for the demonstrated impact metric, on which they are significantly under average.
I can't speak specifically to any of the direct alternatives to WE for this contract, but relative to the charities that we've assessed in terms of demonstrated impact—as I said, roughly 250 charities—WE Charity is below average.
Bloc
Rhéal Fortin Bloc Rivière-du-Nord, QC
Thank you, Mr. Chair.
Ms. Bahen and Mr. Thomson, if I understand correctly, you said earlier that about 80%—a significant percentage, at least—of the WE Charity budget was transferred to ME to WE, a for-profit company. You told us that the information about a major part of the immovable assets was not revealed in the financial reports. I also gathered that WE Charity is the only client of the auditing firm. In other words, that firm has no other clients. All this information seems very important to me.
I see that you managed to find all that information with your small team of three or four people and an annual budget of about $435,000. My hat is off to you; this is good work.
How is it that you were able to discover all that information, while the federal government, with all the means at its disposal, was not able to do a simple audit like that before awarding the contract to WE? That troubles me.
In concrete terms, how much time did it take you to discover that information? How many hours of work does this research, this checking, represent?
My question goes to Ms. Bahen or Mr. Thomson.
Managing Director, Charity Intelligence Canada
For WE Charity Foundation, it would take longer than normal. Having analyzed it for many years, we have a model, so it's just an update to the model. I estimate I would have spent—and I would have gone through this one very carefully, as it is more complex—probably two days on it. I know when the audited financial statements were received, and I know when I was ready to provide that information back to management.
If I can just clarify, the donations that went to ME to WE, the private business, were not significant. They were 7% or 8% in fiscal 2019 and fiscal 2018.
Bloc
Rhéal Fortin Bloc Rivière-du-Nord, QC
Okay. I made a mistake. It is not 80%; it is about 7% to 8%.
So it apparently took about two days for you to do that audit. That's good. My hat is off to you.
Once again, I wonder how our government could have let that slide. How come it did not even issue a call for tenders? That's more a comment than a question.
However, I would like to ask you again about the situation in Quebec, the question that I brought up earlier. In your checking, were you able to ascertain whether WE Charity conducts activities in Quebec, or to your knowledge, does it do so only outside Canada? I know that it does so overseas.
Managing Director, Charity Intelligence Canada
In reading the information on WE Charity's results reports, I was using the fiscal 2018 annual report for its results. I was informed by WE Charity management that the 2019 annual report was late because of COVID, and I did not do an update on its programs and locations, so, in my analysis, I did not see mention of its programs in Quebec.
Bloc
Rhéal Fortin Bloc Rivière-du-Nord, QC
So, to your knowledge, WE conducts no activities in Quebec. Do I understand correctly?
Managing Director, Charity Intelligence Canada
That kind of information is not reported in the audited financial statements, and I did not see that in my time going through its website.
Liberal
The Chair Liberal Wayne Easter
Okay. Thank you, both. It might be a question when further WE witnesses come forward.
We have Mr. Julian, followed by Ms. May.