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.

On the agenda

MPs speaking

Also speaking

Greg Thomson  Director of Research, Charity Intelligence Canada
Kate Bahen  Managing Director, Charity Intelligence Canada

11:10 a.m.

Liberal

The Chair Liberal Wayne Easter

I call the meeting to order.

Welcome to meeting number 49 of the House of Commons Standing Committee on Finance. Today's meeting is taking place, as has become the custom, by video conference. The proceedings are being webcast and will be made available via the House of Commons website.

This meeting is scheduled to last for two hours. It was originally planned to be three. An amended notice of meeting has been published.

Our witnesses today are from Charity Intelligence Canada. Kate Bahen is the managing director and Greg Thomson is the director of research.

Ms. Bahen and Mr. Thomson, welcome to the meeting by video conference. Thank you for agreeing to appear. I know that you had very short notice, and I apologize for that on behalf of the committee.

You have a total of 10 minutes for your opening presentation. Then we'll go to members for questions.

Welcome. The floor is yours.

11:10 a.m.

Greg Thomson Director of Research, Charity Intelligence Canada

Thank you.

Good morning. My name is Greg Thomson. I am the director of research for Charity Intelligence. Charity Intelligence is itself a charity, one that analyzes Canadian charities to help donors be informed and give intelligently. Our website hosts free reports on more than 780 Canadian charities and provides insight into such specific giving areas as the environment, cancer and homelessness. This year some 314,000 Canadian donors used our website for information on Canadian charities, reading over 1.3 million charity reports. We estimate that our research helped inform and influence $95 million in Canadian charitable giving last year alone.

Just as democracy depends upon informed citizens, the fundamental health of philanthropy rests on well-informed donors. Our own research supports this case. In our surveys of donors who have used our website, 77% say that Charity Intelligence reports have improved their confidence in giving to charities, and have inspired these donors to give 32% more money to charities. It’s within this context that Ci presents to the finance committee today.

Since 2011 Ci has analyzed and reported on WE Charity. WE Charity Canada is a big piece, but only one piece, of what we now know is a highly complex international network of WE-related entities. Starting in 2014, Ci rated WE Charity with our highest four-star rating based on transparency, reporting and overhead spending. WE Charity ticked all of the boxes and performed well relative to other Canadian charities.

In September 2019 Ci analyzed WE Charity’s demonstrated impact, the measurable returns from its programs, and found WE Charity’s impact to be “fair”. Fair is below average. This reduced Ci’s rating on WE Charity to three stars.

Our major limitation as analysts is that we are only as effective as the data is reliable. We are analysts, not auditors.

Ci’s August 2019 report on WE Charity flagged the following material information: a breach of financial covenants on its $13.7 million in bank debt that its bank has waived for the second year in a row; and the related party transactions with 8% of donations to WE Charity going to ME to WE, the private business controlled by Marc and Craig Kielburger, to purchase goods and services. In August 2019 an outside party shared with us public records about WE Charity’s real estate transactions. These transactions were not disclosed as related party transactions in WE Charity’s audited financial statements. Given this lack of disclosure, we reviewed WE Charity’s auditor, who has a solid reputation for tax and business. However, the auditor’s website advertised only one charity client: WE Charity. In our database, no other charity used this auditor.

This contrasts with WE Charity hiring the most prestigious law firms and its stated commitment to the highest financial transparency. We questioned why WE Charity has not hired leading international auditors to prepare their financial statements, despite being one of Canada’s largest charities with global operations. On learning of the resignation and replacement of WE Charity’s directors in March of this year, we arranged a 30-minute video call with WE Charity’s chief operating officer. Subsequently, we learned through the media that one of the newly appointed directors had resigned. We were not assured by WE Charity’s comments or statement. On July 17, 2020, Ci issued its strongest alert, a donor advisory.

With more news coming to our notice, and after looking at other WE entities, we released our list of 10 questions, primarily as follows. Was the cabinet aware that the CSSG was contracted through WE Charity Foundation, a new and separate foundation with no employees or assets, rather than WE Charity? Why are the Kielburgers not directors of any of the WE charities but take the title “co-founders”, which allows them to avoid fiduciary responsibility and evade disclosure? Why has neither WE Charity Foundation in Canada or ME to WE Foundation in the U.S. disclosed in their regulatory filings the non-arm's-length relationships of their three directors? Why does WE need such a complex organizational structure with multiple single-purpose entities to do its work? This is highly unusual for charities, even amongst Canada’s largest international aid charities.

WE Charity is an outlier. Normal metrics for assessing charities do not adequately reflect its suitability for donors. It is not similar to the vast majority of other Canadian charities. We have flagged these issues because the more donors understand about the entirety of the WE network, the better informed they will be and the better able to give intelligently.

With that, I'll hand the floor to Kate Bahen, managing director.

11:15 a.m.

Liberal

The Chair Liberal Wayne Easter

Ms. Bahen, before you start, I would like to give members the lineup for the questions afterward.

We will start with Mr. Poilievre and then go to Mr. Sorbara, Mr. Fortin and Mr. Julian.

The floor is yours, Kate.

11:15 a.m.

Kate Bahen Managing Director, Charity Intelligence Canada

Thank you, sir.

Good morning. My name is Kate Bahen. As managing director of Charity Intelligence, I prepared the two most recent updates on WE Charity, which were on August 28, 2019, and July 10, 2020.

Before answering your questions, I would like to speak to some of the issues that have been raised during your proceedings and on social media about Charity Intelligence and the motives behind our reporting. Let me address these in order.

Yes, Charity Intelligence is a small charity. Our annual revenues of $435,000 support a team of three full-time staff, supported by exceptional university summer students. This April we hired another charity impact analyst, so our full-time roster increased by 33%, to four. Charity Intelligence's team answers Canadians' questions about giving, and we update our popular website. Despite our small size, we have demonstrated a significant impact on Canada's charitable giving.

Yes, Charity Intelligence lost its charitable status for one day, in September 2012, because I was late in filing the annual return. I am solely to blame for falling behind in this essential paperwork. It was a hard lesson, learned well. Ci has filed before the deadline in the last eight years.

As to the motivation for our work, it is simply to give Canadian donors the best independent and objective advice we are capable of. Charity Intelligence is not partisan. I do not know the political affiliations of our staff. These matters simply do not come up in our research and analysis of charities. I find partisanship toxic. As you may notice from my accent, like many new Canadians I came from away to Canada. I am deeply indebted to this amazing country. To some, partisanship may be a sport or a game, but as a child I saw the Troubles, I learned of the Orangemen's march and I heard the bombs. I want no part of that ever again.

All of that brings me to the Canada summer service grant. This is a sorry mess. There is one simple solution to help charities at this time of critical need that I would like to bring to your attention for consideration. One leg of the three-pronged CSSG initiative was to help Canadian charities through student volunteers. For many charities, volunteers can be essential in program delivery, but with the COVID shutdown, front-line charities need money. Our biggest concern is about individual giving. Imagine Canada estimates that individual giving will drop by between $4.2 billion and $6.2 billion this year. For context, last year giving was approximately $17 billion.

One quick way to address this gap is for our government to increase the disbursement quota of charity foundations and endowments. The disbursement quota is a little-known charity regulation. It sets the minimum amount foundations must distribute of their assets to charities each year. Canada's disbursement quota is 3.5%, the lowest disbursement quota in the world. In the U.S., foundations are required to pay out 5% each year, with people calling for it to be raised to 10% for the COVID response. Over the last 15 years, Canadian foundations have averaged investment returns well above 8%. Today the investments at private foundations, community foundations, public foundations and endowments exceed $100 billion.

This quota can be changed to 5% by the stroke of our finance minister's pen. It can be just temporary, just enough to help charities through this pandemic. The change between the current 3.5% and 5% may seem small, a 1.5% difference, but mathematically it's a 43% increase, which would result in an additional $700 million more flowing from foundations to charities this year. The money that foundations hold is already tax-receipted.

This change wouldn't cost the government any additional revenue but would meaningfully support thousands of front-line charities. More information on this initiative is available at Give5.ca.

Thank you.

11:20 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you both very much for your remarks.

Thank you for that suggestion, Ms. Bahen. We'll make note of that.

There's a change in the lineup of initial speakers. We'll start with Mr. Morantz.

I see you're on there now, Mr. Poilievre. Do you want to start, or Mr. Morantz? Who's on?

August 6th, 2020 / 11:20 a.m.

Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

I'll be taking the first round, Mr. Chair.

11:20 a.m.

Liberal

The Chair Liberal Wayne Easter

Okay.

11:20 a.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

There was a thunderstorm here, Mr. Chair.

11:20 a.m.

Liberal

The Chair Liberal Wayne Easter

Ah, okay. It's usually you blocking me out, Pierre, not the other way around.

Go ahead, Marty. The floor is yours. You have six minutes.

11:20 a.m.

Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

Thank you, Mr. Chair.

I want to thank you both, Ms. Bahen and Mr. Thomson, for being here today. Your work on this matter has been exemplary.

I note that, as such a small organization, you were able to do so much due diligence on this charity, compared to the vast resources of the federal government. They seem to have been unable to discover any of the red flags that you've been able to uncover.

One question I have is, how easy would it have been for the federal government to find the information, particularly in the context of the Prime Minister saying that on May 8 he actually pushed back, which should be taken to mean that he wanted extensive due diligence done on this?

Why is it that the federal government either didn't have this information or chose to ignore it?

11:20 a.m.

Managing Director, Charity Intelligence Canada

Kate Bahen

I think WE Charity is very sophisticated. I believe—and I've asked others who have greater expertise—that if you go through its regulatory filings, it ticks all the boxes. At Charity Intelligence, in our analysis, we use different data. We use audited financial statements, which we find, for our purposes, to have greater detail. We also look at the government filings, the T3010As, but in the audited financial statements there is much more disclosure about the balance sheet, the loans and the bank covenants. I think regulators now in Canada, the U.K. and the U.S., I hope, are really going through the filings of all these multiple WE entities.

11:20 a.m.

Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

In terms of the public service doing due diligence on this, would it have been as easy for them to acquire the information that you acquired if they had chosen to?

11:20 a.m.

Managing Director, Charity Intelligence Canada

Kate Bahen

I'm not sure which charity they were doing the due diligence on. Was it WE Charity, or was it WE Charity Foundation? If you look for WE Charity Foundation, it doesn't have a website. It doesn't have financial statements, and it doesn't even have a T3010A. If the government was doing due diligence on the shell foundation, there would be no information. On WE Charity, yes, there was information on its website.

11:20 a.m.

Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

That's what I'm wondering; they would have been able to uncover most of the information, if not all of the information, that you, as a small organization with limited resources, were able to uncover. Is that accurate?

11:20 a.m.

Managing Director, Charity Intelligence Canada

Kate Bahen

I think it also helps if you have familiarity with financial statements.

11:25 a.m.

Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

I'm sure they have people who do.

I was going through your website, and there are literally dozens of charitable organizations across Canada that have your four-star rating. I noted just a couple, the David Suzuki Foundation and Doctors Without Borders.

What is it about WE that caused you to give it only a three-star rating?

11:25 a.m.

Director of Research, Charity Intelligence Canada

Greg Thomson

WE Charity had a four-star rating, until we analyzed what is called its “demonstrated impact”. Demonstrated impact takes a look at the charity programs and looks for data showing that the charity has actually made a difference in the lives of the folks it's working with.

When we looked at WE Charity, as we looked at the data that it provided, we could only come up with a rating of “fair”, which is below average, on WE Charity's demonstrated impact, which then reduces its star rating from four to three.

11:25 a.m.

Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

Then it would have been a simple matter for those in government doing due diligence on WE Charity, to be specific about that one, to simply go to your website and for a $20 subscription find out that they have a three-star rating. Would that be accurate?

11:25 a.m.

Director of Research, Charity Intelligence Canada

Greg Thomson

We would love for every government agency to go to our website and take a look at any charity that they are interested in looking at. Certainly it would be very easy.

11:25 a.m.

Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

It just seems awfully concerning that all these red flags that you have uncovered were ignored: the board resigning, the bank covenants that you mentioned, the lack of fiduciary responsibility around the Kielburger brothers not being on the board. It just seems to stretch credulity that the federal government, during their due diligence, wouldn't also have had this information available, given their vast resources.

One of the things I wanted to ask was this. During the Kielburgers' testimony, they attempted to discredit your organization, talking about the charitable licence and about the small nature of your organization, with only two individuals working for the organization. Why do you think that they would have gone after your organization to discredit you under these circumstances?

11:25 a.m.

Managing Director, Charity Intelligence Canada

Kate Bahen

Can I just correct one thing about the board of directors? That was not public information, and it only came out on Twitter that the board had resigned in June, so we were not aware of that material information. It was not posted on WE Charity's website.

I understand that we get under the skin of many charities, and we have frequent conversations with other charities. On this issue we have been a go-to for the media to share and talk about due diligence and our interpretation of bank covenants, which is different from WE Charity's position.

11:25 a.m.

Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

When you saw them do that, to attempt to discredit your organization, did you impute any motive to them for doing that? Why did you think they did that?

11:25 a.m.

Managing Director, Charity Intelligence Canada

Kate Bahen

Greg can answer.

11:25 a.m.

Director of Research, Charity Intelligence Canada

Greg Thomson

We would not want to impute any motive on why they would do that. We've seen them do that before, but....

11:25 a.m.

Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

Have they ever contacted your organization directly?