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

Noon

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Chair, I have point of order.

Noon

Liberal

The Chair Liberal Wayne Easter

There's a point of order on the floor from Mr. Sorbara.

It isn't a point of order, but I'll allow Mr. Poilievre to finish.

Noon

Conservative

Pierre Poilievre Conservative Carleton, ON

Well, it is a point of order, and I'll tell you why. You were just telling us about the confines of our study, which this committee adopted, and I'm simply pointing out that the questioning that we're putting to the expert witnesses today is entirely within the mandate of this study.

I know that Mr. Sorbara is desperate to keep these questions unanswered, and I suspect he'll jump in again to try and cover up and slow the study—

Noon

Liberal

The Chair Liberal Wayne Easter

Now we're straying from your point of order, Mr. Poilievre.

Noon

Conservative

Pierre Poilievre Conservative Carleton, ON

I would just point out that all of the questions that have been asked today are within the confines of the study, as is the valuable information that Charity Intelligence is sharing.

Thank you.

Noon

Liberal

The Chair Liberal Wayne Easter

I allowed that round of questioning. All I'm saying is let's not stray too far and away from the government connection to this charity. That's all I'm saying.

Mr. Sorbara, you had a point of order.

Noon

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Mr. Chair, I wanted to express my doubt that Mr. Poilievre's comments were actually a point of order. They sounded much like debate and his own personal views; and as for his comment about questions, there are a lot of questions that have been asked, and let's continue to ask good questions—

Noon

Liberal

The Chair Liberal Wayne Easter

And yours is not a point of order, in my view, either.

We will go to Mr. Cumming and then Mr. Fragiskatos. We're into five-minute rounds.

James, the floor is yours.

Noon

Conservative

James Cumming Conservative Edmonton Centre, AB

Thank you, Mr. Chair.

I'll try not to stray. It sounds like there is a great concern about that, but it's difficult with the WE group not to look at the entire group.

I thank both of you for coming today and the good work that you do in the charity sector. I know that donors appreciate the work you do.

You had mentioned that when you reviewed the financial statements, one of the issues was the bank covenants. I read the response from WE suggesting that it was because they changed their year-end, which was true in 2018, and that the issue with covenant was apparent in 2018. But then they had a full fiscal year under their belt for 2019 and there still an issue with the bank covenant. I would like to get your response on that because it looked like it was a continuing issue, not just an issue around a change of the year-end.

Noon

Managing Director, Charity Intelligence Canada

Kate Bahen

That's an excellent point. To WE's comments or explanation for its bank covenants, it mentioned that the bank covenant was a ratio that may have been affected by fiscal 2018 only being the eight months, but that it would not affect the ratio for fiscal 2019—that was 12 months.

WE Charity also stated to us publicly in the letter they posted that it was an accounting paperwork, which is a different interpretation from ours of bank covenants.

Noon

Conservative

James Cumming Conservative Edmonton Centre, AB

Right.

I tried to dig around their the statements for some time and their 2019 statements weren't on their website. They are now, I believe.

They would have had to file their return by February, and you say they didn't produce financial statements for you till July. Is there any indication what the delay was? Why did it take so long for you to be able to do your due diligence?

To me this relates back to the government doing its due diligence, in that you would think that the statements, if they were filed in February, would easily be up on the site in March or April.

Noon

Managing Director, Charity Intelligence Canada

Kate Bahen

WE typically likes to write a letter from the executive director before issuing its financial statement, so while it had the financial statements—just the financials without the management discussion and analysis ready—it wanted to release them all together, and that might have caused the delay in posting.

12:05 p.m.

Conservative

James Cumming Conservative Edmonton Centre, AB

Then, in terms of their capacity, as we know, it became known within the public domain that they had done some layoffs, and this was roughly about a $65 million charity, if you consider the charity. I know that the WE Foundation has no assets, no employees and this was funnelled through that, but there was some inference that WE Charity would be administering this.

A $43 million administrative fee for a charity that would normally have about $65 million in revenue, for a program that's going to be delivered in four months or so, does that seem a bit odd to you to have the capacity to be able to execute something like that?

That's an enormous, enormous amount of capital going to a charity in a very short period of time.

12:05 p.m.

Director of Research, Charity Intelligence Canada

Greg Thomson

When Marc and Craig said that there was no financial [Technical difficulty—Editor].

12:55 p.m.

Liberal

The Chair Liberal Wayne Easter

We're re-welcoming our guests here, with the translation and other services in Ottawa until 1:30 Ottawa time. It's 12:55 here now.

We will reconvene.

My apologies to everyone for the system's going down. I think there may be some lessons learned on the technology end with this experience today.

We'll go back to Mr. Fragiskatos. You have three minutes left in your question time.

Peter, the floor is yours.

August 6th, 2020 / 12:55 p.m.

Liberal

Peter Fragiskatos Liberal London North Centre, ON

Thank you, Chair.

I will pick up where I left off.

Mr. Thomson, I had put to you a question about assessment criteria and how Charity Intelligence comes up with those criteria. I accept your answer, but the challenges on my end are issues around subjectivity. I pointed to a study done by MoneySense, a well-known Canadian website that comments on financial matters. They did put out a list of the top 100 charities, in their view, for 2019, based on their own assessment criteria. WE is on that list and gets an overall ranking of A-.

For fundraising efficiency, they had a grade of A+; for charity efficiency, they had a grade of A+; on social results and transparency, they had a grade of B+. All of that combined for an overall rating of A-. My point is not to delve into whether Charity Intelligence or MoneySense got it right.

There are many other lists out there based on various criteria. That's the point. All of this is very subjective. It's hard for any outside observer—certainly as a member of Parliament, but I would think within government too—to look at these criteria in a very objective way and come up with a determination about where a charity ranks in terms of quality.

I know that in your own assessments, as an organization, certainly as far as demonstrated impact goes, the WE organization received a grade of “fair”. When it comes to cents to causes, in other words measuring overhead costs compared to programming, I see that WE did very well.

My job is not to defend WE here—they'll do that themselves—but I do have concerns about subjectivity. For example, on demonstrated impact, I wanted to ask more about that.

I know you have a definition on your website, but how do you measure that as well? You have a limited staff. By your own admission at the outset of the meeting, I think you said you have three or four staff. It's a small organization. You're obviously very passionate about your work. When it comes to vetting charity after charity—there are so many that you do on an annual basis—how are you able to understand in this case the demonstrated impact that WE has? It's a bit perplexing to me.

12:55 p.m.

Director of Research, Charity Intelligence Canada

Greg Thomson

We use measures that are as objective as possible. We want to remove as much subjectivity from our analysis as possible.

We have shared data. We've discussed metrics with MoneySense and MoneyWise, and other other folks here who have put together top 100 lists. We know their lists intimately.

You hit the nail on the head about the reason that WE was on their list and not on our list. That is the demonstrated impact assessment that we've done, and that they did not, including their assessment—

12:55 p.m.

Liberal

Peter Fragiskatos Liberal London North Centre, ON

Mr. Thomson, how were you able to measure WE's demonstrated impact? That implies that your efforts are solely focused on WE as an organization, but they're not focused on WE only.

We've heard already today that Doctors Without Borders is an organization that you've assessed. World Vision is on your website, as well as Amnesty International, and many other charities. How were you able to come up with a judgment with such a limited staff and limited resources?

12:55 p.m.

Director of Research, Charity Intelligence Canada

Greg Thomson

We value every program of every charity that we assess. We take a look at all of the demonstrated results a charity has. We take a look at every change that the charity claims to have made, and we value each, and determine for every dollar that is donated to a charity, the dollar value of the impact produced for clients and society.

Yes, we are a very lean organization, but we're able to do that on the number of charities that we have assessed. We've assessed over 250 charities on demonstrated impact at this point, and we're continuing to expand that as resources allow. We do it consistently and fairly.

1 p.m.

Liberal

Peter Fragiskatos Liberal London North Centre, ON

Thanks very much, Mr. Chair.

As a final point, because I think I've gone over time, I have nothing against you or the organization, so take this comment as just an observation. It's hard for me to understand how an organization of four people can judge 250 organizations on a range of criteria and delve into them and offer an enormous set of judgments, which for us to look at as MPs is a challenge. I'll just put that on the record.

Thank you very much.

1 p.m.

Liberal

The Chair Liberal Wayne Easter

Just to give you a list of the lineup, it will be Mr. Cooper, Ms. Koutrakis, and then we'll be into three minutes for Mr. Fortin, Mr. Julian, Ms. May, and then Mr. Poilievre and Mr. Vaughan for five minutes each, and then we'll wrap it up at that. That will put us at 1:30 Ottawa time.

Mr. Cooper, the floor is yours for five minutes.

1 p.m.

Conservative

Michael Cooper Conservative St. Albert—Edmonton, AB

Thank you, Mr. Chair, and thank you, Ms. Bahen and Mr. Thomson. Picking up on where Mr. Fragiskatos left off, I find it rather remarkable that your organization of only four people with an annual revenue short of $450,000 could identify all of the obvious red flags that seemingly were avoided by the Prime Minister and cabinet, even after the Prime Minister supposedly pushed back, but I'll leave it at that.

I want to pick up where Mr. Cumming left off with respect to bank covenants. He noted the misleading testimony by the Kielburgers with respect to their suggestion that they were only in breach for a short period of time, when that was not the case, much the same as Marc Kielburger misled the committee when he implied that Charity Intelligence had lost its charitable status for the entirety of 2012, as opposed to a day. When we talk about banking covenants and a charitable organization being in breach of banking covenants, in your experience, Ms. Bahen, or Mr. Thomson, how common is that and how big of a red flag should that be?

1 p.m.

Liberal

The Chair Liberal Wayne Easter

Who wants to go?

Ms. Bahen.

1 p.m.

Managing Director, Charity Intelligence Canada

Kate Bahen

Thank you.

I've never seen it before in reading the audited financial statements of over the 1,780 charities. That bank covenant note was new to me. I did additional outside research into that and I disclosed it in the report in August 2019.

If I could just take the opportunity to say that when I worked in Burns Fry research way back in the day when I was young, there was a team of 38 people in the research department and our research influenced 25% of the daily volume on the Toronto Stock Exchange. If you are a credit analyst for a Moody's or a Fitch or a Standard & Poor’s, you assess the credit of 100 organizations. This type of small team doing research coverage is very common in other sectors.

1 p.m.

Conservative

Michael Cooper Conservative St. Albert—Edmonton, AB

Yes. Thank you for that.

What would explain the breach of these banking covenants? Obviously this was an organization with a lot of debt and few assets.