Good morning.
Thank you for the opportunity.
My name is John Hallward, and I am the president of GIV3, a registered Canadian charity.
I'm here to recommend the creation of a new national social sector fund to help invest in the greater capacity of the charity sector, which would have no cost to the federal budget. It would not require taxpayer money, and it would directly address the growing charity crisis affecting tens of million of Canadians every day.
As we all can appreciate, Canada's charitable sector plays a significant role in every community across the country. It represents over 8% of our GDP, employs well over 2.8 million people and serves tens of millions of Canadians.
Few know that our charity sector is struggling on many levels. Statistics Canada reports that both financial donations and volunteered hours continue to decline in Canada, threatening the future of the sector. Other surveys indicate that charities are experiencing increased burnout, with a significant portion of charities reporting that they cannot keep up with demand for their services. The recent rise in costs is just exacerbating the problem. Statistics Canada summarizes this as a widening charity gap. Such structural problems require systemic solutions as a public good.
Key stakeholders support the idea of a social sector fund, including the majority of operating charities in Canada and 80% of Canadian taxpayers, as measured by an Ipsos poll. What is so attractive to all is that our recommendation does not require taxpayer money. Instead, we're proposing a self-financing social sector fund created through a modest amendment to the Income Tax Act. The fund would be financed by redirecting a portion of charitable granting from philanthropic foundations. These are funds that foundations are already obliged to grant under their current disbursement quota. Let me explain how this works.
Canadian philanthropic foundations are required by law to spend a minimum percentage of their assets annually on charitable activities. This is called their disbursement quota. We're proposing that a very small fraction of this quota be directed to the funding of the new national social sector fund for the strengthening of the whole sector. This is why there would be no incremental cost to the federal budget.
One approach is to mandate a very small multiple of foundation investment assets. An alternate approach is to follow what has been done in the United States, which is to levy a 1% income tax on foundations' investment income. Either option would equate to a rounding error in size to any one foundation but would add up to between $50 million and $150 million annually for the sector fund based on the small rate you choose to establish. There would be no new tax and no incremental financial burden on the foundations; this would be money they must grant anyway.
To be clear, there is no shortage of money in the charity sector. There is close to $200 billion in foundation investment accounts today in Canada. We just need a reallocation of a minor fraction of these funds in smarter ways.
To operationalize this fund, we're proposing the creation of an independent, fit-for-purpose fund agency to receive the funds and allocate them according to a strategic plan. This agency would be composed of the many peak organizations already in existence in Canada. In turn, this would not be a threat to the current establishment but would bring funding to invest in their stronger performance.
The intention of the fund is to build sector capacity and efficiency. It would work on the idea that a rising tide lifts all boats. I can share examples of a few possibilities for this fund.
One would be a coordinated campaign to strengthen generosity as a public good. This would be akin to Participaction as a social campaign and would work to support greater generosity as a social norm.
The fund could create a purchasing co-op, an organized effort to build greater buying power on behalf of the tens of thousands of small, fragmented charities. This would help to reduce costs for software licences, technology, insurance, professional services and so on, and this alone could save the sector tens of millions of dollars annually.
The fund could support coordinated training and best practices. The fund could invest in a best practices hub, similar to the What Works Network in the United Kingdom. This could help harmonize learning and train charities on best practices to boost their efficiencies and effectiveness.
Why does this require the federal government? It's because such a new sector fund would solve problems that are not getting funded independently in our current ecosystem, and also because it offers sustained, long-term and reliable funding to invest in building sector capacity just when Canada needs it most.
The sector fund is a structural solution. If you were to give more money to charities today, they would still be fragmented, lacking shared infrastructure and duplicating costs. We would still be failing to address the decline in generosity in Canada.
It's a strategic idea, it's sector-led, it's transparent, it doesn't create new bureaucracy within government and it adds no cost to the federal budget.