Government Operations Committee on Aug. 13th, 2020

[Kate Bahen]

Special-purpose entities have been used in corporations and in real estate. I have never seen them used to anything like this extent in charities. Unfortunately, with the state of affairs right now, I do believe that fact-checking is really important. I know that as humans we default to trust, but I think that right now we just need to go back over everything and dot the i's and cross the t's.

[Kelly McCauley, Conservative, Edmonton West, AB]

It's funny that you should make that comment. Again, if you look at the Treasury Board regulations, mounds of pages—pages and pages—go over and cover every single one of these possible things. They just seem to have been missed altogether.

Mr. Thomson, are you familiar with any charities that have set this up? Again, at our hospital foundation, we actually built a hospital with provincial government money. We didn't set up, for lack of better words, a separate shell company. Are you familiar with any?

[Greg Thomson]

No.

I have just a brief correction. They had WE Charity Foundation already set up. They didn't set it up specifically for this purpose. They changed the purposes of the foundation to—

[Kelly McCauley, Conservative, Edmonton West, AB]

Have you seen anyone change the purpose of a foundation to do it?

[Greg Thomson]

No, I've never seen this in the charitable sector either.

[Kate Bahen]

I think what was more interesting on this was listening to Michelle Douglas's testimony. The board had actually said no to setting up the foundation, yet when you look at the registration date, it was established on January 1, 2019. The board was not even aware of it and had not approved the establishment of WE Charity Foundation.

[Kelly McCauley, Conservative, Edmonton West, AB]

Yes, it's very strange.

How much time do I have, Mr. Chair?

[The Chair, Conservative, Tom Lukiwski]

We have no time left, Mr. McCauley, unfortunately.

[Kelly McCauley, Conservative, Edmonton West, AB]

I would just say very quickly, Ms. Bahen, that I appreciate your love of transparency. We should steal you for Treasury Board president.

[Some hon. members]

Oh, oh!

[The Chair, Conservative, Tom Lukiwski]

We will now go to Mr. Drouin, please, for five minutes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you, Mr. Chair.

I want to thank all the witnesses who are before us today. I know that for some of you it's your second appearance in front of a parliamentary committee on the same subject. I'll divert a bit to another line of questioning.

If you have this platform.... Ms. Bahen, you've touched on this. You said that the charitable sector is in.... I don't want to say “dire straits”, but obviously with COVID-19 they, too, are suffering. You talked about the disbursement quota. Can you elaborate on this and how this could help the charitable sector?

[Kate Bahen]

Over the last 15 years.... Foundations—community foundations, private foundations—have their assets, and these have already been tax receipted. With the stock market gains over the last 15 years, these assets have been able to grow in excess of 8% each year. Of that growth of 8% each year, foundations are only required to pay out 3.5% to front-line charities, so that's the disbursement quota.

With the growth over the last 15 years, foundations—community foundations, private foundations—are now sitting on an estimated $110 billion, and that has already been tax receipted. When we talk about changing the disbursement quota from 3.5% to 5%, we're only talking about 1.5%. That might seem really small, but mathematically it's 43%.

By changing the disbursement quota from 3.5% to 5%, the community foundations and the private foundations will now have to open up and disburse 5% a year. They have the balance sheets to do that. The charity sector needs that cash right now, and just changing that from 3.5% to 5%, maybe just for the COVID period, would be a tremendous benefit.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Is that something you're hearing from other charities on this particular disbursement quota going from 3.5% to 5%, or is this something you came up with yourself?

[Kate Bahen]

There's a band of renegades who've just been looking at this and thinking this is insanity. Canada has the lowest disbursement quota in the world. People always say they need to save up money for a rainy day; we're looking out the window and it's pouring, and still they're not disbursing.

I'm working at it from “Please, foundations, step up now.” Of the over 2,000 private foundations in Canada that have more than a million dollars in assets, only 20 have stepped up to increase their giving to 5%. I had hoped it would be voluntary, but that's not what we're seeing.

Gail has written about the disbursement quota from the charity side.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Gail, do you want to add anything?

[Gail Picco]

When it comes to charity transparency—and Kate and I are in agreement on this—there are the charities that deliver programming, like WE, like World Vision or Oxfam. They're out there in the field. They're spending money. Whether they're having an impact or not, they're out there spending money.

There's also a group of charities—private foundations, community foundations and hospital foundations—that are holding on to tens of billions of dollars. The 10 biggest private foundations in Canada are sitting on assets of $32 billion, and by increasing the disbursement quota.... You know, Kate argues for 5%; I argue for 10%. That money is sitting there, and private foundations are not willingly going to increase that disbursement quota. They've shown that. That is something that's going to have to be regulated.

We did calculations at The Charity Report that if we raised the disbursement quota for foundations to 10% for three years as part of an emergency response to COVID, we would generate $14 billion from 20 of the largest private foundations in Canada. When we're talking about transparency, we need to be talking about the foundations that are sitting on tens of billions of dollars. This also comes to light when we're talking about donor-advised funds, where there's no disbursement quota required at all and which—

[The Chair, Conservative, Tom Lukiwski]

Thank you very much. I'm sorry. I apologize for cutting you off, but we do have a fairly tight timeline to deal with.

We'll now go to our final interventions, which will be two and a half minutes each, starting with Madame Vignola.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much.

Mr. Thomson, the contribution agreement was signed on May 5, but it was signed with the WE foundation, as Mr. McCauley mentioned a few moments ago. However, because the entity has no assets, it is hard to conduct due diligence. If the WE foundation has no track record and no assets, how could they have determined that, as they said, it was the only organization able to manage both a grant program and a program to recruit and place volunteers?

[Kate Bahen]

And the cabinet didn't know about it.

[Gail Picco]

Is that a question for me?

Actually, at the time, it didn't seem to me to be an unreasonable conclusion: at that time, in this process, prior to all of this other stuff coming out about WE. Actually, WE has also operated its WE Days in Montreal, in Théâtre St-Denis, for the last few years. It has rallies, and so on, in Montreal. Looking at the facts at that time, it didn't make as little sense as it does now.

A lot has been brought to the table. I don't recall any other charity in Canada that's been put under the microscope more than this particular charity, other than the Canadian Red Cross during the tainted blood scandal. We learn a lot about charities when we put one under the microscope.

This charity, I think, was—

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you, but the goal of my question is really to find out how it is possible to enter into a $900-million agreement with no tendering whatsoever—although that also makes it possible to move quickly—with a company that has no assets. So, this is a company that is unable to demonstrate that it can manage $900 million in grants while also recruiting and placing volunteers. It is an enormous job, but the company has no assets to prove anything.

[The Chair, Conservative, Tom Lukiwski]

Unfortunately, we will have to end our questioning there. If any of our witnesses wish to respond to Madame Vignola's questions, once again, I would ask that they respond in writing to our clerk.

Our final intervention, for two and a half minutes, will go to Mr. Green.

[Matthew Green, NDP, Hamilton Centre, ON]

Ms. Picco, do you believe that non-profit and charitable sector staff deserve a minimum wage?

[Gail Picco]

Yes.