Human Resources Committee on May 14th, 2015

[Siobhan Harty]

I can't comment for the Canadian context because we obviously haven't done any in the federal government. We've just launched one, a kind of hybrid between pay-for-performance and social impact bonds, but it's in its early stages.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Which one is that?

[Siobhan Harty]

Minister Kenney had announced something in October 2013, and this is in the area of literacy and essential skills. It is a short-term project. It will run for 18 months, approximately. It has two populations: one of employed Canadians and one of non-employed Canadians. In both cases, interventions are applied to increase their literacy and essential skills levels, with the objective of their having stronger labour market attachment. These are en route. They're currently being finalized in terms of the partnerships and the negotiations.

What we hear from other jurisdictions, of course, is that the potential to cherry-pick, as you say, or to cream—another term that's used—should be present in order to ensure you get a return on your investment. In social sciences there are different methodologies and techniques that can be used in the assignment of people to experiments, because these are experiments that will try to prevent that.

Some contracts will introduce those. For instance, some contracts will say you have to work with the most difficult clients, and they will put that in there.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

A percentage?

[Siobhan Harty]

Yes, or 100%, and they'll define that—people who have multiple barriers, for instance.

As I said, there are different techniques, and that's common in applied social sciences, but there are also many remedies from a research design perspective to address that.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Thank you.

[The Chair, Conservative, Phil McColeman]

On to Mr. Eglinski.

[Jim Eglinski, Conservative, Yellowhead, AB]

Thank you, Mr. Chair.

I'd like to thank all the witnesses for coming out today.

I'm going to follow through on the trend Mr. Mayes was starting. I was very interested in that, so it's going to be very similar.

Just to step beyond, he was talking about a grocery store, but in just about every community across Canada, we have recycling depots. Many of these recycling depots are operated by charitable groups. Some are offered by private companies, etc. They're an ideal place for handicapped people or people with learning disabilities to work because they can do one function.

I'd like you to answer what Mr. Mayes started. I think it's very important. We see it in almost every community in Canada, and for many, it's a part of social finance. It gives them a place to work.

Who wants to start?

Blair, you haven't answered—

[Cathy Hawara]

I can begin answering the question.

There are actually a number of things that charities can do currently within the existing framework by working with partners that are not registered charities that might be non-profit organizations, or that might be businesses. That's what I referred to in my opening remarks in relation to program-related investments.

This is where charities might make an investment, a non-conventional investment, an investment that is really made for the purpose of furthering a charitable purpose, for furthering their own charitable purpose. Their purpose might be to relieve a condition associated with a disability or to relieve unemployment of a particular class of beneficiary, such as persons with disabilities. They can make an investment, let's say, in a corporation through the purchase of shares, for example, and then a proportional number of employees would be individuals who meet the eligibility criteria of the charity, so potentially in this case, persons with disabilities.

There are also ways in which a charity itself through charitable programming can do what you've described. In our policies, we indicate that charities can run what we call social businesses for persons with disabilities, where the majority of the workforce is made up of persons with disabilities. The work is structured and operated in a way that addresses the disability and accommodates the workers so that they can be permanently employed and productive members of society.

All of this is guidance that we've provided to charities, in particular, through our community economic development policy, and they are things we can do now. It's not so much an incentive on the business side. From our perspective, we are enabling charities to carry out these kinds of activities in furtherance of their own charitable purposes. It's a way for them to bring in other partners from outside the charitable sector to achieve the social outcomes you've identified.

[Jim Eglinski, Conservative, Yellowhead, AB]

What about stepping outside the box of charities? What about the private individual—and that may be a firm—who has a compassionate side and sees a function? It may cost his company money to have that person there, but he feels it's worthwhile to give that person something to do in life, to give him a purpose in life. Is there room for him to move in that respect, which we can look at? It is a form of social finance, in a sense.

[Miodrag Jovanovic]

I would just say that if it costs the business to hire these individuals...and the cost can be reflected, I guess, in lower productivity and lower returns and income. Then, when the income is taxed, it's the lower income that is taxed. Implicitly there's a deduction there that is taken into account when assessing the income. There also could be more direct expenditures or expenses for the business related to the training of that person or accommodating that person and making some adjustment to the physical place of work.

All of that would be deductible at the corporate level, if it's a corporation, or even if it's not a corporation. Implicitly there's already a recognition in the system for that.

[Jim Eglinski, Conservative, Yellowhead, AB]

Budget 2015 proposes to remove the restriction on registered charities investing as passive investors in limited partnerships. What amendments would be necessary to implement such a change?

[Miodrag Jovanovic]

The reason they were not able to invest in limited partnerships is that the general interpretation under the Income Tax Act is that investment in a partnership is by definition carrying on business. That's why they could not invest in limited partnerships.

The way this will be brought in within the legislation is to say that the mere fact of investing in a partnership now, if you're a registered charity, doesn't necessarily mean that you are carrying on business. We're going to look beyond that. We're going to say that as long as you invest in a limited partnership and you respect these conditions, i.e., you, the charity, along with related parties, don't invest more than 20% in that partnership, are not related to any general partner in that partnership, and comply with other conditions as well, which we call “anti-avoidance” provisions, then you should be fine. You will be able to invest in that limited partnership.

That's how we're going to change the legislation, so that it provides way more flexibility for charities.

[The Chair, Conservative, Phil McColeman]

That's the end of round one. We'll move on to round two.

Madam Morin.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

Thank you very much, Mr. Chair.

I also want to thank the witnesses for coming here today. It is always greatly appreciated.

Ms. Harty, my question is for you.

Some witnesses mentioned that some of the programs for SMEs could also benefit non-profit and charitable organizations. Are you able to give us a brief overview of the programs that are available to the SMEs that are not available to non-profits? If not, perhaps your colleagues could say a few words about this. I don't know whether you are able to answer that question.

[Siobhan Harty]

Personally, I don't know. I think this has more to do with the mandate of our colleagues at Industry Canada.

Industry Canada has programs that may be accessible to non-profit organizations, especially social enterprises. I think it is up to Industry Canada to answer that question. My department doesn't have the answer.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

Okay.

[Siobhan Harty]

Sorry.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

No problem. In fact, I wanted clarification on that question.

I have no further questions, Mr. Chair.

[Siobhan Harty]

We might be able to work with our colleagues at Industry Canada in order to provide that information to the committee.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

Yes, that would be good if Industry Canada were able to indicate which programs are for SMEs and non-profits, and which programs are not for non-profits.

[Siobhan Harty]

They might not know that they can access those programs.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

Thank you very much.

I have no further questions, Mr. Chair.

[The Chair, Conservative, Phil McColeman]

Mr. Butt.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Mr. Chair, I want to thank everyone for being here today.

I think it's a great irony that Imagine Canada is touring around, visiting us MPs today, promoting the charitable sector, and promoting the important work they're doing. Social enterprise is very much on their minds. I think, and I'm hoping, that this study and the recommendations from this committee are going to be very helpful to the government in looking at ways we can be promoting, encouraging, and supporting greater social enterprise and social finance in the country.

One of the things a few of the charities have raised with us is their concern about their charitable status if part of the social enterprise is engaging in some commercial activity. I'm going to give you an example. There is a place called Destination Cafe in Mississauga that I'm familiar with. It specifically helps individuals with mental illness-related issues. It is affiliated to some degree with the Canadian Mental Health Association. Basically, it provides housing and employment opportunities in running a cafe. The cafe is on the ground floor. The apartments are on the second floor. The people who live in the building also work. They are earning commercial revenue as that social enterprise. As I understand it, if the revenue is a higher percentage of their overall budget in a year, it could jeopardize their charitable status.

I'd like someone to explain to me how that works, because I think that would be a real shame. I think it would be a shame if we had a group doing some excellent work on the ground, but because of the technical requirements in the rules around how much revenue they can bring in as a percentage of their overall budget it could threaten their charitable status.

I don't know who the best person is to answer. Cathy, are you the best person to answer that? Maybe you could walk us through how that would work with a typical charity that wants to do something like that.