Mr. Speaker, I have the pleasure today to second and to speak in support of Bill C-224, an act to require charitable and non-profit groups receiving public funds to declare the remuneration of their directors and senior officers.
This bill is the first important step toward reforming Canada's not for profit sector. With the implementation of C-224 all organizations with charitable or non-profit status receiving public funding by direct grants, government transfers or by tax exemption will be required to publicly disclose the amount of the salaries and benefits paid to their principal officers.
This bill is about accountability. It is about allowing these collectively funded organizations and agencies to be scrutinized not only by government but also by the public. It sets the same standard of accountability for not for profit organizations as those set for individuals, businesses and government.
When government funds individuals and businesses, rules and regulations are in place to ensure accountability. Why should the rules be different for not for profit organizations? In difficult economic times all precautions must be taken to ensure sparse public funds are allocated according to real need.
The issue is of utmost importance given the absolute necessity to control government spending today. We are forced to re-evaluate the role of government in society generally. Now more than ever we must closely scrutinize recipients of all public funds.
There are two distinct advantages to achieving charitable status in Canada. Once an organization is registered it is exempt from paying income tax. Registration also allows the organization to issue official donation receipts which donors then claim as income tax credits. This results in a reduction of tax revenues to the government.
Currently, registered charities, including private and public foundations and charitable organizations are required to file a registered charity information return with the department of revenue. These returns are also available for public release as per section 149(1) of the Income Tax Act.
Section D of the return asks how much remuneration is paid to employees, executive officers, directors and trustees. The question of how many people are paid from the total regular employees remuneration is not asked. As long as the organization files a return, even though it be incomplete, it retains its charitable status. There is no penalty if required information is missing.
The member for Hamilton-Wentworth's November 1994 report concerning special interest group funding contains returns from selected charitable organizations. Of these, only 50 per cent specified the number of executives or their salaries. The other half implied they had no executive officers, directors or trustees and therefore did not have to specify how much money was allocated for their salaries.
One wonders how an organization such as the Canadian Council on Smoking and Health claiming receipts of almost $1 million and employee salaries of close to $400,000 can function without directors or executives.
By simply including all salaries in the figures paid out to regular employees, organizations avoid having to identify or reveal executive salaries. The current charity information return does not require detailed information about remuneration. Canadians who are hard pressed to donate a simple $25 to a charity may be appalled to find its executive director receives half a million dollars in salary.
While the Income Tax Act requires charities to use at least 80 per cent of individual donations on charitable activities, it does not mention what proportion of a government grant should be used in this way. Moreover, when a charity is 80 to 90 per cent government funded the current rules leave an enormous gap.
The situation is even worse for non-profit organizations. They are generally not taxable. While non-profit organizations cannot issue official tax receipts, they receive direct funding from the government by way of grants and transfers and indirect funding in the form of tax exemptions.
Currently, non-profit organizations are required to file a non-profit organization information return with Revenue Canada detailing their financial information. Not every non-profit organization is required to file a return. Only those having revenue exceeding $10,000 per year or having assets of more than $200,000. Only 4,960 of an estimated $40,000 non-profit organizations filed a return in 1993. Under the Privacy Act and section 241 of the Income Tax Act all of this information remains confidential.
A non-profit organization has absolutely no public accountability. There is no way for any member of the public or the government to adequately assess the financial operations of these organizations. MPs are asked to approve grants for organizations in their own constituencies having little idea where that money is actually going. I have personally withheld cheques from organizations in my constituency that have failed to provide me with adequate financial information.
Bill C-224 requires a detailed public breakdown of all salaries for all charitable and non-profit organizations. This would eliminate a prime area of potential abuse in a largely unaccountable sector.
The Consumers' Association of Canada lists three sources of income on its information return with government grants totalling almost $900,000, more than 70 per cent of its total revenues. This organization pays one executive officer $96,000 a year. At least it reports this information. Most do not.
We can no longer allow any publicly funded organization to remain outside financial scrutiny. Given the state of the government's finances, the present situation is totally unacceptable.
There are more than 66,000 registered charities in Canada, a number which increases by 4,000 annually. We do not know exactly how many non-profit organizations truly exist.
The Canadian Centre for Philanthropy reports approximately $86 billion passed through registered charities in 1993, 13 per cent of Canada's gross domestic product and equal to the entire GDP of British Columbia. We can safely say that together charities and non-profit organizations account for more than $100 billion in cash flow. They pay out approximately $40 billion in salaries to 3.2 million people or 9 per cent of the Canadian labour force.
Registered charities alone receive approximately 56 per cent of their revenue directly from various levels of government, $49 billion annually; $5.5 billion comes from the federal government in direct grants and transfers and $600 million in forgone tax revenue, over $6 billion in total per year.
In our quest to control government spending, not for profit organizations cannot be ignored. Accountability in terms of salaries paid out by government funded agencies is the essential first step proposed in this bill.
Other important recommendations in the bill also need to be considered. The Income Tax Act must be amended to allow public access to the financial statements of non-profit organizations. Revenue Canada must scrutinize more closely the activities of registered charities.
Applicants for government funding should be required to waive certain protections offered by the Access to Information and Privacy Acts. Organizations should not receive significant government funding without having had their annual statements reviewed and approved by the granting authorities.
All of these recommendations establish accountability. Current financial conditions demand close scrutiny of all groups receiving government funding. This bill is only the tip of the iceberg, a small but necessary step in reforming the way we handle Canada's non-profit sector.
In the U.S., charitable and non-profit organizations must file returns with the IRS which are available for public inspection. Information must be filed by both charitable and non-profit organizations, unlike the Canadian policy which keeps the returns of non-profit organizations confidential.
The U.S. form is much more comprehensive and detailed. One section asks for the names, addresses, compensation, benefits and expense allowances of officers, directors and key employees. If any receive annual compensation of more than an aggregate $100,000 an additional schedule must be attached. The organizations are thus held directly accountable to the public.
We publicly fund charitable and non-profit organizations in Canada which engage in activities unrelated to their charitable status. Some participate in blatantly political activities by donating funds to political parties.
The Canadian Labour Congress was given a grant of over $3.6 million in 1993 for its labour education program. The CLC contributes none of its own revenues to this program yet was able to give over $1 million to the New Democratic Party in that same year.
The definitions of charitable activities are vague and open to abuse. Activities in the public interest and those of special interest are not clearly defined. As for non-profit organizations there are very few guidelines. Some of these organizations such as the Canadian Ethnocultural Council receive up to 80 per cent of their revenue from sustained government funding. Many could not survive without direct annual funding from the government. We are talking about $49 billion in government funding each year. We must get our act together.
I ask all hon. members to vote for the bill as a first step in addressing a situation that both the public and the legitimate not for profit sector should welcome. The taxpayer has a right to evaluate the spending priorities of recipients of government grants. Legitimate not for profit organizations have an interest in knowing that both government and private funding is allocated to those who need and deserve it most.