Mr. Speaker, thank you for the opportunity to address today's proposal by the member for Mississauga East—Cooksville, in the form of Bill C-470. I am sure it will stimulate some very interesting debate. It is very timely and I congratulate the member for getting her private member's bill on the floor of the House. That is an accomplishment for any member of this House. As I say, it will provide an interesting discussion of charitable organizations and the compensation given to those employed by such organizations, a discussion that is certainly worth having.
Before addressing the specifics of today's proposal, let us look at the overall role and contribution of charities and the charitable sector in Canada.
As all members of this chamber would agree, charities are a very important part of the fabric of any country. Of course, that holds true for Canada as well. The Canadian Centre for Philanthropy has labelled charities and the larger voluntary sector as the vital third pillar of Canada's civil society. Indeed, there are approximately 85,000 highly diverse registered charities in Canada. These charities operate in a wide variety of areas, such as local services, health, the churches, arts and culture, education and research. I am a member of the world's largest service organization, the Lions Clubs International, and have been involved in many fundraising events all across this country.
What is more, according to Imagine Canada:
The nonprofit and voluntary sector is a significant economic force in Canada. When the value of volunteer effort is included, this sector contributes 8.5% to Canada’s GDP and is almost as large an employer as the country’s entire manufacturing industry.
Some of the smallest entities are run entirely by volunteers, with very limited budgets. At the other end of the spectrum are hospitals and universities and colleges, which are large organizations, both in terms of their budgets and in the number of people they employ.
Accordingly, the revenue base of these charities is equally diverse. Some depend primarily on donations they receive from the public, some raise considerable income from fees, while others operate related businesses. Still others depend highly on revenues from the federal and provincial governments.
There are three types of registered charities in Canada: charitable organizations, public foundations, and private foundations. The designation a charity receives depends on its structure, its sources of funding and its mode of operation.
The first category, charitable organizations, includes the majority of registered charities here in Canada. A charitable organization primarily carries on its own activities. It has a board of directors that is made up mostly or entirely of individuals who operate at arm's length from one another. Finally, it generally receives its funding from a variety of donors.
The second type of registered charity is a public foundation. Local community foundations or hospital foundations are typically structured this way. A public foundation is similar to a charitable organization in that it also receives its funding from a variety of arm's-length donors, and also has a board of directors that is made up primarily of persons who are at arm's length from one another. However, a public foundation primarily exists to help finance one or more charitable organizations. It may deliver some of its own programs, but most of its activities generally involve helping charitable organizations to run their programs.
Finally, the third type of registered charity is a private foundation. A private foundation differs from a charitable organization and a public foundation in that its funding often comes from one person or a group of related persons. This is often the case with a family foundation. A private foundation may fund other charities or it may operate its own programs.
The diversity of the charitable sector in Canada is especially noticeable in the size of its operations. Over half of the registered charities in Canada have total annual revenues of less than $100,000. At the other end of the spectrum, about 10% of charities have annual revenues that exceed $1 million. Again, as mentioned earlier, while charities have numerous sources of revenues and volunteer support, the generous donations of individual Canadians continue to be one of the principal sources. According to the recent “Canada Survey of Giving, Volunteering and Participating”:
In 2007, Canadians donated a total of $10 billion, an increase of 12% or $1.1 billion since 2004, and volunteered 2.1 billion hours, a 4.2% increase. The average donation increased to $437 from $400 in 2004.
In some of the larger charities, such as hospitals, health care institutions, universities and colleges, executives are responsible for overseeing the spending of millions of dollars in resources. They manage hundreds of employees. These charities are often involved in carrying out highly complex work. Because of the responsibilities placed on the shoulders of the leaders of large charities, such charities offer compensation for their executives. Today's proposal surrounds that issue of compensation.
Let us briefly turn to the regulation of charities in Canada and provide the chamber an overview of the measures currently in place to deal with just that issue and other issues related to today's proposal.
The Canada Revenue Agency, or CRA, has various tools to monitor and report on compensation at charities. At the federal level, the CRA administers a system to register charities under the Income Tax Act. As the regulator of charities, the CRA's responsibilities include processing applications for registration, offering technical advice on operating a charity, handling audit and compliance activities and providing general information to the public. Regulation of the charitable sector by CRA is based on both common law and the provisions of the Income Tax Act.
The common law requirement that charities devote their resources to charitable activities is central to how CRA provides guidance to the sector and enforces the rules. For instance, recent legislative and administrative reforms have given CRA additional compliance tools to use in the regulation of the charitable sector. An example of these include intermediate sanctions in the form of taxes or penalties for charities that do not comply with the requirements of the Income Tax Act. Prior to this, the only sanction available to the CRA was revocation of registered charity status.
At the same time, the concept of undue personal benefit has been clarified in the Income Tax Act. As a result, in the case of excessive executive compensation, the CRA has the authority under the Income Tax Act to conduct an investigation to determine whether the charity is indeed fulfilling its charitable purposes. It also has the authority to determine whether there is undue personal benefit and to impose a range of penalties up to and including the suspension of receipting privileges.
There is also more public information available today on the activities of registered charities. This helps increase accountability in the sector by providing prospective donors with information to determine for themselves whether they would like to donate to a particular charity. Under the Income Tax Act, all registered charities are required to complete a registered charity information return. This in turn is published on the CRA website and includes information about compensation.
What is more, our Conservative government recently made a key change to further improve the accountability surrounding charities. Up until 2008, charities were required to report on the compensation of the five highest paid employees and indicate their salary range, with the last threshold being $119,000 and over. We have changed that. Starting in 2009, charities were required to report the 10 highest compensated positions. The annual compensation categories were also expanded, with the last threshold being $350,000 and over.
The introduction of this new reporting on employee compensation has served as a key tool to help increase transparency in terms of how charitable resources are being used. Increased transparency is providing the generous Canadians who are donating their hard-earned money with even more information to help guide their giving decisions. Such concrete measures are examples of useful initiatives that our government has taken to address the broader accountability concerns.