Charity Sector: Careful what you wish for

publication date: Sep 26, 2017
author/source: David Oyler

There is continuing narrative that charities should be able to do whatever they believe is needed in order to further their missions through lessened or eliminated regulatory restriction. This is leading to calls for significant changes to Canada Revenue Agency policy around political activity and allowable business activity, with fundraising activity also being thrown into the mix. The general message seems to be that, as long as an organization’s purposes are deemed charitable, how much of an organization’s resources are spent on any activity be it business or fundraising should not be important.

Included in the recent Report of the Consultation Panel on the Political Activities of Charities was a recommendation that the legislative framework a focus on charities’ purposes, rather than activities. The Mowat Centre’s research paper entitled Enabling Environment calls for easing constraints on allowable business activity to develop a modern federal policy framework. This series was contributed to by Imagine Canada who, despite their stated focus as supporting registered charities also appears to support NPOs. NPOs are organizations who are not required to ensure their purposes are charitable. A 2014 report by the MaRs Centre for Impact Investing also called for changing the rules around business activity for charities and also recommended the inclusion of NPOs as equals in the arena of public benefit.

I would caution against a change to allow unrestricted business activity for registered charities. There does not seem to be an appreciation among supporters of this concept that the majority of new businesses fail which could have serious consequences for a charity’s finances and reputation. That alone should make it logical to house a business with an intention to solely earn profits to direct to a charitable cause as a separate corporate entity. As a separate entity, the majority of business profits could be directed to the charity without exposing the charity to any financial or liability risks.

Another reason for caution is the time and effort that would be needed to operate a business, let alone one that would generate enough profits to make that time and effort worthwhile. A separate entity would ensure that the business activity would not be interfering with the work of staff and their boards or use up precious volunteer time.

An easing of limitations on fundraising may sound appealing to individual organizations but when one realizes that the majority of the over 80,000 other charities could be also doing more fundraising activity it becomes an issue. It should be obvious that the fundraising environment is a very competitive one and that there is only so many dollars to go around in any given year. It is a distinct possibly that the net fundraising dollars directed to charities as a whole may be stagnant or decreasing.

In my opinion, unlimited spending on fundraising would not lead to an increase in the net amount of fundraising to the sector. The recent merger of the Cancer Society and the Canadian Breast Cancer Society is an indication that in order to stay competitive and maintain a healthy fundraising program collaboration, partnerships and mergers is the reality rather than easing constraints through policy changes.

Unlimited spending or more money on fundraising may sound appealing at an organizational level. This complexity is added to by the inclusion of non-profit organizations (NPOs) without charitable status into the discussion. The risks associated with operating a business and fundraising with no constraints on expenditures should be of concern when looking at the charity sector as a whole. 

Oyler Consulting works with organizations and allied sector professionals to increase their effectiveness and capacity to deliver their programs and services. Services include practical guidance on Canada Revenue Agency policy for registered charities, assistance for organizations seeking to register as a charity, fundraising program development, strategic direction for revenue generation, and the CED/social enterprise concepts.

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