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Do Charities in Canada Need More Public Funding?

About the author: Robert Lyman is an economist with 35 years’ experience as an analyst, policy advisor and manager in the Canadian federal government, primarily in the areas of energy, transportation and environmental policy. He also has eleven years experience as a private consultant conducting policy research and analysis on energy and transportation issues as a principal for ENTRANS Policy Research Group. For the last five years, he has been a frequent contributor to the publications of the Friends of Science, a Calgary-based independent organization concerned about climate change-related issues. He resides in Ottawa, Canada. Full bio here.

The recent scandal concerning the federal government’s announcement that it had awarded the WE Charity the right to administer a $900 million…almost one billion dollars…student grant program has had many dimensions. Most of the public controversy has focused on the improper relationships between Justin Trudeau and Bill Morneau and their families and the WE organization. There has been less attention to the implications of the scandal for government funding of charities and non-profit organizations overall.

Charities generally benefit from the public perception that they perform a public service in a more efficient and lower cost way than government institutions can. As recently as January, 2018, a Special Senate Committee on the Charitable Sector submitted a report which, while not examining the efficiency and cost considerations, concluded that the funding for the sector was “constrained” and that new measures were necessary “to ensure strong and stable funding for the sector”, including “the provision of predictable and sustainable grants and contribution agreements”.

Is it true that charities need more public funding? The following graph illustrates the trends in funding for Canadian charities from 1997 to 2016, with partial results for 2017.

Source: Compiled from CRA filings and data.

As is indicated, charity industry revenues increased from $100 billion per year in 1999 to about $260 billion in 2016. Most of the growth in revenues was from governments, with that from provincial governments dominating.

In 2017, the gross revenues of charities rose to $280 billion, of which governments provided $184.4 billion. The federal government share was $9 billion.


If $184.4 billion in government revenue is not enough, how much more support is necessary? All levels of government spend about $800 billion annually on program expenditures; $184.4 billion to the charitable sector thus accounts for 22% of total programme expenditures.

A recent Financial Post article suggested “We can reduce the poverty gap by making work pay more“, claiming that some $5,460 should be a wage subsidy.

As it turns out, the analysis of charity funding indicates governments are annually granting the equivalent of about $5,000 to Canadian charities from every man, woman and child/pplkind of Canada, with no agreement or direction from those taxpayers/citizens. These contributions are purely at the discretion of government.

As it turns out, the analysis of charity funding indicates governments are annually granting the equivalent of about $5,000 to Canadian charities from every man, woman and child/pplkind of Canada, with no agreement or direction from those taxpayers/citizens. These contributions are purely at the discretion of government.

https://blog.friendsofscience.org/wp-content/uploads/2019/02/Big-Green-Money-NO-vs-PRO-FINAL-RevB-FEB-12-2019-2.pdf

It seems evident from the trends in funding that provincial governments have off-loaded a significant share of their programs onto the charity industry. They have done so, one can presume, because of the perception that this will lower costs. However, the expenditure of funds by arms-length organizations is subject to far less scrutiny by legislatures and by Auditors General than are those by government departments and agencies. As the WE Charity scandal has demonstrated, the use of outside charities is also more vulnerable to improper relationships between politicians and charity organizations. Charities in Canada must submit annual reports to the Canada Revenue Agency, but they are subject to far less detailed reporting, and therefore public scrutiny, than their counterparts in the United States. Further, as a result of recent court decisions, Canadian charities are virtually free to spend a large share of their funds on political activities, so long as they are not obviously partisan.

Surely the time has come to impose a higher level of scrutiny on the operations and funding of charities in Canada and to impose some empirical tests on whether they in fact offer an efficient service that justifies the reduced accountability. It should be clear by now that many of these ‘charities’ are first and foremost businesses – businesses that, contrary to their carefully manicured public image, subsist on government funding.

https://blog.friendsofscience.org/2019/05/07/environmental-charities-a-compilation-of-reports-on-their-finances-power-and-implications-for-canada/

Updated Aug. 27, 2020 to correct “$900 million…almost a billion dollars…” [previous typo incorrectly stated it was a $900 billion grant program]

https://youtu.be/WNjtPT5pUEk

2 Comments

  1. Craig Jowett Ph.D. P.Eng.(r)

    With the many tens of thousands of registered charities competing with hospitals, clinics, etc. for the same dollar, we need to ensure that these private corporations are not simply acting as unregistered political lobbyists. The Competition Bureau enforces legislation about misleading and deceptive advertising, and can accept complaints about these from citizens. If hospitals scared people with future predictions as some of the environmental charities do, there would be [justifiable] civic outrage. The same rules should apply to all.

  2. Andrew J Roman

    Many charities are essentially businesses. Their product is lobbying and influencing public opinion. Instead of receiving government money they should pay income tax like other businesses. The WE charity has a large commercial real estate business that is associated with it. If WE had to pay income tax these two-tier tax games would stop.

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