Outline - The New Accountability

Reference Number
CES - 002

Date
June 10, 1997

Introduction (opening remarks)

What is accountability?

Word often heard, but what does it mean.

"Accountable": bound to give account, responsible

Webster's: ... responsible for a trust; liable to be called to account; answerable to a superior

Provision of Information and Explanations

1. Reason why "accountability" often hitched with another currently popular concept, "transparency".

2. "Responsible": liable to be called to account ...; of good credit or position or repute, respectable, evidently trustworthy.

• Webster's: accountable; answerable; able to respond to any claim; involving responsibility ("a trust, or the like, resting on a person")

3. Trustworthiness. Key concept for charities, born and bred as they are out of the law of trusts, which basically involve the concept of A giving money to/entrusting money to B who is obligated to use that money for the benefit of C.

4. Trustworthiness, in the general sense, is also inherent in the nature of many charities' work. Often as A's (donors), we have no way of knowing whether the money we give is going to be well spent. For example, charities working overseas. Or, as we're not art experts, we can't tell whether the latest purchase by a public gallery was a wise expenditure.

5. Again, the C's in the equation (the beneficiaries) are also often dependent on the trustworthiness of the organization and its staff.

• We don't know that the hospital doctor pointing that needle at us is going to harm or hurt us; we have to trust that he or she has taken the appropriate precautions and knows what they are doing.
• Also there are the charities with a clientele comprising the completely powerless, the defenceless members of society - the orphans, the aboriginal children, the down-and-out. Beneficiaries have to trust there is no abuse of this asymmetrical power relationship since they are not going to be able to defend themselves.

6. Therefore, we often give our money to charities even when we cannot be certain how exactly it is going to be used. By and large, we are prepared to trust that the money will be well spent. But if we have any doubts on this score, then assuredly our wallets are going to close, and we will find other channels for our altruism.

Why Today's Emphasis on "Accountability"?

7. Is it because charities have been non-accountable/irresponsible/untrustworthy in the past? My view: a definite no. Why then the emphasis?

• Because of recent scandals.
• General public attitude of cynicism towards all manner of institutions, including political system, and public servants. To the extent that some charities have been rather involved in various political matters, they too have felt some of the fall-out: - just another lobby group, pushing their members' interests.
• Challenges from ideological "right" and "left" have questioned sector's legitimacy.

The left

Classic expression in Walter Stewart's book, expressing a distrust of charities inherited from the 19th century. Seen as a means of controlling working class dissent, and salving the conscience of the rich, when what was needed was a reorganization of society that would do away with misery entirely. Continuing strain with labour movement over the issue of volunteers being used to replace union workers ("Workfare").

The right

Basically, don't understand how any institution not operated like a business can be efficient, and is prepared to assume the worst. The following is a sample from a House of Commons debate on the Bryden bill:

"In a free market economy, ... companies have to make a profit or they die, they go into bankruptcy and become insolvent...

Most non-profit and charitable organizations have a different focus. They are not trying to make a buck. They have a specific and worthwhile function they are trying to achieve. However, without having the restraints required of turning a profit..., they will have a tendency over their history to build in inefficiencies. The greatest inefficiency is in the area of wages.

Public Perceptions

8. How widespread is the public demand for accountability? Very little available, but there seems to have been an increase in scepticism in recent years.

9. Summer 1991, Decima national survey: "How about the people who run voluntary and charitable organizations? Would you say you have a great deal of confidence in them [46%], only some confidence [44%] or hardly any confidence in them [9%]?" Not an overwhelming endorsement, but in fact charities got the highest rating of any sector studied. For the people who ran the civil service, only 11% had a great deal of confidence, while 36% had hardly any.

10. 1996, Angus Reid survey found a considerable degree of cynicism. In the context of making gifts to charities that help people outside the country, respondents asked if they agreed with "Most of the aid sent to poorer countries never gets to those who need it most." 73% sceptical, with 40% in strong agreement.

11. Last fall, we asked a few questions on a national survey. 71% agreed charities should be more accountable, with only 25% disagreeing.

12. If media can be regarded as a mirror of society, a sense of public mistrust also emerged when we did an analysis of the close to 300 newspaper clippings in our files for 1994/95/96 that dealt with charities. About half of these voiced complaints against various charities.

13. Incidentally, found 102 clippings critical of the department. The dominant criticism was that we were lax or too easy-going.

1997 Budget

14. We expect draft law next month or so. Unless trust levels are high, sweetening the charitable tax incentive isn't going to draw in more funds for the sector.

Measures

Transparency

15. Budget: "these measures will improve donors' access to information about charities, and provide for greater transparency with regard to charities' affairs. Greater transparency will increase self-discipline in the charitable sector, and empower donors to play a better role in monitoring the sector."

16. More Revenue Canada documents to be made publicly available, for example:

• If registered, application form and letter of registration, including any qualifications, warnings.

If revoked, the letter setting out reasons for revocation.

• · A charity's governing documents.

Revenue Canada will try to make this information more widely available, for example, on the Internet.

Additional resources for Charities Division

17. Budget: "A number of changes are also proposed in this budget in order to ensure donors that they can continue to be confident that their donations are being put to good use. Notably, Revenue Canada will be given additional resources in order to improve its ability to ensure that charities comply with the provision of the Income Tax Act."

18. Basically, we need to double our staff. However, lot of this is catch-up money. In 1986, we had 1 employee per 700 charities compared to 1 per 1200 charities today.

19. Also, perhaps a recognition that as the tax incentives for charitable giving are increased, there will inevitably be a growing tendency for the less-than-entirely-philanthropically-minded to seek to take advantage of what is available.

How will the funds be used?

20. The funds will be used:

• To ensure prompt and accurate filing of returns. A new T3010 form, CARE re-engineering, IRRS, etc.
• To ensure better and more timely audits.

21. It is not a matter of strong-arm tactics. We know that the charitable sector is often staffed by a constantly changing cast of volunteers, who face what is sometimes a very complex set of rules. We need a strong educational component, for example, Roadshows.

22. To improve service. We need more efficient service to process applications and general enquiries, and a new publication (hopefully this year). " Revenue Canada will provide information to charities on how to broaden the understanding of the tax assistance available for charitable donations" and will be asking for input.

Consultation

23. Charities want clear and relevant rules. The content of the rules may not be so important (or even who provides them, government or the sector itself through self-regulation), as having everyone playing from the same rule book, so that one organization cannot steal a march over another and importunate donors can't go charity-shopping for a better discount rate for their charitable remainder trust or for some fancier form of donor recognition. On the other hand, there is no point in elaborating elegant regulatory schemes if they don't match the real world.

24. Thus, we want to work closely with the sector, but there are a number of practical problems. How can the government and the sector collaborate on this? What are their respective roles? How do we make sure the views of Canadians at large are heard, both in their capacity as donors and volunteers, and as the taxpayers who bear the costs of the charitable tax incentive? How close should the relations be between a regulatory agency such as the Charities Division, Revenue Canada and the sector?

25. All ideas are welcomed. Interesting times ahead.