All Philanthropy is Political

May 15, 2023 | Blog

Response to “Some input for rapporteur in meddling probe” published on April 26th in the Calgary Herald

All Philanthropy is Political. I read Steve Allan’s advice to the Right Honourable David Johnston, Rapporteur on the Chinese influence on our elections. Allan said he was drawing upon his experience as the Commissioner of Alberta’s public inquiry into foreign interference into ENGOs (environmental non-profits). The article is not really advice for Mr. Johnston. It is a restatement of Allan’s under-reported findings on Canada’s charitable sector. In my opinion, for good reason as is pointed out below.

Allan lays out three claims about Canada’s charitable sector:

Lack of transparency and as a result accountability
Too much foreign influence
Lack of business-like operations

Putting Allan’s three points into context of Canada’s charitable landscape, it becomes obvious that at the end of the day, all philanthropy is political.

Public Policy and Philanthropy

The minute you make a donation to an organization that funds any marginalized community or a special interest group (environment, reproductive rights, think tanks, etc.) you reinforce your political leanings.

I have been advising family foundations and private philanthropists for almost three decades. As a society, we incentivize philanthropy through tax credits. Through this incentive, we have an economic system that rewards certain behaviours and downplays others. This is what some call the Non-Profit Industrial Complex.

“If I had begun earlier I might have had some fun in giving it away. Now I must leave it either to relatives whom I hate or to churches and colleges in which I have no interest.”
Illus. in: Puck, v. 50, no. 1275 (1901 August 7), centerfold. Copyright 1901 by Keppler & Schwarzmann.

The Philanthropic/Non-Profit Industrial Complex in Canada

Big dollars influencing many organizations

David Hammack, a history professor at Case Western Reserve University, defines nonprofits as “formal, self-governing, voluntary, private organizations that don’t distribute profits and provide a public benefit.” Legislation governing charities does not dictate the size, the bank account balance, or a requirement around capacity to execute on mandate.

The way North Americans have developed their charitable legislation reinforces the model that, “… Nonprofits function as a form of soft social control to placate the masses and maintain order.” The Non-profit Industrial Complex (NPIC) is, “… A ‘system of relationships’ between non-profits, foundations that fund them, the local, state, and federal government, and “the owning classes.” (Incite. “Beyond the Non-Profit Industrial Complex | INCITE!” https://incite-national.org/beyond-the-non-profit-industrial-complex/)

The implications of these relationships present themselves in varying degrees. One of Allan’s points is that charities should be more like the corporate sector. As one sector analyst states, “taking this approach will encourage social movements to model themselves after capitalist structures rather than to challenge them… This, in turn will funnel money that would otherwise go toward taxes into private foundations, allow corporations to perpetuate oppression under the guise of charity, and “control social justice movements.” (Incite, 2022)

Interestingly, that is exactly what Allan is trying to prevent from happening.

Let’s take this a step further.

Who knows what?

Create a reporting standard – be transparent

One argument that Allan makes is the need for more transparency. This challenge comes up every time there is an issue with a charity, so what is missing? Why do funders feel like they do not have a clear line of sight on use of proceeds?

The charitable sector is highly regulated and all organizations are required to disclose publicly.

The minimum reporting requirements for Private foundations are:

identify which charities they fund and how much,
who is on the board of directors, and
revenue sources.

Public charities’ minimum requirements include:

disclosure of revenue sources (including foreign contributions),
activities,
top salaries,
where they operate, and
year-over-year comparison of spending. (Charities Listing: CRA – Canadian Government).

Rather than a lack of transparency, perhaps the questions asked are not relevant for the funder asking the question.

If it is not about the data already in the marketplace, perhaps it is a lack of understanding by funders of the charitable landscape. This includes lack of clarity on the available evaluation tools that assess the efficacy of organizations.

Evaluation standards by the numbers

There are standards upon which a charity can evaluate itself.

All philanthropy is political. What a donor chooses to consider in their assessment of a potential grantee’s efficacy and deservedness of funding, directly correlates with the funder’s political leanings. With this in mind, Allan clearly chose to not contextualize the findings into the broader charitable marketplace. He chose information to highlight, even though, when put into the context of the marketplace, the findings are inconsequential.

Transparency

Let me take a moment to shed some light on the numbers in the name of transparency:

Allan’s analysis starts in 2010. At that time, there were 84,000 registered charities (Blumberg, Mark “Blumbergs Snapshot of the Canadian Charity Sector 2010.” Canadian Charity Law, 10 June 2013, ). This includes the private family foundations and corporate foundations. In comparison, in 2018, there were 85,000 registered charities. It stands to reason that if the size of the charitable pie grew, then so too would the number of donations.

Foreign investment into Canadian charities over the course of those 8 years ($1.5 billion in total) represented less than 1% of the total giving in Canada. According to CharityData.ca approximately 730 organizations benefited from that $1.5Billion. Just as the dollars amounted to less than 1% of total giving during this time, the number of organizations that received these funds was less than 1% of the total number of operating charities. So while the dollar values may seem large, the influence of foreign investments into Canada’s charitable sector is minimal. Given the size of the market, these are statistically irrelevant, or as the business sector would call it, “A rounding error.”

Finger on the pulse

The role of Government in the Charitable Sector

Allan argues that there is too much money going from the government into charities. How much is too much? Or, put another way, what type of society do we want to have?

According to CRA data, year-over-year government funders (at all three levels) represent about 30% of the total dollars that flow into the charitable sector. Typically, these dollars go towards funding the “unsexy.” The programs and services your personal donations support are directly algined with your your political lens. The reason why “Flies on Eyes” famine relief advertising in the 80’s and 90’s was so powerful was because it elicited an emotion to facilitate a transaction.

Government funds in the “unsexy” through government grants to non-profits. If it weren’t for these grants we would have: devastatingly slow crisis response times, a lack of schools in new neighbourhoods, the athletic facilities and arts complexes enhancing your lifestyle wouldn’t see the light of day. Not to mention, the drug rehab centres and affordable housing complexes and health facilties would not be created.

Your tax dollars generate the funding via government grants for these projects, and so much more. If it was left to civil society to fill that gap, we would have limited to no social safety nets.

And what about these Foreign Actors who are unduly influencing our charitable sector and the work they do?

Alien Invasion

Alien invasion. Foreign donors are lifting up Canada’s charitable sector. Or is it?

This old trope has been espoused since we formalized the Philanthropic Industrial Complex. It keeps hold because, in large part, there is a lack of understanding on accountablities. Allan states that if charities were required to disclose their foreign investment, we would feel secure that our charitable sector isn’t being unduly influenced by foreign interests.

Allan can rest easy, because, all NGOs are required to answer the following question in their annual filings (T3010): “Did the charity receive any donations or gifts of ANY KIND valued at over $10,000 or more from any donor that was NOT a resident in Canada and was not a Canadian citizen, employed in Canada, carrying on a businesses in Canada or having disposed of taxable property in Canada?” [emphasis added by author] The answer to that question is publicly available on the CRA website and can also be found on the CharityData site.

Let’s fast forward to last year’s numbers. In 2022, of the $304 billion in total revenue generated by charities (donations, fee-for-service, investment returns, etc.), $2.9 billion came from outside of Canada. Once again, a large number for most of us, but in context, it is less than 3% of the total revenue generated by all types of charities. Considering just ENGOs this amounts to less than 1% tracking to the previous time frame laid out by Allan.

Allan’s criticism of the charitable sector is around transparency, lack of accountability, too much government funding, and foreign investment. As this has now been put into context, maybe what underlies his issues is the charitable sector business cycle.

To every season…

Timing is everything

Private business primarily drives Canada’s economy. Depending on the source, is between 83% and 85% of the GDP – “Statista Industry Overview.” Statista). Unlike charities, private businesses do not have to disclose their operations publicly. Therefore, to say that charities should be transparent like businesses seems disingenuous. Given that there is transparency, and the foreign investment concerns are not statistically relevant, perhaps the issue is with the timing.

To be fair, charities, like businesses, have up to six months following their year-end to file tax returns. All the data we have is, at a minimum, six months behind. Given that there is a review on some of the filings, sometimes public information can be a year old. This may leave some donors wondering about accountability.