Public Policy Sources #31:
Why are New Institutional Arrangements Required?

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Before proceeding to an examination of the final report’s recommendations, it would be useful to look at some of the assumptions underlying the Panel’s work. This will allow us to see how the Panel approached the issues, and assist us in scrutinizing its recommendations.

Both the consultation paper and final report assert throughout that the voluntary sector needs new administrative arrangements to improve governance and accountability. This conviction appears to be based upon five major assumptions (Building on Strength, pp. 56-57):

• the institutional machinery is antiquated and should be redesigned;
• to promote good governance and accountability, more is required than Revenue Canada’s current watchdog role and auditing expertise;
• the growth of the voluntary sector is creating a new balance "in which governments need a strong, well managed sector that maintains high levels of public trust";
• the government machinery needs to be redesigned "to facilitate the improvement of the sector’s effectiveness, both as partners in delivery of public services and as autonomous organizations"; and
• it is essential that a public window exist on the sector.

While there may be wide agreement in the voluntary sector and government that new arrangements would be desirable, the above rationale is not entirely convincing. First, new is not always better, and changes should not be undertaken just for the sake of change. Second, while improvements in governance and accountability are desirable, much could be achieved without institutional change.

Third, though the growth of the voluntary sector has been remarkable, it is debatable whether any new arrangements should be justified in terms of the needs of governments, rather than of voluntary organizations and the people they serve. Certainly, any changes should be directed towards maximizing the public good, but the needs of governments are not necessarily synonymous with the public good.

Fourth, though government machinery may need to be redesigned, it would be a mistake to assume that doing so is the only way of improving the sector’s performance. As well, many voluntary organizations would object to being considered and treated as government "partners." Finally, though providing a public window on the sector is both justified and desirable, achieving this need not require substantial changes to existing arrangements. Alternative arrangements will be discussed below.

There are other assertions and unstated assumptions underlying the Panel’s work that it would be best to consider prior to conducting a detailed examination of its recommendations. First, there is the statement that the charitable sector comprises one-eighth of Canadian gross domestic product (GDP). While technically true, this is misleading, since, as the Panel notes itself, "almost 60 percent of revenues in the sector are in teaching institutions and hospitals"4 A small proportion of these organizations is independent, but the great majority of them are government-run, and all of them are supervised by their respective ministries. As the Panel itself recommends that no substantive change be made in this regard,5 it would be either careless or disingenuous to claim justification for particular measures on the grounds of the technical size of the sector. The actual size of the sector the new VSC would be responsible for would be closer to 5 percent of GDP.

Second, there is the assumption that the continued growth of the sector automatically would be in the public interest. While a strong argument could be made that expansion would be beneficial, indefinite expansion is another question. As pointed out by the Supreme Court, there is an important question of public revenues involved.6 As well, given the increasing complexity of charitable for-profit ventures, expansion poses important questions that, although beyond the scope of this paper, need to be considered carefully.

Third, there appears to be an assumption that governments need to be at the centre of any reforms.7 While government clearly is responsible for setting the boundaries for charitable activity and ensuring that charities conform to legislative requirements, it does not necessarily have to take up an important role in the actual operation of the sector. Other options need to be given serious consideration.

Last, there appears to be a belief that the new responsibilities and activities envisaged in the final report need to be concentrated as much as possible.8 Though this viewpoint is one commonly shared by administrators, in practice decentralization and specialization are more likely to produce better results because communities are better informed as to their own needs. The Panel seems not to have considered possibilities along these lines.

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