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Public Policy Sources #31:
How Would the New Voluntary Sector Commission Work?

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Bearing these lessons in mind, we can now proceed to examining the functions that the proposed VSC would assume. The Panel would have it that the new VSC would not have the same powers as the Charity Commission:

In Canada, jurisdiction over charitable organizations is shared, with federal jurisdiction limited primarily to matters related to the Income Tax Act; this alone would cause a federal commission to be more restricted in its role than is the case for the Charity Commission in the UK" (Building on Strength, p. 64).

However, if one compares the aims and functions of the Charity Commission and the proposed VSC, they are remarkably similar.

The aim of the Charity Commission is to give the public confidence in the integrity of charities. This aim is underpinned by the following objectives:

to develop an effective legal and accounting framework for charities; [this includes making decisions on charitable status]
to promote the accountability of charities;
to encourage standards and good practices in charities;
to deal with abuse and poor practices; and
to promote awareness of the role of charity and the Charity Commission."25

In comparison:

[t]he four primary functions of the [Voluntary Sector] Commission would be [to]:

[p]rovide support, information, and advice about best practices to voluntary organizations related to improving accountability and governance;

[c]ollect and provide information to the public;

[e]valuate and make recommendations on registration of new applicants; [and]

[a]ssist organizations to maintain compliance with Revenue Canada and other regulatory requirements, and investigate public complaints (Building on Strength, pp. 58-61).

A closer look at the details concerning the VSC’s relationship to government brings the similarity into sharper focus (Building on Strength, p. 63):

it would be headed by government-appointed independent commissioners;
it would report to Parliament through a minister;
it would table an annual report with Parliament; and
it would be funded by the federal government.

In each of these particulars, the VSC mirrors the Charity Commission. The Panel admits that "[I]n some respects, the model we have proposed bears a resemblance to the Charity Commission" (Building on Strength, p. 64), but in fact, it is difficult to spot differences between the two organizational structures and the responsibilities of each.

It also is of interest that the proposed functions and structure for the VSC are precisely the same ones outlined for a federal commission in the consultation document, though the wording is slightly different (Helping Canadians, p. 41). This being the case, it is puzzling to see the justification for the Panel’s claim (Building on Strength, p. 62) that its recommendation for the establishment of a new VSC is based upon a blend of the discussion paper options for a federal commission and for a non-governmental agency.

If the rationale for this claim is not clearly discernible, the Panel at least lays out the basic principles that guided its thinking in regard to the establishment of a new VSC (Building on Strength, p. 63):

the need for including expertise from the sector;
the desirability of enhancing the functions of intermediary and other voluntary organizations;
the necessity of avoiding being either large or bureaucratic;
the desirability of working through partnerships with the sector and others;
the requirement of being accessible to the sector and the public;
the need for secure and stable funding;
the advantageousness of being insulated from political interference; and
the desirability of being flexible enough to evolve over time.

Let us examine each of these principles in relation to the VSC’s four primary functions stated above, as elaborated upon in the final report.

Expertise from the sector

This obviously would be a desirable ingredient, and the Panel foresees the VSC hiring a number of people with experience in the sector to fill key roles (Building on Strength, p. 64). However, it would appear that these employees would fill secondary positions, since the commissioners would be appointed by the federal government, on the basis of "expertise and merit." Of these five to seven appointees, only one third necessarily would be required have had extensive experience working or volunteering in the sector (Building on Strength, p. 63), which seems an insufficiently small proportion given the stated bases for appointments.

The Charity Commission, on the other hand, has only three to five commissioners chosen from the civil service, and at least two of them must be qualified lawyers.26 Given that the proposed VSC is to make recommendations on charity status, it would seem advisable that a requirement be instituted for a portion of its commissioners to have a background in charity law. The Panel notes that "[t]he strength of Revenue Canada is its expertise in auditing, not in determining charitable purposes in the first place" (Building on Strength, p. 59), but it is hard to see how commissioners lacking legal expertise could be much more expert in the matter. We will return to the question of determining charitable status below.

Enhancing the functions of intermediaries and other voluntary organizations

Many charitable organizations would welcome assistance in improving their performance, and undoubtedly improvements could be made in accountability and governance standards in the voluntary sector. The report envisages the VSC’s efforts in this regard as being complementary to the work already being done by intermediary organizations, foundations, and other organizations. The VSC would operate primarily as a clearing house for information and ideas, in order to facilitate the wide distribution of innovative approaches. The VSC also would be authorized to provide funding for particular projects, though the overall level of funding that should be made available is not specified.

Though these activities might well be useful, past experience with government-sponsored information and education programs is not entirely positive. Part of the reason for this is that mass distribution is not necessarily the most efficient means of disseminating information. Organizations receiving this information might consider it interesting, but then they might not. The true test of whether information is useful is whether or not it is put to use, and organizations intent upon improving themselves will seek the information that they need.

To be fair, the report does recognize that the main responsibility for capacity building and education should remain with the voluntary sector (Building on Strength, pp. 60-61), however, the case is not made that a new agency is required to take on any role in this area at all. There are number of initiatives being undertaken in this area by non-governmental organizations,27 and in the internet age the importance of having a "one-stop shop" for information is declining every day.

Of course, there is another way of enhancing the functions of voluntary organizations, other than by improving their efficiency--by providing additional funding. If the justification for a VSC role in disseminating information is entirely convincing, the involvement of such a body in distributing federal funding is even less so. There are many existing agencies that fulfil this role. In any case, the federal government would be better advised to implement further measures to increase charitable contributions from individuals and corporations, most importantly by working to increase individual disposable income, one of the primary determinants of charitable giving.28

Avoiding size and bureaucracy

The Panel does note a desire for economy in the VSC, though it is not clear from the wording of the final report whether this desire stems from conviction or perceived necessity:

Although we believe that there is strong need for the new kind of agency we are proposing, we recognize that there is little appetite among governments or the public for the creation of large and expensive new machinery. The agency we are proposing, however, would be neither (Building on Strength, p. 63).

On this note, the final report states that the VSC:

…should have a small staff. Although it is difficult to estimate numbers at this point, a staff of less than 100, about the current size of the Charities Division of Revenue Canada, would probably be appropriate. (Building on Strength, p. 64)

Granted, it is difficult to estimate numbers, but a comparison with the staffing levels of the Charity Commission is instructive. According to the consultation paper, the Commission employs 700 people to deal (not so well, as we have seen above) with some 182,000 charities.29 Currently in Canada, there are some 78,000 charities (Building on Strength, p. 13), and the staff of the VSC would be undertaking basically the same functions as their British counterparts, with the additional complications involving provincial jurisdictions. As well, given the widespread demand for a relaxation in the legal definition of charity, the new agency probably would be faced initially with a deluge of applications for charitable status.

In addition (and contrary to the practice of the Charity Commission), it appears that VSC staff would be involved (in a manner not made entirely clear in the final report) in "bringing the voice of the sector to the cabinet table" and in helping co-ordinate policy between government departments. These endeavours, which will be examined in detail below, would impose further work on VSC staff.

It would seem, therefore, that the Panel’s staff estimate is clearly far too low. Using the information quoted by the Panel, it would appear that, on a simple proportional basis, 300 staff would be required just to replicate the work of the Charity Commission.30 This is further reason to examine carefully the scope of activities proposed for the VSC.

The Charities Division does manage with a staff of only a hundred or so, but this comparison is not meaningful, since the staff there is devoted primarily to registration and compliance work. They devote little time to the other activities envisaged for the VSC.

Working through partnerships with the sector and others

The primary VSC function most closely affected by this principle is that of assisting organizations to maintain compliance with regulatory requirements. The VSC is to achieve this by working closely with Revenue Canada and voluntary organizations (Building on Strength, pp. 60-61). As we have seen in Britain’s case, ensuring co-operation on these issues between the revenue and a semi-autonomous body is easier said than done.

The report makes several concrete suggestions as to how this would work in practice, but unfortunately these raise more questions than they answer. To begin, it is recommended that the VSC would conduct an initial review of information returns, and help organizations complete them. It is not stated whether the returns subsequently would be forwarded to the Charities Division, but one would assume so.

The first observation to be made is that the staffing requirements for conducting a check of all information returns would be prohibitive.31 This being the case, the VSC would have to adopt a selective approach, but what this approach would be is not made clear.32 What is clear is that Revenue Canada personnel undoubtedly would be better qualified to conduct selective assessments than would VSC personnel, at least initially. What is more, Revenue Canada staff is motivated by the desire to minimize the loss of public funds, while the staff of the proposed VSC would be torn between conflicting motivations.

Presumably, since the submission of returns to the VSC would be mandatory, and since the VSC is to be funded by the federal government, voluntary organizations would not be charged a fee for having the VSC review their returns. This being the case, no doubt many charities would use this free service and request that their returns be reviewed. Given its mandate and its envisaged role as "coach," it would be difficult for the VSC to refuse such requests. Since the VSC’s first response to improper filing would be to offer assistance, there would be a substantial incentive for organizations initially to be less than careful and thorough--in effect, to count on the VSC to complete what is properly their own work.

Quite apart from the workload created, it is difficult to justify having a federally-funded organization provide a free review service to voluntary organizations. Part of the expectation placed upon organizations benefiting from tax expenditures or direct government support must be that they be minimally efficient administratively. This includes proper filing of information returns. It makes little sense to provide a further indirect subsidy that has a side effect of encouraging laxity. The Panel is right in proposing less stringent reporting requirements for smaller organizations (Building on Strength, p. 31), however, proper reporting by charities should not be viewed as a burden imposed by government, but rather as a serious responsibility for voluntary sector organizations, related to their qualification for charitable status. Lack of resources is no excuse, since charitable status is a privilege entailing responsibilities, not a right to be used to invoke further taxpayer support.

Of course, the VSC could charge for the review service, but then it could hardly be made mandatory. And if it is not mandatory, there is little rationale for a single organization attached to the federal government being involved in the process. Other voluntary intermediary agencies, or indeed private sector organizations, could provide the same service.

The Panel sees the VSC being involved in another way, recommending that the VSC be empowered to impose intermediate sanctions in cases of continuing non-compliance. The final report provides only one example of such intermediate measures--publicity.33 It is unclear how such a measure would relate to existing legislative restrictions on the release of tax-related information. As well, since negative publicity can entail serious and lasting financial consequences for charities, and as it cannot be expected that Revenue Canada will agree with all of the VSC’s decisions, using this sanction against an organization might expose the VSC to legal action brought by the organization. In cases where such intermediate sanctions proved insufficient, matters would be referred to Revenue Canada, where, it must be said, they properly should reside from the beginning.

To complicate matters further, the final report recommends that the VSC investigate public complaints. Currently, this function is performed by Revenue Canada, and there is no indication given in the report that it is doing this ineffectively. Again, as any decisions by the VSC resulting from investigation of complaints would be open to review by Revenue Canada, it is unclear why the VSC should play a role at all. Finally, it is assumed in the final report that the VSC would be working closely with the Department in all these areas, though it is not difficult to foresee problems arising from the proposed measures.34

Being accessible to the sector and the public

The Panel recommended that the new VSC should be accessible and decentralized, qualities that undoubtedly are desirable in any publicly-funded body. The reasoning behind this recommendation is that the Panel considered it very important that a VSC be involved in collecting information and providing it to the public (Building on Strength, pp. 58-59). Measures to these ends suggested in the final report include "a sophisticated, but user-friendly web site, partnerships, regional offices … and … regional advisory groups" (Building on Strength, p. 64). Though commendable, this decentralization could well impose additional requirements for staff and resources. And if regional offices and advisory groups are considered necessary, why need they be combined into one central organization?

One rationale given for increasing public awareness is that Canadians, though holding a high opinion of the voluntary sector, know little about it. Increasing public awareness is said to be important because visibility enhances both accountability and public confidence. To this end, the Panel argues that:

…members of the public also need to have ready access to consistently reported information about specific organizations in order to make comparisons and personal decisions about their own giving and volunteering. (Building on Strength, p. 59)

Undoubtedly it is most important that donors take the responsibility for ensuring their donations are used appropriately, and the provision of such information might well be useful. However, it is not clear why a new VSC is required to provide it. As the Panel itself notes, much information of this kind already is collected by Revenue Canada. Admittedly, however, although most of this information is available to the public, and although the Department is making efforts to improve accessibility, improvements could still be made.

The Panel’s proposed solution is to integrate the databases of the VSC and Revenue Canada, and make non-confidential data on individual voluntary organizations available free of charge on the VSC’s internet site (Building on Strength, p. 59). If a single, centralized database is desired, however, there is no reason why Revenue Canada could not accomplish this on its own, given the requisite authorization and resources.

Why a single, centralized, publicly-accessible database is necessary, however, is not clear. The Panel itself recognizes that donors typically are not interested in obtaining information about all charities, but rather about all charities of a certain type, or charities in their local area. In any case, whatever reporting requirements are imposed, potential donors are likely to contact charities directly for more complete information, and to get to know the staff. Furthermore, raw information on particular organizations of the kind now collected by Revenue Canada is not necessarily the most useful to potential donors. Alternatives to the centralized model will be discussed below.

Another issue related to transparency is the current restriction on Revenue Canada from releasing information regarding applications for charitable status. This undoubtedly causes much wasted effort both on the part of applying organizations and the Department. The Panel uses this point to argue that the VSC should be involved in making recommendations to the Department on applications for charitable status, saying that the VSC could then make the information public. This by itself, however, is not reason enough to involve the VSC in this process, for as above, Revenue Canada could simply be authorized and required to make public its decisions in this regard.

Finally, the Panel raises the valid point that it is necessary that adequate information be collected on the sector as a whole. They suggest that the VSC:

work with Statistics Canada to ensure that adequate data are collected about the sector as a whole, and that they are available to those in the sector, and to those seeking information about it… (Building on Strength, p. 59)

Although it would be desirable for Statistics Canada to collect and make public additional data on the sector, it is unclear why Statistics Canada should require the assistance of a VSC to accomplish this task. In any case, the voluntary sector already is establishing information sources of its own,35 and further resources of this type will develop as demand for them grows over time. What is more, university and in-sector researchers are generating increasing amounts of information and analysis about the voluntary sector, and this work is being made accessible. Considering all the above, it is hard to see how a VSC could justify its involvement in gathering or disseminating information on the sector.

Secure and stable funding

The Panel believed that it was necessary for the new VSC to have secure and stable funding, and recommended that this funding be provided by the federal government (Building on Strength, p. 63). There are a number of observations to be made in this regard.

First, it is the dream of every organization to obtain secure and stable funding, and such a situation does have its advantages: it encourages long-term planning, and reduces the amount of work required to keep the money flowing in. Security and stability do have side effects, of course. Historically, organizations with assured funding tend to be less productive, less innovative, and less responsive than those who have to work hard to keep themselves afloat. The Charity Commission is a perfect example of this phenomenon. Another consideration to keep in mind is that, as we have seen in recent years, government funding for particular programs cannot be assured. There is no reason to expect that a VSC would be immune from this danger.

Diversification of income sources is another way of achieving stability, one that should be considered as an alternate arrangement to full government funding. The new VSC could charge for its services and, if it were not given any regulatory powers, it could raise money through donations from the corporate36 and voluntary sectors. Were this latter course to be pursued, however, the rationale for having a VSC attached to the government would be weakened somewhat.

There is another reason, however, why diversifying income sources would be advisable. Any organization completely dependent for funding on the body to which it reports is highly susceptible to being influenced by that body. If this appears not to have been the case with the Charity Commission, this is because the British Parliament, though willing to criticize the Commission’s performance, so far has not been disposed to interfere directly in its operations. One could not expect this inclination to persist if the Charity Commission’s performance continued at its current level.

Insulation from political interference

In its reports, the Panel stresses the importance of maintaining a degree of independence for the new VSC (Building on Strength, p. 50; Helping Canadians, p. 42), like that enjoyed by the Charity Commission. But we have seen that such an arrangement does not seem well suited to ensuring good performance. There are a number of aspects of the final report, however, that appear to indicate that a somewhat closer relationship than this is foreseen, or that one would develop naturally over time. Although this might well improve government oversight of the VSC, it would seem to undermine the rationale for having an arms-length body.

The first thing that catches the eye in this regard is the proposed arrangements for the "independent" commissioners. To begin, it is difficult to understand why five to seven commissioners would be required to run a staff of 100, when the Charity Commission has three to five commissioners to run a staff of 700. More to the point, it is not clear in the final report either that these commissioners would lend credibility to the VSC, or that they would be insulated from political interference. It is stated that the commissioners would be appointed on the basis of expertise and merit, but it is only required that one-third of them have any extensive experience in the sector, and no requirement is mentioned for the legal expertise necessary to making decisions on charitable status. This leaves the nature of the expertise and merit of the other two-thirds open to question. On their own, these two qualities are not sufficient to ensure public confidence in an organization, as may easily be seen if one considers public perceptions of the Canadian Senate. If commissioners are to be appointed, they should be fewer in number, at least a two-thirds of them should have extensive experience in the sector and, if the VSC is to have a role in determining charitable status, at least one-third of them should have the requisite legal expertise.

More troubling is the Panel’s recommendation that:

…the federal and provincial governments ensure that the voluntary sector has a voice in government policy making, by assigning responsibility for the sector to a specific Minister, and by creating small, horizontal policy units to help coordinate the activities of various departments engaged with the sector. (Building on Strength, p. iv)

This modification to cabinet organization in governments across the country is justified on the basis of comparison and with the obvious desire to increase government funding for the voluntary sector:

Imagine how absurd it would seem if agriculture, the financial services or natural resources sector were not represented at federal or provincial Cabinet tables. Arguably, the voluntary sector is as important in its economic impact and social significance. It is also essential to how governments carry out their own core business. Yet, with the exception of British Columbia, no Canadian government has a Cabinet minister ensuring that the sector’s interests are represented at the strategic policy and resource allocation stage of government decision making. In one sense, every Cabinet minister might claim to speak for the sector…[b]ut, secondary and fragmented voices are seldom as powerful or constructive as that of a designated minister." (Building on Strength, p. 17)

This argument seems to have originated during the consultation period from a suggestion made by the CCP:

Despite the complexity of the public sector-voluntary sector relationship and the size of the sector (charities alone account for more than 12 percent of the country’s GDP), there is no body at either the federal or provincial level anywhere in Canada that deals with the voluntary sector as a whole…In sum, the voluntary sector lacks a point-of-contact and liaison within government similar to those available to the much-smaller farm and agrifood sector, for instance, or the financial services sector (Finance), or any of the resource and industrial sectors (the federal departments of Natural Resources, Fisheries and Oceans, Industry, Tourism and their provincial counterparts)." (CCP, Submission to the Panel, pp. 7-8)

There is much to consider here. First, recommending changes to cabinet structures would seem to be a bit beyond the original aims that were to have guided the deliberations of the Panel. Second, the actual size of the charity sector is closer to 5 percent of GDP. In any case, it is not absurd to question whether having the charitable sector represented at the cabinet table is in the public interest. The track record of governments in "managing" or "coordinating" various sectors of the economy cannot be said to be unblemished. It also should be noted that, although charities perform many functions that otherwise would be performed by Canadian governments, whether or not these functions should be the "core functions" of government is open to debate on both economic and philosophical grounds.

The role to be played by the proposed "horizontal policy units" also bears consideration:

The job of the policy unit would be to work horizontally within government with the primary goal being to provide some coordination across line departments relative to their programs and policies for the sector. We do not imagine that such a policy unit would, nor should be one-stop shopping for the sector. Nor should it would (sic) replace the direct relationships that line departments have with voluntary organizations. At the federal level, such a unit might continue the work of coordination begun by the Task Force on the Voluntary Sector and could also play an important liaison role between government departments and the … [VSC]. (Building on Strength, p. 17)

Although it is not stated clearly, it would appear that such units would be created at the federal and provincial levels, and that the staff of these units would be drawn from the civil service. It is not immediately obvious why creating new bodies of this nature would improve coordination between Departments, the staffs of which presumably coordinate their efforts already. By creating new points of contact between the voluntary sector and government Departments, the move might actually increase confusion rather than coordination. The only thing that can be said for certain is that the creation of such policy units would result in more people talking to each other.

As far as the "liaison role" between the VSC and government departments is concerned, it is not clear how this is related to the stated goals of the VSC. The Panel states that the VSC "should not be seen as the advocate for the sector" (Building on Strength, p. 60), however, given the likely nature of the VSC’s relationship with the federal minister responsible for the voluntary sector and with the horizontal policy unit, and its "liaison" functions with other government departments, it is difficult to see how this perception would not evolve over time into reality.

This relates directly to the question of political advocacy. Though the Panel is correct in saying that vibrant voluntary organizations are beneficial to democracy (Building on Strength, p. 9), this must not be confused with advocacy by charitable organizations for changes in legislation or increases in funding that would benefit only a portion of society. Lobbying for increased government spending on charitable endeavours essentially is no different than industry lobbying for special privileges from government, and neither should be considered as being charitable in a legal sense.37

Finally, there are serious questions to be asked about the effect of the voluntary sector being "plugged into" government in this way:

A deliberately provocative way of putting the problematic contemporary relationship between the state and charity is that as compared with the welfare state, which at once supplanted charities and co-opted them to government purposes, the contemporary state is becoming a charitable intermediary or foundation and charities are becoming state actors… Where the state no longer views itself as sole or even principal provider of public services, it becomes a part-supplier of funds for public purposes in a market of fund suppliers. Its role becomes indistinguishable from that of the charitable foundation, which attempts to prioritize and do distributive justice among a broad range of good causes soliciting its support. The principal differences, of course, are obligatory contribution to the state "foundation" through taxes and the large number of donors to whom the "foundation" is accountable… When the charity becomes a public service provider that is the locus of collection and disbursement of public monies for that service ... the "intermediation" of the state effects a shift toward charities as the ultimate state actors. The point is that with a fully intermediated state funding function, charities would not (sic) longer be supplementary, discretionary add-ons to what was otherwise state service provision. They would instead become the executive arm of the state.38

To carry the argument a step forward, it should be noted that there is a clear distinction between voluntary organizations acting primarily as agents of a democratically elected government or as a collective expression of the charitable wishes of individuals. There are two key points to note in this regard. First, there is the question of compulsory versus voluntary donation. Second, anyone with any familiarity with the political process would have to admit that government decisions on funding priorities are influenced by party political considerations.

Once again, it is beyond the scope of this paper to examine this in detail, but the issue obviously is an important one and both the charitable sector and governments should enter into any such new arrangements with their eyes open. It should be noted, however, that the voluntary sector need not develop into the executive arm of the state. An alternate model is available, in which the role and influence of the state "foundation" is reduced, permitting individual citizens and voluntary organizations to play a greater role in determining the nature and character of services that should be provided. Both alternatives should be kept in mind when discussing "capacity building."

Flexibility to evolve over time

If one is concerned with maintaining flexibility, the lesson of the ages is clear: do not set up a monopoly bureaucratic body with assured funding and without full accountability. The only evolution natural to such bodies is towards gigantism, stasis, and complacency.

If a VSC is to be established, its tasks must be kept to a minimum and its mission must be unambiguous. Given the Panel’s stated support for the principle of outcome-based assessment, a VSC should be made subject to the same constraints and expectations it is considered desirable to impose on voluntary organizations. As well, measures should be put in place at its inception with a view towards gradually weaning it from dependence on government funding.