September/October 2011
64
Not-for-Profit Law
Twenty years or so ago, as a novice international co-operant, I can remember at my in-country
orientation, being told of the need to “learn to live with the contradictions”. Perhaps that was a
fitting message for a bunch of gung-ho international development workers itching to change the
world. But, as I have learned since, accepting “the contradictions” is all too often a defining feature of
working in the voluntary sector.
Hearing that message two decades ago was brought to mind again by some of the press
coverage of the sector this past summer. Most glaringly, stories about two different health charities –
one dealing with the inclusiveness of an organization in its fundraising and the other critiquing the
resources devoted by a group to its fundraising and suggesting that spending on raising donations
was diverting money from its other operations – highlighted the often conflicting expectations of the
public of charities.
Reconciling these mixed messages presents a quandary for both those who work in the sector
and politicians and administrators trying to regulate it. Unhappily, the temptation for lawmakers
to jump on a populist bandwagon and impose one-size-fits-all solutions on complex situations
can trump a more measured approach – witness C-470, the effort in the last Parliament to cap the
compensation of charity workers.
Salary constraints are just one aspect of the frequently-expressed concern that charities operate
“efficiently”. There is little doubt that there is a large public appetite for organizations spending
as much of their revenues as possible on direct charitable services. But, as the press coverage last
summer highlighted, the public wants other things from charities as well.
Facing contradictions
Peter Broder
Column: September/October 2011
65
They want inclusivity. One of the groups that faced adverse publicity in June was an Alberta
health charity mounting a fundraising event where participants were required to obtain a minimum
amount of pledges before they could take part. The controversy stemmed from a woman, whose
circumstances prevented her from gaining enough support to reach the minimum pledge amount,
being told she wouldn’t be able to participate. In the end, the publicity around the incident
generated sufficient pledges for her to qualify, but the organization
was painted in a very negative light.
Although this situation relates to a fundraising effort,
charities face similar calls for inclusivity in their work all the time.
In the public’s eyes, it usually isn’t an acceptable answer when a
charity suggests that providing services or allowing participation
isn’t economically justifiable. It is the nature of charities that they
frequently address market failures, and deal with situations that
aren’t economically tenable in themselves. That needs to be kept
in mind when looking at a charity’s financial record to see if it is
operating “efficiently”.
A second thing the public is frequently said to want is fewer charities. Many people argue
against what they see as a proliferation of charities: they don’t see the need for one organization to
support research to cure a disease, another group to educate the public on prevention of it and a third
body to provide support services for those suffering from it. In part, no doubt, this is because they
would prefer to deal with fewer solicitations for donations.
But this can play out differently when you get down to specifics. A number of broadcast
and newspaper reports last summer took aim at supposed erosion of spending on research of
another health organization. The reports detailed increased fundraising and administrative costs
and described the organization as having diversified its mandate, so it no longer focused solely on
research, but was now worked on prevention and treatment as well. Given this change in focus the
differences in fundraising and administrative costs may have been quite reasonable, but the reports
looked at historical data rather than comparing the group to other organizations operating with a
complex mandate. Adoption of this integrated approach by the organization was seen as tangential to
the main story of cost increases.
This brings us back to “high” salaries. Aside from the fact that the public expects sophisticated
and multi-faceted charities, which may entail more professional – and more expensive – management,
administration and fundraising, organizational costs can be driven by a little remarked on (though
presumably broadly supported by the public) policy choice to use a mixed public sector/private
market model to generate the resources to support health and other public benefit activities in
Canadian society. Again, different public expectations are at odds with each other here.
Perhaps because private philanthropy was historically so closely associated with faith-based
groups, an expectation endures that the giving and use of funds to charity will occur outside the
economic marketplace. But over the last few decades the growth of fundraising as an industry –
Not-for-Profit Law
Though it is not widely
appreciated by the public, there
is a cost – and a fairly steep one
at that – in relying on the private
sector to underwrite an increasing
portion of the work of charities.
Column: September/October 2011
66
and to a lesser extent the professionalization of management and
administration within the charitable sector – has been on a marketdriven
model. And, like most markets, the one the charitable sector
deals with has its structural and information imperfections – and
the cost distortions associated with those imperfections.
Though it is not widely appreciated by the public, there is
a cost – and a fairly steep one at that – in relying on the private
sector to underwrite an increasing portion of the work of charities.
The freedom of letting people make their own giving decisions,
as opposed to making them pay for things through taxes is often
touted these days as a rationale for curtailing government support for sector groups. But growth
in fundraising costs is, at least in part, a function of increasingly counting on individual donations,
rather than on the tax base to fund the charitable sector. With stagnant giving in recent years, many
groups have had to invest more and work harder just to maintain their past revenue levels.
But it is rarely, if ever, mentioned that it might well be more cost-effective to raise and
administer at least some of the amounts currently generated by private fundraising through
government than through the marketplace. While it is appropriate to balance the cost of privatizing
this activity against the impact of compelling everyone to pay for these activities through their taxes,
unless we can find a way to return to a model where religious values are again the primary driver of
giving and of running charities, the costs associated with relying on the market can’t be ignored.
As my international development colleague recognized back in the early 1990s, we ought not
to be paralysed by contradictions. But that is a different thing than unthinking acceptance. Success
in raising attention to these inconsistencies among lawmakers, regulators and the public will be
hugely important if the charitable sector is not to be hobbled by ill-considered legislation like C-470.
Learning to live with the contradictions need not just apply to those of us working within the sector.
Peter Broder is Policy Analyst
and General Counsel at The
Muttart Foundation in Edmonton.
The views expressed do not
necessarily reflect those of the
Foundation.
Not-for-Profit Law
it might well be more costeffective
to raise and administer
at least some of the amounts
currently generated by private
fundraising through government
than through the marketplace.