May 14, 2024

#7 - How to Source the Financial Resources to Drive Progress?

I've previously expressed my belief that relying on Ottawa to bridge the widening 'charity gap' is NOT VIABLE due to decades of inaction and because they already have substantial government deficits. The track record proves this to be the case.  So, let's admit it and chart a new course with the resources within our reach.

Before delving into the specifics of who, what, when, and why, let's first explore HOW we can finance our innovations, for without resources, all aspirations remain mere fantasies.

Fortunately, the charity sector is not lacking in funds, with tens of billions flowing annually, and over $140+ billion sitting in grant-making foundation endowments. We just need to think innovatively, and apply a fraction of the funds in new smart and strategic ways.

Establishing a Sector Fund

To financially support the innovations crucial for sector advancement. I am advocating for the creation of a new "Social Sector Fund", independent of federal budget allocations (and the Treasury Board)...

My proposal involves urging Ottawa to enact a minor modification to the Income Tax Act concerning charities, mandating both private and public foundations to make a small annual grant to this Sector Fund. This grant, calculated as a minuscule percentage of foundation endowments, would be akin to a rounding error for any individual foundation but, collectively, could amass over $35+ million, annually, from the $140+ billion in endowment accounts.

Importantly, if this mandated grant is counted within the "Disbursement Quota," it would not increase any additional financial obligations of foundations.

The granted funds for the new Sector Fund could be collected by the Charity Directorate of the CRA, and entirely passed on to a new fit-for-purpose agency (The Sector Fund Agency) to oversee the allocation of the fund, annually.   This bypasses the public treasury board without imposing any burden on taxpayers. It stays outside of the political ecosystem.

This funding model draws inspiration from existing precedents, such as the mandatory tire recycling fee collected by tire retailers when Canadians buy new tires, which is then passed directly to the rubber association to fund the recycling program – a public good.  

Does the federal government have the right to mandate such a sector fund grant?   I believe so (as supported in some discussions with lawyers). The federal government could enforce such a grant as a condition for foundations to issue federal tax credit receipts to donors.  

Establishing a Sector Fund Agency

To oversee the allocation of funds, a specialized fit-for-purpose agency should be established.

Governance structures for this agency warrant exploration, with one proposed model featuring a small Membership representing provincial charity networks (e.g. ONN, IONS) and key sector leadership organizations (e.g. Imagine Canada, CFC). This Membership would elect a Board, which in turn, would hire an Executive Director to fund the strategic allocation of the Fund. This would bring independence, with inclusive, transparent, and accountable practices, solely dedicated to strategically applying the Sector Fund without external agendas, biases, or influences.

This Sector Fund Agency is intended to complement existing organizations rather than supplant them, providing additional financial support aligned with a Sector Strategic Plan. Developing allocation rules for fund disbursement from the outset is advisable, with ample time for collaborative deliberation.

Initiatives like crafting a sector strategic plan should take precedence to guide the allocation of funds towards pressing priorities.

For now, let's defer discussions on the strategic plan. This will take time to develop. In the interim, let's brainstorm on some key priorities in the upcoming dialogue. Your insights on the top three priorities are invaluable as we navigate this path of change.  I will share some ideas in future blog posts.

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