Heritage Committee Transparency in Sport Charities
April 17, 2023
Recommendations for improved Financial Transparency:
- All RCAAAs required to complete an annual T3010.
- All RCAAAs and all Canadian charities, with total revenues over $1 million and/or financial assets over $5 million, required to have audited financial statements.
- These audited financial statements are to be posted on a Federal government website for quick and easy public access.
My name is Kate Bahen and I am the Managing Director at Charity Intelligence.
Charity Intelligence researches Canadian charities. Our reports and charity star ratings are posted on our website for Canadians to have information about the charities they give to so their generosity can have impact and make the biggest difference.
Charity Intelligence does not research or rate RCAAAs like Hockey Canada. Our involvement in researching Hockey Canada was to help Canadian journalists make sense of its audited financial statements.
I have been invited to report to you on the financial transparency of Canada’s RCAAAs and charities.
No disclosure requirements on RCAAAs
RCAAAs are amateur athletic associations that are a small subset of Canada’s registered charities. They can issue donation receipts. Yet this small group of 138 amateur athletic charities are not required to file an annual return called the T3010. Every other Canadian charity must complete this annual return. The T3010 discloses basic information that includes staff, compensation, programs and finances. This loophole must be closed. RCAAAs should be required to file an annual T3010 just like every other registered charity in Canada.
Last May, when the news broke about Hockey Canada’s legal settlement, Canadians had many questions. We were unable to answer these questions. Hockey Canada was not financially transparent. Its books were closed and not publicly available.
This information is available if one goes to the bother, cost and delay of filing an Access to Information request. Mark Blumberg filed an access to information. The pages he received were incomplete.
In took three months, until August 2022, for us to receive Hockey Canada’s complete audited financial statements.
Hockey Canada became financially transparent in December 2022 when it posted the pdfs of its audited financial statements on its website.
I would like to take this opportunity to express, on the public record, our gratitude to all the chartered accountants and the 882 people who read Hockey Canada’s audited financial statements and shared with us their expertise. This included many hockey parents who wanted to understand how their fees are used.
13% of charities refuse to provide audited financial statements in 2022
The lack of financial transparency among Canadian charities is far more common than Canadians expect.
In 2007 when we asked charities for their audited financial statements, 28% refused.
In 2022, 13% refused.
This lack of financial transparency is out of step with the public’s expectations. 92% of Canadians say that charities should be financially transparent. Whether it's 2007 or 2023, Canadians are always shocked to learn that charities are not required to be financially transparent.
Should charities have the right to refuse to be financially transparent? This option is only available in Canada. In the US, the UK, and Australia, financial transparency is regulated. In these countries, the audited financial statements are posted on the charity regulator’s website and available at just a click.
It’s time Canada got in step and did the same.
Cultural opposition to transparency
While Canadians overwhelmingly expect charities to be financially transparency, there could be strong opposition from the minority of charities that fiercely keep their books closed. These charities include some of Canada’s largest charities that receive hundreds of millions of dollars in annual donations. We track $750 million in annual donations going to these “dark pool” or “black hole” charities.
Thomas Cromwell found this attitude at Hockey Canada. I quote from his report:
"Hockey Canada expressed that some other changes were just not well suited for their organization (emphasis added), such as making the financial statements … available to the public. Although Hockey Canada has achieved considerable financial success over the years, Hockey Canada is concerned that being seen as an organization with “deep pockets” could create some negative implications.
For example, this could have an effect on their bargaining power with respect to the settlements of lawsuits, and this could also influence the amount of money that sponsors would be willing to offer in the future. This is not to mention the fact that the media could use this information to depict a negative image of the organization.”
Thomas Cromwell, Interim Report, p. 23
Hockey Canada’s attitude is common among the non-transparent minority of charities. These charities see their activities as nobody else’s business.
But registered charities are not private clubs, but public organizations. By their very incorporation, charities are created to provide a public benefit. And in exchange, Canadian charities receive the most generous tax treatment. They are privileged to operate tax free because their work is in the public benefit. Our rules need to change to require transparency in the public interest.
And non-profit organizations, respectfully, have a choice. If they prefer to keep their books closed, they can relinquish their non-profit status and all its generous benefits.
You are our elected leaders. You have unique powers that even the richest corporate sponsors do not have. Only you have the power to change the regulations of RCAAAs and charities.
It is one simple and easy step to regulate financial transparency. It’s long, long overdue. Canada looks to you for your leadership.
The full 1 hour proceeding before Heritage Committee is here.
Charity Intelligence, The rest of the story: What Hockey Canada’s 2022 annual report fails to disclose but is reported in its audited financials, January 2023
Charity Intelligence, Cromwell’s Final Report with 39 Recommendations for Hockey Canada’s governance overhaul, November 8, 2022
Charity Intelligence, Hockey Canada – the Cromwell Report part 1, October 14, 2022
Charity Intelligence, Hockey Canada: What can we do? August 2, 2022
CRA Charities Directorate, Taxpayer Bill of Rights: Understanding your rights as a taxpayer
Charity Intelligence, Access to Information: Suggestions to improve access to information on Canadian charities, August 3, 2021 submission to Treasury Board with international examples of financial transparency in the UK, the US, and Australia and comparisons of redaction in Canada.
Toronto Star editorial, Charity sector needs transparency, November 16, 2021