Charity Intelligence Finance Committee statement

Charity Intelligence Finance Committee statement

To watch the Finance Committee questioning of Charity Intelligence. (There is a break due to a server issue at 12:06 and the meeting resumes with final questions at 12:56.)

To watch Ci at Committee of Government Operations and Estimates on August 13, 2020 with Gail Picco of The Charity Report

 

Ci's response to WE Charity's statement of August 7

Ci considers all information provided by charities on an ongoing basis, and we value these two-way conversations.

In particular, Ci has thoroughly reviewed the various public communications provided by WE Charity both in relation to our general analysis of WE entities and to our testimony to the Standing Committee on Finance on August 6, 2020. In addition, Ci has been in regular contact with the COO of WE Charity through emails and Zoom calls, including a call on July 16 to discuss, among other issues, the significant change in board governance.

Ci has noted ongoing discrepancies related to WE Charity operations.  We have provided WE Charity with our suggestions for shoring up donor confidence in discussions and by email. With respect, rather than resolve our concerns, the various responses by WE organizers have amplified them.  

Historically the greatest concerns about research analysts and rating agencies is when the watchdog doesn’t bark. Ci stands by its statements.

Finance Committee opening statement

" My name is Greg Thomson, Director of Research for Charity Intelligence. 

Charity Intelligence is itself a charity – one that analyzes Canadian charities to help donors be informed and give intelligently. Our website hosts free reports on more than 780 Canadian charities, and provides insight into specified-giving areas such as the environment, cancer, and homelessness.

This last year, some 314,000 Canadian donors used our website for information on Canadian charities, reading over 1.3 million charity reports. We estimate that our research helped inform and influence $95 million in Canadian charitable giving last year alone.

Just as democracy depends upon informed citizens, the fundamental health of philanthropy rests on well-informed donors.

Our own research supports this case. In surveys of donors who have used our resources, 77% say that Charity Intelligence reports have improved their confidence in giving to charities and have inspired these donors to give 32% more money to charities.

It’s within this context that Ci presents to the Finance Committee today.

 

Since 2011, Ci has analyzed and reported on WE Charity. WE Charity Canada is a big piece – but only one piece – of what we now know is a highly complex international network of WE-related entities.

Starting in 2014, Ci rated WE Charity with our highest 4-star rating based on transparency, reporting, and overhead spending. WE Charity ticked all the boxes and performed well relative to other Canadian charities.

In September 2019, Ci analyzed WE Charity’s demonstrated impact – the measurable returns on its work – and found WE Charity’s impact to be Fair. Fair is below average. This reduced Ci’s rating on WE Charity to three stars.

Our major limitation as analysts is that we are only as effective as the data is reliable. We are analysts, not auditors.

 

Ci’s August 2019 report on WE Charity flagged this material information:

  • a breach of financial covenants on its $13.7 M in bank debt that its bank has waived for the second year in a row. 
  • the related party transactions with 8% of donations to WE Charity going to ME to WE, the private business controlled by Marc and Craig Kielburger, to purchase goods and services.

In August 2019 an outside party shared with us public records about WE Charity’s real estate transactions. These transactions were not disclosed as related party transactions in WE Charity’s audited financial statements.

Given this lack of disclosure, we reviewed WE Charity’s auditor, which has a solid reputation for tax and business. However, the auditor’s website only advertised one charity client, WE Charity. In our database, no other charity used this auditor.

This contrasts with WE Charity hiring the most prestigious law firms and its stated commitment to the highest financial transparency. We questioned why WE Charity has not hired leading international auditors to prepare their financial statements, despite being one of Canada’s largest charities with global operations.

On learning of the resignation and replacement of WE Charity’s directors in March of this year, we arranged a 30-minute video call with WE Charity’s Chief Operating Officer. Subsequently, we learnt through the media that one of the newly-appointed directors had resigned. We were not assured by WE Charity’s comments or statement.

On July 17, 2020, Charity Intelligence issued its strongest alert, a donor advisory.

 

With more news coming to our notice, and after looking at other WE entities, we released our 10 questions. Primarily:

  • Was the Cabinet aware that the CSSG was contracted through WE Charity Foundation, a new separate foundation with no employees or assets, rather than WE Charity? 
  • Why are the Kielburgers not directors of any of the WE charities, but take the title “co-founders” which removes fiduciary responsibility and shields them from various disclosure requirements?
  • Why has neither WE Charity Foundation in Canada or ME to WE Foundation (US) disclosed in their regulatory filings the non-arms-length relationships of their three directors? 
  • Why does WE need such a complex organizational structure with multiple single-purpose entities to do its work? This is highly unusual for charities, even Canada’s largest international aid charities.

 

WE Charity is an outlier – normal metrics for assessing charities do not adequately reflect its suitability for donors. It is not similar to any of the vast majority of other Canadian charities.

We have flagged these issues because the more donors understand about the entirety of the WE network, the better informed they will be, and the better able to give intelligently.

With that, I will hand the floor to Kate Bahen, Managing Director.

 

 

Good morning. My name is Kate Bahen. As Managing Director of Charity Intelligence, I prepared the two most recent updates on WE Charity - on August 28, 2019 and July 10, 2020.

Before answering your questions, I would like to speak to some of the issues that have been raised during your proceedings and on social media about Charity Intelligence and the motives behind our reporting.

Let me address these in order.

Yes, Charity Intelligence is a small charity. Our annual revenues of $435,000 support a team of 3 full-time staff, supported by exceptional university students each summer. This April, we hired another charity impact analyst, so our full-time roster increased by 33% to 4 people.

Charity Intelligence’s (Ci) team answers Canadians’ questions about giving and we update our popular website. Despite our small size, we have demonstrated a significant impact on Canada’s charitable giving.

Yes, Ci lost its charitable registration status for one day in September 2012 because I was late in filing the annual return. I am solely to blame for falling behind in the essential paperwork. It was a hard lesson, learnt well. Ci has filed before the deadline in the last 8 years.

As to the motivation for our work, it is simply to give Canadian donors the best independent and objective advice we are capable of.

Charity Intelligence is non-partisan. I do not know the political affiliation of our staff. These matters simply don’t come up in our research and analysis of charities.

To keep comments within the 10-minute limit this section was cut from the opening statement: In the past, I personally contributed $950 to Chris Alexander's campaign - a conservative, and a high school friend. I also contributed to Bryon Wilfert's campaign, a Liberal and my history teacher. I believe in supporting people but I am not politically motivated in my work.

I find partisanship toxic. As you may notice from my accent, like many new Canadians, I came from away to Canada. I am deeply indebted to this amazing country.

To some, partisanship may be a sport or a game. Yet as a child, I saw the Troubles, I learned of the Orangemen’s march, I heard the bombs. I want no part of that. Ever again.

 

Give 5: Raising Canada's disbursement quota to at least 5%

All of which brings me to the Canada Summer Service Grant. This is a sorry mess. There is one simple solution to help charities at this time of critical need I would like to bring to your attention for consideration.

One leg of the three-pronged CSSG initiative was to help Canadian charities through student volunteers. For many charities, volunteers can be essential in program delivery.

But with the COVID shutdown, frontline charities need money.

Our biggest concern is about individual giving. Imagine Canada estimates individual giving will drop by between $4.2 billion and $6.2 billion this year. For context, last year, giving was approximately $17 billion.

One quick way to address this gap is for our government to increase the disbursement quota of charity foundations and endowments.

The disbursement quota is a little-known charity regulation. It sets the minimum amount foundations must distribute of their assets to charities each year.

Canada’s disbursement quota is 3.5% -- the lowest disbursement quota in the world. In the US, foundations are required to pay out 5% each year, with people calling for it to be raised to 10% for the COVID response.

Over the last 15 years, Canadian foundations have averaged investment returns well above 8%. Today the investments at private foundations, community foundations, public foundations, and endowments exceed $100 billion dollars.

This quota can be changed to 5% by the stroke of our Finance Minister’s pen – it can just be a temporary change to help charities through this pandemic.

The change between the current 3.5% and 5% may seem small – a 1.5% difference. Mathematically, it’s a 43% increase – which would result in an additional $700 million more dollars flowing from foundations to charities this year.

The money foundations hold is already tax receipted. This change wouldn’t cost the government any additional revenues but would meaningfully support thousands of frontline charities. 

More information on this initiative is available at GIVE5.ca.

Thank you."

 

GIVE5.ca / DONNEZ5

About GIVE5 / Pourquoi maintenant DONNEZ5

 

Correction made to opening statement August 7 2020. The bank loan covenant breach was first reported in Ci's report on WE Charity in August 2019 (using WE Charity's audited financial statements for F2018. This was the first time this information was in WE Charity's audited financial statements. The same information was repeated in WE Charity's 2019 audited financial statements, Financial Note 13)

Additional readings about disbursement quota and foundations

Hilary Pearson, Thoughts on Philanthropy and Giving It All Away, July 31, 2020

John Hallward, “Unlocking the expanding wealth of charitable foundations: Foundations can afford to use more of the billions they have collectively accumulated. A new disbursement quota is in order.” Policy Options, Options Politique, May 20, 2020

Big Philanthropy Stopped Being Charitable, Here’s How to Fix It”, The American Conservative, August 5, 2020

William A. Schambra, “The Giving Review: An increasingly hostile atmosphere for endowed institutions”, Philanthropy Daily, May 19, 2020

James B. Steward, Nicolas Kulish, “Leading foundations pledge to give more, hoping to upend philanthropy”, New York Times, June 16, 2020

A 10% disbursement quota adds billions to the charity economy”, The Charity Report, June 9, 2020

Morris Pearl, Chuck Collins “How to get $200 billion for covid-19 relief – at no cost to taxpayers” The Hill, May 5, 2020

Chuck Collins “It’s Time for an Emergency Charity Stimulus”, Inside Philanthropy, May 12, 2020


Print   Email