Hon. Terry M. Mercer: Honourable senators, I rise today to speak to Bill S-222, the Effective and Accountable Charities Act. I thank Senator Omidvar for introducing this bill. While I will try not to repeat much of what Senator Omidvar has said, I would like to offer some thoughts of my own. The introduction of this bill clearly demonstrates the outdated, complex and costly rules and regulations that prevent great works of charity on behalf of Canadians, not only in Canada but around the world.

As we saw in our report from the Special Committee on the Charitable Sector, this is but one of the many issues that needs to be fixed. What will this bill’s proposed changes do to help the sector? The bill:

. . . amends the Income Tax Act to permit charities to provide their resources to a person who is not a qualified donee, provided that they take reasonable steps to ensure those resources are used exclusively for a charitable purpose.

Charities currently use their resources to fund projects that they support through their charitable purpose. But what if they want to fund a similar project with an organization that does not have charitable status in Canada or in another country?

They can, but the direction and control provision in the Income Tax Act specifically lays out the control the registered charity must have over that project for it to meet the purpose and requirements of the law.

This was, at one time, intended to protect the donors’ money and the integrity of the charity. It is now untenable for many small groups to comply. As a result, there are unfortunate limits on the great works of charity many of them want to accomplish. As Senator Omidvar rightly laid out, the partnership process is overrun with problems. Our report stated:

According to stakeholders, demonstrating “direction and control” in such partnerships involves “complex written agreements” and “onerous reporting requirements,” which engender “unnecessary” administrative costs.

The report went on to say:

In the view of the Canadian Bar Association, the CRA’s guidance on direction and control could be relaxed without falling foul of the statutory requirements.

Senator Omidvar reviewed some examples of how this regime is hurting the smaller organizations that want to do works that a larger, recognized charity wants to help them with.

My question is also how it makes any sense for charity A to fund a project by organization B — which could be hundreds of kilometres away or, indeed, across the globe — if they must exercise complete control over the project? Who is on the ground? Who understands the needs of a community when it comes to what is being funded? That’s right — the organization.

So if they share a similar charitable purpose, how can we make it easier for a charity and an organization to accomplish their goals? Adam Aptowitzer, Lawyer, Charities and Not-for-Profits for Drache Aptowitzer LLP, noted in his testimony before the committee:

I’m not in favour of the control and direction test. As my colleagues suggest, in some cases it’s a bit of a farce to suggest that Canadian involvement in an international project at a minority level should have control over the project. It’s simply unworkable in many circumstances. It’s certainly offensive in many circumstances, and it doesn’t do Canada any favours.

He goes on to say about direction and control:

Whatever test does replace it, as I hope this committee will suggest, does both accentuate the idea that Canadians are accountable for spending of the funds but also portrays to the Canadian government that the funds are being spent as they were originally intended.

I believe this is what this bill is trying to do.

Witnesses at our committee suggested different approaches to improve the situation. For example, Kevin Perkins, Executive Director of Farm Radio International said this:

My feeling is that, rather than putting the expectation on direction and control of the daily spending decisions or the activities that the intermediaries do, we should be putting more emphasis on the due diligence, monitoring and assurance sides of things.

He went on to say:

That includes making sure there is a system to monitor and ensure that the partner is doing what it said it would do and using the money the way it said it would use it, and putting in more emphasis on the due diligence but also more flexibility in terms of allowing the partner to make more decisions about the priorities for that community.

Honourable senators, I couldn’t agree more.

Some witnesses used the United States model as an example of a system of due diligence. As Senator Omidvar noted, their model uses the language of “expenditure responsibility” while her bill proposes “resource accountability” — both similar approaches that will ensure oversight but withdraw the burden of direction and control. This bill’s approach may indeed solve the dilemma charities face.

If a charity can take “reasonable steps” to ensure that their resources are being put to good use, and as long as the charitable purpose of the charity is in turn being followed, this legislative change would allow charities to expand their reach and help them do what they do so well: accomplish the greater good across Canada and around the world.

Everyone is held accountable, and the delivery of services remains trustworthy.

I look forward to seeing this bill moved to committee, where senators can further explore what the bill intends to do and how effective it can be. I invite you to read our special committee’s report as well.

As Senator Omidvar and I wrote in a recent op-ed, charities and non-profits have been one of the sectors hardest hit by the COVID-19 pandemic. I cannot underscore enough just how much Canadians have relied on charities during this time. Their services are going to be needed more than ever in the post-pandemic period. Let’s see what we can do to help them be at their best and operate as efficiently as possible, to maximize the benefits to all Canadians. Thank you, honourable senators.