Abstract
The regulation of charitable fundraising is no longer just about the regulation of fundraising but about good governance, and increasingly involves co-regulatory regimes which blend elements of self- and state regulation. Canada’s charitable sector has undertaken a bold experiment in creating a comprehensive certification system for good governance, including fundraising, which reframes the target of regulation from the informed donor to the well-performing charity and has the ambitious goal of building a community of practice for self-improvement. At the same time, the federal government has introduced new guidance on fundraising that not only outlines accepted cost to revenue ratios but also specifies standards of good governance. It is an open question as to whether this new self- and state regulation will remain as dual systems or evolve into a hybrid co-regulatory regime in which government integrates sector certification into its own risk management.
Résumé
La régulation de la collecte de fonds caritative n’a plus seulement trait à ladite collecte mais traite de la bonne gouvernance, et implique de manière croissante des régimes co-régulateurs associant des éléments d’autorégulation comme de régulation par l’état. Le secteur caritatif du Canada a initié une expérience audacieuse avec la création d’un système exhaustif de certification pour une bonne gouvernance, incluant la collecte de fonds. Le cadre de la régulation se voit modifié pour cibler non plus un donateur informé mais une organisation caritative au fonctionnement adéquat, et il a pour objectif ambitieux de construire une communauté de pratique visant à l’amélioration propre. Le gouvernement fédéral a concomitamment introduit des directives nouvelles quant à la collecte de fonds qui exposent non seulement les ratios charges/produits acceptés mais précisent les normes de bonne gouvernance. La question reste ouverte de savoir si cette nouvelle autorégulation comme cette régulation par l’état demeureront en tant que systèmes doubles ou évolueront en un régime co-régulateur hybride dans lequel le gouvernement intègre la certification du secteur au sein de sa propre gestion du risque.
Zusammenfassung
Die Regulierung der Geldmittelbeschaffung für gemeinnützige Zwecke dreht sich nicht mehr ausschließlich um die Regelung der Geldmittelbeschaffung, sondern auch um eine erfolgreiche Steuerung und umfasst zunehmend ein co-regulatorisches System, das Elemente der Selbst- sowie der staatlichen Regulierung vereint. Der Wohltätigkeitssektor in Kanada hat ein gewagtes Experiment durchgeführt und ein umfassendes Zertifizierungssystem für eine erfolgreiche Steuerung, einschließlich der Geldmittelbeschaffung, entworfen, das das Regulierungsobjekt vom informierten Spender zur gut funktionierenden Wohltätigkeitseinrichtung verlagert und das ergeizige Ziel verfolgt, eine praxisbezogene Gemeinschaft zur Selbstverbesserung zu entwickeln. Gleichzeitig hat die Bundesregierung neue Richtlinien zur Geldmittelbeschaffung eingeführt, die nicht nur das Verhältnis zwischen genehmigten Kosten und Einnahmen abdecken, sondern auch die Standards einer erfolgreichen Steuerung festlegen. Es bleibt die Frage offen, ob diese Selbst- und staatliche Regulierung als Dualsysteme bestehen bleiben oder sich in ein vereintes co-regulatorisches System entwickeln, in dem die Steuerung die Sektorzertifizierung in ihr eigenes Risikomanagement integriert.
Resumen
La regulación de la recaudación de fondos con fines benéficos ya no tiene que ver solamente con la regulación de la recaudación de fondos sino con la buena gobernanza, e implica cada vez más regímenes correguladores que mezclan elementos de auto-regulación y de regulación estatal. El sector benéfico de Canadá ha emprendido un audaz experimento creando un sistema de certificación integral para la buena gobernanza, incluida la recaudación de fondos, que redefine el objetivo de regulación desde el donante informado a la organización benéfica competente y tiene la ambiciosa meta de edificar una comunidad de práctica para la auto-superación. Al mismo tiempo, el gobierno federal ha introducido nuevas orientaciones sobre la recaudación de fondos que no solamente esbozan los ratios aceptados costes/ingresos sino que especifican normas de buena gobernanza. Resulta discutible si estas nuevas auto-regulación y regulación estatal seguirán siendo sistemas duales o evolucionarán hacia un régimen corregulador híbrido en el que el gobierno integre la certificación del sector en su propia gestión del riesgo.
摘要
慈善筹款的监管不再仅限于筹款本身的监管,并且包括妥善的治理结构以及融合各种自我和国家调控的共同监管制度。加拿大的慈善机构对于建立良好治理结构的综合认证系统(包括筹款)进行了大胆尝试,重新规划捐助人及运营良好慈善机构的监管目标以及希望建立自我改善环境的宏伟目标。与此同时,联邦政府已经推出了新的筹款指导,规定了合理的成本收入比,还定义了良好治理的标准。这一新的自我和国家调控系统是否会作为双系统保留还是会演变成一种混合的共同监管制度(政府将部门认证整合到风险管理中)还未可知。
ملخص
قواعد جمع التبرعات الخيرية لم تعد فقط عن قواعد لجمع التبرعات بل عن الحكم الرشيد، تشمل بشكل متزايد المشاركة في لوائح الأنظمة التي تمزج عناصر من الذات – و قواعد الدولة. لقد أجرى قطاع كندا الخيري تجربة جريئة في خلق نظام شهادة شامل لحكم رشيد، بما في ذلك جمع التبرعات، الذي يعيد صياغة الهدف من القواعد من الجهة المانحة المستنيرة للجمعية الخيرية ذات الأداء الجيد ولها هدف طموح لبناء مجتمع ممارسة للتحسين الذاتي. في الوقت نفسه، أدخلت الحكومة الفيدرالية توجيهات جديدة لجمع التبرعات التي ليس فقط تحدد نسب التكلفة للإيرادات المقبول و لكن تحدد معايير الحكم الرشيد. إنها سؤال مفتوح حول ما إذا كان التنظيم الذاتي الجديد- تنظيم الدولة سيبقى كنظم مزدوجة أو يتطور إلى لوائح نظام تعاون مختلط الذي فيه الحكومة تدمج قطاع الشهادة في إدارة المخاطر الخاصة بها.
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Notes
Charitable fundraising embraces a wide swath of methods of solicitation of donations and gifts, both large and small, although for purposes of regulation this normally excludes membership fees and purchase-of-service contracts. Fundraising through charitable gaming and lotteries usually involves additional regulation which is not discussed in this article.
The requirement for information and reporting may occur at different points of the fundraising lifecycle (Breen 2009): pre-solicitation (e.g., authorization for a fundraising campaign); the moment of solicitation (e.g., disclosure to donors of the percentage of the donation that goes to the charitable cause); when funds are transferred from a third party fundraising businesses to a charity; and annual reporting to a central regulator (e.g., limits on fundraising expenses).
Note that percentage-based fundraising is contrary to the ethical code of the Association of Fundraising Professionals and the charitable sector’s own code.
A club is defined by three attributes: the requirement that members act in ways that go beyond existing legally required obligations; the imposition of costs on members in exchange for reputational branding (a hallmark that can be publicly trusted); and provision of private benefits, usually in the form of organizational learning (Prakash and Gugerty 2010; Potoski and Prakash 2009).
This is a somewhat more restructive view of hybrid than is often taken as some mixes of arrangements are haphazard and contradictory rather than intentional and complementary.
A tax shelter can be a legal means of tax avoidance. These gifting arrangements involved questionable or sham gifts, however, for which investors received tax receipts for amounts that exceeded the value of the actual donations and little money was retained for use by the charity once the fees of promoters and related for-profit companies were paid (Hawara 2011). In one type of gifting arrangement, a taxpayer donates property at a higher value than its cost, often because it was bought at cut-rate prices offshore and sold at artificially inflated retail prices. The amount of cash a participant pays is typically 30% of the amount of the receipted donation (OAG 2010, p. 17). In a leveraged cash donation scheme, a taxpayer makes a pledge to the charity and might contribute 15% of this in cash: the remaining 85% would be financed by a non-recourse loan from the promoter (usually with a security deposit paid to the promoter which is invested to pay the interest and principle of the loan plus a fee); a tax receipt for the total of the cash and loan is issued. The CRA has disqualified these as gifts, requiring taxpayers to repay the tax benefit with interest and potentially with additional penalties, and in many cases also determined that the charities were operated for non-charitable purposes, thus revoking their status.
Proper reporting of fundraising expenses has been compounded by the absence of standardized non-profit accounting rules. In Canada, these rules are in transition as new standards adopted by the Canadian Institute of Chartered Accountants will come into effect on January 1, 2012. Other jurisdictions, notably Australia, have moved more assertively to standardization. In July 2011, all Australian states and territories adopted the Standard Chart of Accounts developed by the Australian Centre for Philanthropy and Nonprofit Studies at the Queensland University of Technology.
Alberta has been the most directive by requiring registration prior to solicitation (when the attempt is to rise more than $25,000 CDN or when using a fundraising business) and requiring fundraisers to inform potential donors of the costs of fundraising relative to the amount to be raised. Manitoba requires authorization to fundraise and sets some rules but with minimal penalties; Prince Edward Island also requires charities to register but exempts those covered by the federal Income Tax Act; and Saskatchewan requires fundraising businesses to register (see Broder and Conley 2010). In 2005, a Uniform Charitable Fundraising Act was drafted that would introduce and harmonize regulation across the country, but no province or territory has adopted it. When fundraising involves gaming or lotteries, provinces may license these under separate gaming legislation, with municipalities licensing small gaming events, pursuant to the national Criminal Code definitions of legal activities.
Even Quebec which operates its own taxation system has generally harmonized its recognition of charity with the federal system although it, too, has recently developed a code of good governance for the sector. In other aspects of oversight of charities, there is greater fragmentation and lack of coordination across the country.
Over several years, the CRA has been given additional audit resources and in the 2011 Budget received authority to apply tougher standards to amateur athletic associations (which have the same tax receipting privileges as charities but with more limited accountability and reporting requirements, several of which were involved in tax shelters). CRA can now refuse to register a charity if individuals with a history of fraud or abuse of charities are involved in its management or leadership (Minister of Finance 2011). The Budget also indicated that the House of Commons Standing Committee on Finance will be asked to study charitable donation incentives.
Fundraising that involves illegal or misleading conduct, is contrary to public policy or an end in itself, or provides excessive private benefit is prohibited.
So far, CRA has not been revoking status or sanctioning charities simply for having high fundraising ratios. The two revocations for excessive fundraising and administrative expenses from January 2010 to mid-2011 also involved overt deception so as to alter the ratio.
The law supplies an interpretation that the CRA can look at how charitable purposes are carried out; however, the courts have held that CRA guidance does not have the force of law, and there is a paucity of case law dealing with permissible fundraising conduct by charities. Appreciation to Peter Broder of the Muttart Foundation for clarifying these constraints.
The three insurance companies that had supported the Ethical Code each contributed a total of $300,000 CDN over 3 years, and the Initiative has an active fundraising committee. Fees are set on a sliding scale based on the size of operating budgets; the application fee (paid once and upon renewal every 5 years) ranges from $400 CDN for an organization with annual operating expenses under $250,000 to $8,000 for those with expenses over $25 million. In addition, the annual license fee ranges from $200 to $4,000.
Independent watchdogs and charity rating firms have not been successful in Canada, as they have the US and to a lesser extent in the UK.
The option that funders require accreditation as a criterion for grants and contracts is a strong but complicated incentive as it imposes the cost of club membership on grant recipients or contractors. While complicated, the issue of how funders can assist in creating incentives for certification needs a fuller discussion.
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Acknowledgments
Appreciation to Peter Broder of the Muttart Foundation for detailed comments on an early draft of this article and Myles McGregor-Lowndes and participants at the Reforming Fundraising Regulation Conference hosted by the Centre for Philanthropy and Nonprofit Studies, Queensland University of Technology for further ideas.
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Phillips, S.D. Canadian Leapfrog: From Regulating Charitable Fundraising to Co-Regulating Good Governance. Voluntas 23, 808–829 (2012). https://doi.org/10.1007/s11266-011-9237-x
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DOI: https://doi.org/10.1007/s11266-011-9237-x