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How Has the Advocacy Chill Affected Charities?

Tuesday, October 4, 2016
Sector Monitor
Taxes, Laws & Regulations
Sector Research
Public Policy
Government Relations

Increased CRA scrutiny of political activity by charities has led to widespread perceptions of an advocacy chill. Over the past few years, there has been a seemingly constant stream of media stories focusing on charities involved in political activities audits. However, we know much less about how the chill has affected other charities. Our latest Sector Monitor looks at this issue.

The highlights report (available today) summarizes responses from 1,850 charities, from a range of sub-sectors across Canada. Overall, it finds that while many charities have been affected by the chill, the effects appear less pervasive than one might expect based on the media coverage to date.

Reported experiences of the chill

Roughly a fifth (21%) of charities active in public policy said they had experienced some sort of negative effect from the increased scrutiny. Just over three quarters (78%) indicated they had experienced no effects and the remaining 1% reported some sort of positive effect.

In terms of specific types of negative effects, 9% reported they had reduced or ceased their public policy activity in response to the chill, or had considered doing so. Almost as many said the increased scrutiny had made them more aware—and frequently more cautious—about the political activity and advocacy rules for charities. Five percent said the increased scrutiny had increased organizational costs in some way. Most commonly, these costs were related to new reporting requirements by CRA, but costs for professional advice and guidance from lawyers and accountants were also common. Two percent indicated they had not experienced any direct effects, but were concerned about indirect effects. They believe the increased scrutiny has created a climate of fear and caused lasting damage to relationships between charities, government and the public. Finally, 1% indicated they had been audited or otherwise had their activities scrutinized by CRA.

Not all charities are equally likely to report these types of negative effects. The most important factor appears to be how active charities are in public policy, as measured by the number of different types of activities they reported and how frequently they engaged in them. Just under half of the most active charities reported negative effects compared to just 10% of the least active charities. This suggests that the impact of the chill may be more significant than we might expect, judged solely on the number of organizations affected. Looking at variations by other factors, such as organizational characteristics like size or sub-sector, the likelihood of reporting negative effects does not vary much. The one key exception is that Quebec charities were much less likely than charities elsewhere to report negative effects (7% vs. 23% in the rest of Canada). Clearly the effects of the chill appear to have been more significant outside Quebec.

Changes in public policy activity over time

While many charities reported experiencing negative effects, a key question is whether charities’ level of engagement in public policy significantly decreased as a result of the chill. To date, the answer appears to be no.

Comparing results from this Sector Monitor with findings from an earlier Sector Monitor conducted in 2010, we found the percentages of charities involved in public policy were virtually unchanged, with no statistically significant differences between the two surveys. We also found no statistically significant differences in the types of political activities reported, or how frequently charities reported engaging in them. Simply stated, what we found was that while a significant minority of charities responding to the latest Sector Monitor said they had reduced or considered reducing their public policy activity as a result of the chill, direct comparison of data from before and after the chill shows no clear evidence of significant reductions. What this suggests is that many affected charities either considered and rejected reducing their activity, or made reductions that were too small to be detectable by our surveys.

While the level of public policy activity does not appear to have changed, what does appear to have changed is that some barriers to participating in public policy are greater than they used to be. Since 2010, the percentage of charities saying they are concerned about the possibility of violating public policy rules for charities has increased from 56% to 64%. Similarly, the percentage of charities saying they lack the skills required to participate in public policy has increased from 55% to 61%. Faced with these and other barriers, charities are more likely to say that political activity is not relevant to their cause (39% to 46%).

Summary and discussion

Rather than causing a significant decrease in the number of charities engaging in public policy, the principal effect of the chill appears to have been to increase charities’ apprehensions around their involvement in it. As part of this, many charities appear to have incurred increased direct financial costs and/or less tangible opportunity costs.

Looking at the overall pattern of findings, we believe a significant driver is charities’ uncertainty about the rules around public policy, particularly rules related to political activities. A good example of how uncertain charities are about the rules is that many appear to be unclear how political activity is defined. Just 8% of charities reporting activities that met the definition of political activity on the Sector Monitor survey also reported political activity to CRA on their T3010 Information Returns. If uncertainty is a key driver, the fact that the charities most heavily involved in public policy—charities that we would reasonably expect to be most familiar with the rules—are more likely to report negative effects is particularly concerning.

Uncertainty is high enough that it has become a policy issue for government. Mandate letters from the Prime Minister to the Ministers of Finance and National Revenue specifically directed them to work to clarify the rules around political activity. Last week, the Minister of National Revenue announced online consultations with charities on the issue, to be followed by in-person consultations in Halifax, Montréal, Toronto, Winnipeg, Calgary and Vancouver later in the year. Imagine Canada has formed a public policy working group on the topic of political activities by registered charities. It is made up of charity leaders from across the country and sub-sectors, with the aim of identifying recommendations for reform that would have broad support from charities.

 

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