Working Together: A Government of Canada/Voluntary Sector Joint Initiative

Working Together: A Government of Canada/Voluntary Sector Joint Initiative - Report of the Joint Tables

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Supplementary Paper B: Institutional Arrangements

Overview

This appendix reflects the Regulatory Table's discussions and conclusions on options for regulatory oversight bodies for the voluntary sector. Also included are comments on the administrative and judicial appeal process. Additional cross-references are made to the Table's comments on confidentiality, intermediate sanctions, advocacy, and the need for clarification of the rules.

Sketched out below are the functions of three models of regulatory oversight, and how registration, appeals, compliance and public reporting would work under each. The models are then tested against the identified need for regulatory change and other criteria, including: the models' ability to accommodate provincial involvement, their effect on regulatory burden, and the likelihood that they will enhance the confidence and trust of the voluntary sector and the public.

The Table's discussions did not go far into the subject of regulation of non-charities. Nor did the Table address broader questions of governance of the sector, or matters such as the appointment and composition of members of any new body of oversight.

Three models

It is clear that many permutations are possible, other options are conceivable, and that under any of the models, many details would have to be further considered. As a first step, however, it would be useful to consider the following:

an enhanced Revenue Canada Charities Division (RCCD);
an agency, partly along the lines proposed by the Panel on Accountability and Governance in the Voluntary Sector (the Broadbent Panel) ;
a commission, along the lines of the Charity Commission for England and Wales.

Inclusion of model A ensured consideration of a no-new-agency option, though it is realized that there is a widely-shared perception in the voluntary sector that Revenue Canada may not be the most appropriate agency to oversee the sector. The Table did not feel compelled to adhere strictly to the proposal put forward by the Broadbent Panel, or to the U.K.-style proposals as expressed by Arthur Drache and others. Instead, the Table fashioned its own take on models B and C.

In broad terms, the following are the core mandates of the institutions envisioned in each model:

As a Division of Revenue Canada, the core mandate of the RCCD would remain the administration of the relevant provisions of the Income Tax Act, including facilitation of public access to information about charities. The Division's practice of administrative fairness would be expanded to include administrative review within Revenue Canada of decisions by the Division. It would be assisted by an advisory committee of persons knowledgeable about charities and the law. The Division essentially would be mandated and resourced to do more than it does currently, such as more outreach and other compliance support. This model, while implying significant change, is closest to the status quo and the most evolutionary of the three models.
A new agency that would be complementary to the functions of Revenue Canada's Charities Division. While the decisions would remain with RCCD, the agency would, at greater arm's length than the advisory committee of model A, provide recommendations on difficult cases, issue policy advice, and otherwise assist organizations in complying with the regulator. As well, the agency would perform other functions to nurture and support charities and other voluntary organizations.
A quasi-judicial commission that would take over all but a few of the functions currently performed by the Charities Division. It would be designed not only to provide authoritative advice to the sector, but also expert adjudication of appeals from decisions by its Registrar. At the same time it would have a support function not unlike model B's agency. This model provides the most integrated approach to oversight of the voluntary sector.

Assumptions

All three models assume that:

the appeal process will be reformed;
confidentiality restrictions around the registration process will be eased;
the institution will be appropriately resourced;
there will be greater assistance to help organizations comply with legal requirements.

Reform of the appeal process

Under any model, room is seen for a de novo appeal from an administrative decision, that is, a fresh appraisal of the facts. Under models A and B, a decision by the Director of the Charities Division would, on request, be reviewed by Revenue Canada's internal appeal process. Further appeals would be to a newly created quasi-judicial body, and then to the Federal Court of Appeal. (Model B's agency may or may not have a role in any of these steps. If it does, it could perhaps be as an Advocate or as a Friend of the court.)

In model C, a panel of commissioners would be empowered to perform de novo reviews. Given the quasi-judicial nature of the commission, appeals from there would likely be directly to the Federal Court of Appeal.

Under any of these options, potential is seen for invoking non-litigious dispute resolution processes. As well, any judicial or quasi-judicial body should be ensured to have the power of a A court of equity in the protection of charities.

These suggestions have in common that they offer greater access to review, and that the bodies hearing the appeals are independent, that their expertise will build, and that their decisions will create the precedents that can guide both the voluntary sector and those who administer this complex area of law. Specific aspects of the appeal process that may suit one model better than another matter less than the achievement of these objectives.

Confidentiality restrictions around the registration process

All three models assume that release of information surrounding the registration process will be exempted under the Income Tax Act and would be made subject only to the Privacy and Access to Information Acts. (Please refer to the comments on confidentiality issues in the chapter Improving the Regulatory Framework.)

Appropriate resourcing

Also common to all three models is the assumption that whatever body or bodies have responsibility for oversight of the sector would have the appropriate policy-making capacity (including expertise to issue technical interpretations), and the ability to educate and communicate. Adequate resourcing of existing and/or future bodies, and their ability to attract and retain the necessary expertise to administer this area of the law, is an absolute requirement.

Ensuring compliance

It is also evident that, no matter how the future of oversight of the sector evolves, greater effort is required to foster knowledge of and compliance with existing regulations (what the English so aptly call efforts in "preventive regulation"). While recent efforts and reforms by Revenue Canada are recognized, much more needs to be done to clarify policies and procedures. (Please refer to the comments on dissonance, and on urgent "next steps" in the discussion of advocacy, in the Regulatory chapter.)

Under any model, the oversight body can be mandated and resourced to more effectively foster compliance. Any differences between models in this regard will largely turn on perceptions and degree of acceptability by sector organizations.

Equally indifferent for choosing between models (in this instance between A/B and C) is the complementary aspect of ensuring compliance, namely enforcement. The Table's suggestions on intermediate sanctions would result in a better-working regulatory system under any model.

Other common features

A federal body

Like the Broadbent Panel and many in the voluntary sector it consulted, great merit is seen in a combined federal-provincial agency. Its creation, however, may be very difficult. At least as a starting point, the models envision a strictly federal body, but the Table considered the capacity to accommodate provincial involvement through opting-in, perhaps leading to coordinated regulation.(i)

In the context of a review of the Social Union Framework, the desire for coordinated regulation of charities could be brought to the attention of the Council of Ministers. In the meantime, federal proposals will have to be carefully designed to ensure respect for provincial jurisdiction.

What Revenue Canada would continue to do

Under any model, Revenue Canada would continue to carry out certain functions it currently undertakes. These include: the performance of financial audits (at its own initiative or at the request of model B's agency or model C's commission), the processing of returns (although an agency or commission may be more active in analysing the returns and making the information accessible), providing advance income tax rulings, determining eligibility and valuation of gifts and donations, and collecting taxes from de-registered charities.

Self-regulation

Self-regulation of the sector is seen here as a form of "good practice," with the potential to be a condition for registration. The Table concluded that, in any model, increased self-regulation could go some way toward satisfying the need for change, namely by offering a:

potential to embrace the non-charitable sector;
potential for a more streamlined registration process; and
potential for increased accountability.

Self-regulation should not, however, create a "double hoop" for organizations to jump through. No significant difference is seen between the models in the potential and effect of increased self-regulation.

Table 1 outlines distinct features of the three models. An assessment follows.

TABLE 1 : CHARACTERISTICS

Function	A: an enhanced RCCD	B: an agency	C: a commission
Registration/De-registration.	Revenue Canada (RC) makes the administrative decision, assisted by an advisory committee that: has legislatively authorized access to all of RC's information; reviews and recommends on selected cases; and offers policy advice	RC makes the administrative decision, but the agency has statutory authority to make recommendations on selected cases brought forward by RC (with access to information as under A). Indirectly the agency influences the registration/de-registration process by: having statutory authority to issue policy advice on matters affecting the sector in federal jurisdiction; and assisting groups with their applications or their annual returns, and generally providing a support function for the sector. The agency could also be obliged to notify RC of cases of persistent non-compliance that come to its attention.	The Registrar of the commission makes the administrative decision, supported by the policy-making authority of the commission.
Enforcement.	Current audit powers, as well as invocation of dispute resolution processes and provision for intermediate sanctions.	Either no role, or a role as facilitator for dispute resolution or as an advocate.	Powers of enforcement, including audit powers. Dispute resolution and intermediate sanctions also as under A.
Financial audit.	Yes.	No, but the agency could request that RC do an audit and would receive the results.	The commission could request that RC do an audit and would determine what action, if any, would be taken.
Audit for adherence to purposes of the organization.	Yes.	The agency could take this on, through a program of systematic or random monitoring, or at the request of RC.	The commission would be given a mandate to take on this function. Could be required to audit specific cases at RC's request.
Support/advice on best practices (accountability and governance).	No.	Yes.	Yes.
Provide information to the public (including complaints handling).	Annual Report of the Charities Division. Enhanced website. Otherwise no change.	Yes, including clearing house and Annual Report to Parliament.	Same as B.

Assessment

The Table assessed the three models in light of the need for change identified in the Regulatory chapter, as well as against other criteria. Assumptions on reform of the appeal process, the easing of confidentiality restrictions and greater compliance support already implied that all models would see improved transparency around registration, more effort to ensure compliance (including institution of intermediate sanctions), and a more accessible appeal process. Hearings on controversial cases could be instituted under any model.

The Table further asked:

Does the model improve public information and knowledge about the sector?
What is its potential to serve the non-charitable voluntary sector?
How well would it accommodate provincial involvement?
How compatible is it with a support or nurturing function?
How does it affect the regulatory burden on the sector?
What is its degree of independence from government and the sector?
Does it enhance the sector's and the public's confidence in the regulator?
Could there be a consequence in fiscal costs?

Suggested answers are in Table 2. Conclusions follow.

TABLE 2 : ASSESSMENT

Goals/Criteria	A: an enhanced RCCD	B: an agency	C: a commission
Improved public information and knowledge about the sector.	Website and other measures could make for improvement over the status quo.	Could be more vigorous program than under A.	Same as B.
Potential for serving the non-charitable voluntary sector.	Status quo.	Yes, on a voluntary basis. The agency would be a more acceptable interface than RCCD.	Yes, in so far as there are statutory obligations, and otherwise on a voluntary basis. The commission would be a more acceptable interface than RCCD.
Ability to accommodate provincial involvement, potentially including coordinated regulation.	The new Canada Customs and Revenue Agency has a Board with provincial representatives.	Broader potential for provincial involvement on a partnership basis.	Structures could be developed to accommodate provincial input more focussed on the charitable/ voluntary sector.
Compatibility with a support or nurturing function.	In the final analysis, RC will remain the cop.	An agency would provide significant scope for this.	Regulatory and support functions can live side by side, but the nurturing function is likely to be somewhat more restrained than under B.
Regulatory burden - compliance cost; - efficiency/duplication.	No change from the status quo (but see suggestions on short- form reporting in Regulatory chapter).	Burden could be lightened as a result of preventive regulation functions, and assistance to individual groups on applications or with returns.	Functioning of the commission would need to be carefully designed to ensure there is no increase in regulatory burden.
Degree of independence from government and the sector, including clarity of roles.	Same as now, except for profile of the advisory committee.	The agency would be a friend of the sector. It would also have extensive working relationships with RC.	A commission would have greater independence from both government and the sector than either A or B.
Enhancing sector confidence and trust in the regulator, e.g.: - working relationship; - respect for confidentiality; - objectivity of the appeals.	Better working relationship than now.	Better working relationship than under A to the extent that the agency succeeds in its role as representing the interests of the sector.	May be better than both A and B (good working relationship, objective and confidential advice, independent appeal machinery).
Enhancing the public's confidence and trust.	Better than now.	Role may be difficult for the general public to understand.	Same as A.
Potential for fiscal costs.	Government remains in control.	Government retains control, but the agency, through its recommendations on (de)registration and through its policy advice, would still be in a position to push at the edges.	Within the four corners of common law and statutory definitions, the commission may see room for both narrower and wider interpretations, possibly resulting in a net gradual expansion of eligibility.

Assessment of the three models: concluding comments

The Regulatory Table did not look hard for full consensus on a preferred model. There was wide support for moving regulatory oversight out of Revenue Canada. Great merit is also seen in integrated oversight as opposed to in bifurcated responsibilities. Yet an attraction was found in the nurturing role that an agency could play, and the opportunities it could offer to enter into partnerships with other stakeholders. On balance, voluntary sector members favoured model C, while government members tended to conclude that any model could work.

The discussions did not lead far into the matter of regulation of non-charities. This issue requires further investigation. It is the Table's view, however, that under any model, the oversight of "deemed charities" be integrated with that of registered charities. The Table also did not discuss governance issues, such as the manner of appointing members of an advisory committee, agency or commission, and its composition. This too should be further explored.

In conclusion, making Charities Division decisions subject to the administrative review process internal to Revenue Canada could be acted upon immediately. As for the major options and their implications, these need to be fleshed out further, considered in conjunction with the conclusions of the other Joint Tables, and then be subjected to a broad-based consultation process involving the sector and the general public. The ultimate decision will be a political one. The general and specific nature of the decision will strongly affect how well the voluntary sector succeeds in its mission.

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The Table specifically considered a model offered by the Canadian Standards Council. It has an advisory committee composed of provincial representatives; the committee’s chair and vice-chair serve ex-officio on the Council, thus ensuring provincial input at the national level.