(October 30, 2021) In an explosive story published yesterday by The Logic, Finance Canada’s Sabia sitting out charitable-giving consultations over spot on MasterCard Foundation board, Claire Brownell reported that Deputy Minister of Finance Michael Sabia has recused himself from being informed of or discussing “any issue involved in the charitable sector in general” including the current consultation regarding the disbursement quota because he holds a seat on the board of directors of the MasterCard Foundation.
Canada’s biggest foundation by a large measure, the MasterCard Foundation has assets of US$39 billion. The Logic’s research showed one in five charities of Canada’s largest charities failed to meet the 3.5% disbursement quota, resulting in a shortfall of more than $400 million. The MasterCard Foundation accounted for 61% of these losses according to The Logic. The Charity Report’s own research is congruous with The Logic’s findings.
MasterCard Foundation spokesperson told The Logic that it has “agreed not to have Sabia participate in any meeting or discussion related to law, policy or relations with the Government of Canada.”
The story the comes at a time when the federal government is considering the first major change in the disbursement quota since 2004, when it was lowered from 4.5% to 3.5%.
“The hot file before our Finance Minister is restoring – even upping – the disbursement quota,” Kate Bahen, Managing Director of Charity Intelligence, told The Charity Report. “This would be the most significant reform of the charity sector and involves between $1 billion to $4 billion in annual funding for charities.
“Yet the deputy minister has recused himself from this most important deliberation due to a personal conflict of interest since he is a volunteer director of Mastercard Foundation.”
Any rise of the disbursement quota would have a massive impact on the MasterCard Foundation, which already holds a special agreement with CRA in which is it only required to meet the disbursement quota over a period of 15 years. The special averaging arrangement with respect to its disbursement quota obligations arrangement is spelled out in the charity’s 2020 Financial statement. The 15-year period ends December 31, 2021.
Kate Bahen asks whether the foundation will be liable for the interest on the amount of funds it was supposed to disburse in the same way an individual taxpayer would be held accountable for the interest in unpaid taxes.
Brownell’s story further points out that Hilary Pearson, wife of Michael Sabia, and former CEO of Philanthropic Foundations Canada, a lobby group for private and public foundations, is currently co-chair the Advisory Committee on the Charity Sector (ACCS), “a consultative forum for the Government of Canada to engage in meaningful dialogue with the charitable sector, to advance emerging issues relating to charities, and to ensure the regulatory environment supports the important work that charities do.” It provides recommendations to the Minister of National Revenue and the Commissioner of the CRA.
The committee came under blistering criticism earlier this year when it identified the major issues in the charity sector as the rules around “direction and control” of who a foundation grants funds to, the right to appeal decisions by the Charities Directorate to the Supreme Court, and charities having a “home” within government, yet took no position on raising the disbursement quota, a call many “C” category charities have been making since the beginning of the pandemic. (“C” category charities are charitable organizations; “A” category charities are public foundations; “B” category charities are private foundations.)
And, despite calls from charity sector lobby groups like Imagine Canada for a $10 billion COVID stabilization fund from government, the ACCS said it had no intention of dealing with the issue of the disbursement quota that would mean charities themselves would be required to make a larger contribution.
At the time, charity lawyer Mark Blumberg told The Charity Report that, “If, after spending millions of dollars, this is what the committee came up with, my suggestion would be that the committee should be shut down and the funds that would have been spent on this committee should rather be used for capacity building activities in the charity sector. Alternatively, the composition and priorities of this committee requires a significant change.”
On March 18, sector co-chair Hilary Pearson responded to a series of questions posed by The Charity Report on her behalf and on behalf of co-chair Bruce MacDonald with the following statement:
“As you know Bruce and I serve as two volunteer co-chairs of an Advisory Committee which reports to the Minister of Revenue and which is also co-chaired by a senior official of the CRA. The advice and recommendations in this and subsequent reports which the 14 volunteer sector members of the ACCS are working on now are framed as advice to the Minister. The Canada Revenue Agency has posted many details publicly including the mandate of the Committee, summaries of all of our meetings to date and the Report itself, which includes a rationale for each of the recommendations that the Committee was ready to make at this stage. Other Reports will deal with a number of issues which the Committee’s working groups are consulting on now.”
Michael Sabia took up his role on the MasterCard Foundation board halfway through 2020 and became deputy finance minister in December.
These latest revelations come at a time when, as has been reported in this space, the charity sector is buffeted by scandal, by repeated polls that agree charities are under water in terms of public trust, and by research and reporting that shows charitable foundations give negligible support to Black, indigenous or people of colour, and that systemic racism is endemic in the sector.
“A global report on charities issued by Edelman PR in January revealed a majority of respondents surveyed in more than 30 countries believed charities were “incompetent.” A poll released by The Charity Report, conducted by Proof Strategies, found the public believes charities are the least capable of public institutions to deal with issue of inequity.”
That a power-couple, such as Michael Sabia and Hilary Pearson, who sit at the top of the philanthropic foundation food chain in Canada are making serious recommendations (or, in the case of Sabia, not making serious recommendations) impacting the lives of the most marginalized Canadians, who have no one speaking for them, will likely heighten calls for widespread sector reform.
In the meantime, the Finance Canada remains tight-lipped about the progress of the report from the disbursement quota consultations.
“The Tax Policy Branch of the Department of Finance is taking the time to carefully review the submissions and will be providing advice to the government on this issue. More information will be released in due course,” Anna Arneson, Department of Finance Canada spokesperson told The Charity Report via email.
DQ Consultation: Fear and loathing in the charity sector September 27, 2021
Growth of Donor Advised Funds: Charitable Boon or Parking Lot? August 28, 2020