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June 29, 2012

Canadian Taxpayers Federation Governance

The Harper government has launched a campaign against some environmental organizations, encouraging Canada Revenue to determine whether they are violating conditions of their charitable status. It is arguable that the Prime Minister is abusing his power in directing Canada Revenue to go after those with whom he disagrees. The tax agency is already tough on charities that violate its rules with penalties every year, including loss of charitable status and the potential of seizure of all assets.

Charities are transparent. Anyone can click on the charities section of the Revenue Canada website and find extensive data on any registered charity, including the number of staff in various pay ranges ($1-$39,999; $40,000 - $79,000; ; $350,000 and over), financial reports, activities and fundraising details.

Charities should not be confused with not-for-profit organizations like the Canadian Taxpayers Federation (CTF). An organization can be incorporated provincially under the Society Act or federally under the Canada Not-for-profit Corporations Act. The CTF is federally incorporated but it is not a registered charity, which means it has none of the disclosure requirements that result in extensive information being available on Revenue Canada's website.

After watching Voice of BC on June 28 with host Vaughn Palmer interviewing Philip Hochstein from the Independent Contractors and Businesses Association of BC and Jordan Bateman from the CTF I started looking for more information about the CTF. After all, we are all taxpayers but I don't recall being asked if the CTF could speak on my behalf. I went to the CTF website in order to look for its financial statements and constitution, curious as to how its directors are elected. The organization that is quick to criticize governments for lack of transparency is far from transparent. It takes some searching but financial highlights can be found which shows it received $3.4 million in donations in 2011, up from $3.2 million in 2010. It paid one person between $91,000 and $110,000, four people between $71,000 and $90,000, and five less than $71,000. A search of the Industry Canada website indicated its last annual meeting was held in 2005 and it has not filed returns for 2011 or 2012; however, after Tweeting that discovery, its Alberta Director and National Communications Manager, Scott Hennig, responded that the Industry Canada information is out of date. My advice is for the CTF to get the information updated and to also provide it on its own website.

Mr. Hennig was most helpful in answering questions about the governance of the Taxpayers Federation. When asked if its 70,000 "supporters" are eligible to elect who is on its board of directors, he Tweeted that only the directors are eligible to elect directors! In other words, the $3.4 million in donations received by CTF is under the direction of five people who elect themselves and choose whoever they want to fill any vacancy; no one else has any control over the organization. Of course, donors could withdraw their contributions if they became unhappy, but how many of those donors know that the Taxpayers Federation has a self-perpetuating board of directors with no accountability to a membership base? Its website reports: "CTF offices field hundreds of media interviews each month, hold press conferences and issue regular news releases, commentaries, online postings and publications to advocate the common interest of taxpayers. CTF representatives speak at functions, make presentations to government, meet with politicians, and organize petition drives, events and campaigns to mobilize citizens to affect public policy change." How many media or politicians know that the CTF is governed by five people who have the power to elect themselves and are not accountable to anyone else?

While I don't always agree with the points of view offered by the Taxpayers Federation, I don't dispute its right to contribute to debate on public policy. However, when it comes to fundraising, I believe not-for-profits should be as transparent as charities, and if a governance structure allows no challenge in elections to a board of directors, potential donors should be fully aware of that form of tight control. Mr. Hennig Tweeted: "Those who are interested know". Thanks to his Tweets and this article, I hope many more will become aware. The Prime Minister might want to think about extending his enthusiasm for probing charities to include improved transparency requirements for not-for-profits that are not charities. In the meantime, donors should ask questions and not-for-profits should voluntarily make full disclosure on their websites.

July 1, 2013 Addendum

As a result of the circulation of this article, I had a conversation on Twitter with @ConBGone who made me aware that non-member not-for-profit organizations are common.

A 2003 Statistics Canada publication, Cornerstones of Community: Highlights of the National Survey of Nonprofit and Voluntary Organizations, reported (tables 1.1 and 1.5) that of the 161,227 non-profit and voluntary organizations it surveyed, 20.6% had no members. The U.S. National Council of Nonprofits discusses membership based organizations compared to non-member or self-perpetuating organizations. It provides a link to the Charity Lawyer website which reports: "In contrast to corporations with boards elected by voting members, most charities are governed by self-perpetuating boards. Self-perpetuating boards simply vote for their own replacements. In a nonprofit with a self-perpetuating board, the Board of Directors is typically the ultimate seat of authority within the organization."

If my understanding is correct, the Canadian Taxpayers Federation fits into the model described by these references as a non-member organization with a self-perpetuating board (or the equivalent where the only members are the directors). While that is a common form of organization, my concern remains that those who donate to it or use it for commentary should know that. The CTF website talks about 70,000 supporters but it doesn't bother to mention that neither supporters nor donors have a vote when it comes to electing its self-perpetuating board.