Innovation and the Charitable Sector.

• Author: Broder, Peter

The merger of the Canadian Cancer Society and the Canadian Breast Cancer Foundation announced on February 1, 2017 has been welcomed by many. The hope is that by joining forces the two organizations can have greater impact on cancer research and support programs.

For those who lament the large number of charities in Canada and what's dubbed (without any widely-accepted metric) the "inefficiency" of many organizations, this type of move is self-evidently a good thing.

In the case of the Canadian Cancer Society and the Breast Cancer Foundation, because of their similar mandates, there are likely organizational synergies that can be realized by the merger. There will certainly be some donors that will be happy not to receive solicitations from similar charities, so bringing the two together may be the right move. Even so, it may be worthwhile questioning the assumptions that fewer is inevitably better and bigger is always more efficient.

At common law, charities--along with meeting certain other criteria in how they are constituted--are granted status because their purpose is to do good or to relieve disadvantage. On this basis, unless one is willing to argue that in 21st century Canada there is already enough good or no further need to relieve disadvantage, it is hard to make a case that there are too many charities.

Moreover, although the common law contains measures to discourage the wasting of charitable assets--or more precisely to hold accountable those responsible for the stewardship of charitable resources for carelessness or misuse of the property in their care, it pays little heed to "efficiency". Instead, it values prudence and caution over getting the biggest bang for the buck. This leads directly to charities being expected to limit themselves in what business activities they undertake.

In some jurisdictions common law restrictions on putting charitable assets at risk are reinforced in legislation. Such statutes, however, are frequently little known and little enforced.

Adding confusion to this is the better-known fact that registered charities and their donors are granted highly favourable treatment under the federal Income Tax Act (ITA). From this ITA recognition often flows preferential treatment under tax and other statutes at the federal, provincial and municipal levels.

Even though, in the aggregate, less than 10% of charity revenues flow from personal and corporate donations, and of that percentage only about 50% is...