From AFP International (www.afpnet.org)

(July 31, 2006) A new report recommends reducing government burdens, investing in new research and providing tax measures to encourage investment as ways to support the work of small- and medium-size charities in Canada.

The study, Building Blocks for Strong Communities, was developed by Imagine Canada and the Canadian Policy Research Networks. It compared small-and medium-size business enterprises to small- and medium-size charities so that policy makers could determine where beneficial changes that had been made for business also could be made for the nonprofit sector.

While small- and medium-size charities are making important contributions to communities across Canada, they also are facing significant challenges and are struggling to fulfill their missions. They have limited access to financial sources and must overcome management and human resources hurdles, such as not enough paid staff, staff training and training and retention of volunteers. As a result, the study states, “the ability of charitable and voluntary organizations to champion and lead societal innovation at the community level in Canada is being tested.”

Recommendations

The recommendations in the report are primarily directed at all levels of government, as well as the private sector, communities and organizations themselves. They are grouped into six areas:

1. Improving knowledge and understanding of small- and medium-size organizations
2. Providing information, tools and advisory and support services
3. Facilitating and leveraging access to financing and improving financial supports
4. Supporting innovation and technology
5. Supporting networking and partnerships
6. Addressing regulatory and others concerns

Under improving financial supports, the report recommends the introduction and/or expansion of tax initiatives to encourage and leverage private investment in these organizations, including the elimination of the capital gains tax on gifts of capital assets (stock, real estate, etc.) to charities, including private foundations. It also calls for loan and guarantee programs for charities, as well as the implementation of the announced Charity Bank.

The report also discusses several regulatory changes (area 6) that would help small and medium-size organizations operate more efficiently and effectively:

Reexamine the definition of “charity,” especially with regard to the many organizations that provide a public benefit without meeting the current criteria

• Review Revenue Canada restrictions on allowable business activity for charities
• Develop further measures to assist and allow these organizations to access and compete for government business and contracts
• Review and reform liability insurance for nonprofits—collect data and conduct analysis on risks for fairer evaluations of premiums, and consider private or government-run nonprofit insurance pools

AFP strongly supports many of these proposals, including the extension of the capital gains exemption to gifts of all types of capital assets and reform of the allowable business activity regulations for charities.

About the Study

The study consists of four parts:

1. Key Findings and Recommendations
2. A Profile of Small- and Medium-size Organizations in Canada (for the charitable sector)
3. A Profile of Small- and Medium-size Enterprises in Canada (for the private sector)
4. Results of Key Informant Interviews (discussions with individuals who have extensive experience in one or both sectors)

All four reports are available on the Nonprofitscan.ca website, which is the public information portal for Imagine Canada.

Imagine Canada was formed in 2005 through the merger of the Canadian Centre for Philanthropy and the Council of National Voluntary Organizations. It works to create public awareness of charities and develops and disseminates research and best practices.

The mission of the Canadian Policy Research Networks is to create knowledge and lead public dialogue and debate on social and economic issues important to the well-being of Canadians.