Banks, law firms see opportunity to assist groups with regulations

Canadian charities have attracted the attention of banks and law firms who see a new market for their professional services.

"There is a real need for professional advice now more than ever," says David Windeyer, a consultant at Scotiabank and former manager of charitable trust services at the Scotia Private Client Group. "It used to be just the donors, but now the individual charities and private trusts have a lot of questions."

Windeyer says the bank advises about 400 private foundations and charities, helping them manage about $1.3 billion in assets. "Certainly there are fees we charge, but these are competitive with everywhere else. We offer almost an instant office to anyone who wants to set up a private foundation."

For the past decade, charities have been struggling to cope with declining government support and welcome donations such as real estate or publicly traded shares of companies, he says.

Windeyer adds, however, that in many cases they aren't sure about how to handle the accounting or tax reporting.

Charities have also been getting increased demands from donors for more accountability in addition to dealing with more stringent regulations.

Most of those regulations and guidelines fall under provincial jurisdiction, which results in varying situations across the country, says Susan Manwaring, a lawyer with Miller Thomson and chair of the Toronto firm's charities and not-for-profit sector.

"The demand has picked up over the past few years" for firms specializing in such services, she says.

Manwaring says donors are asking more questions about how much of every dollar donated goes to the charity's actual work and how much is used for administrative purposes. "One of the biggest trends is donors are more interested in how their dollars are going," she says. "That has left the charities in need of non-designated funds, because they have no money for salaries and ongoing operations."

A study done in 2004 by TD Economics concluded the charitable sector was under intense pressure and that its major challenges were finding skilled staff and adequate, stable long-term financing.

Things could change, however, if the Conservative government acts on its campaign promise to remove the capital gains tax on listed stocks donated to charities.

"Proponents of the measure have argued that donations of stocks could rise by 50 per cent in response," TD Bank Financial Group chief economist Don Drummond wrote in a report released in February. "TD Economics believes that once people understand how attractive the measure is, the impact will be much greater."

In the report, Drummond says it is likely the measure will be in the new government's first budget "because it will be supported by all opposition parties."

Jo-Anne Ryan, vice-president of philanthropic services for TD Waterhouse, agrees the effect on charitable donations could be dramatic. "The elimination of the capital gains tax could benefit many Canadians, from the employee who has acquired company stock at a low cost over the years to the typical investor who has enjoyed nice returns in their stock portfolio," she said in an interview.

Individuals and corporations donating publicly traded securities have received preferential tax treatment since 1997 and pay tax on only 25 per cent of the capital gain instead of the usual 50 per cent.

Ryan says Canadians hold about $1.3 trillion in stocks and that unrealized capital gains account for almost half of the holdings.

"Exempting capital gains from taxation should unlock more of these security holdings and also cause a further shift in the distribution of donations! away from cash toward stocks," Drummond said in the February report.

"With the Conservatives' proposal, the cost to the donor would only be 40 per cent of the total gift, with other taxpayers picking up the tab for the remaining 60 per cent," he added. "This seems like too good a deal for Canadians not to respond in a major way."

In October 2004, TD Waterhouse launched the Private Giving Foundation (PGF), Canada's only donor-advised fund, as an alternative to setting up a private foundation.

Ryan, who is executive director, says that since then donations have exceeded $22 million, with more than 80 per cent of that figure being donations of securities.

Banks require about $1 million to initially start a private foundation and there are legal and accounting fees as well, Ryan says. The PGF has a minimum contribution level of $10,000.

Contributions are invested in a special series of mutual fund units. Money is then distributed ann! ually to the registered public charities the contributors designate.

The latest figures show charitable giving in general is on the increase. A 2004 report found Ontario's charitable and non-profit sector is made up of 45,000 organizations that report more than $48 billion in annual revenue and 959,000 paid staff, according to Imagine Canada, formerly the Canadian Centre for Philanthropy. The report was done by Imagine Canada and a number of smaller groups using information from Statistics Canada data bases.

The report did not break down the size of individual donations.

Manwaring was part of a working group last year that studied different provincial legislation at the Uniform Law Conference of Canada.

The organization was founded in 1918 to "harmonize the laws of the provinces and territories of Canada, and where appropriate, federal laws as well."

Delegates at the conference voted in favour of a Uniform Charitable Fundraising Act, which would ensure that members of the public have sufficient information to make decisions about large charitable donations, to protect the public from fraudulent misrepresentation and to establish standards for charities and fund-raising businesses.

The group studied current legislation that they believed effectively governs fund-raising in Alberta and looked at copying a similar model for all the other Canadian provinces, she says. "Ultimately the legislation has to protect the consumer (from fraud) but not become burdensome to the charities."

Charities and not-for-profit organizations also have an organization to lobby different levels of government and examine new laws in detail. The Canadian Association of Gift Planners (CAGP) will hold its annual conference in Calgary, April 18-21, called Pipeline to the Future.

According to the CAGP website, a gift planner is someone who works with donors and charities to achieve maximum benefit for each party from a charitable donation.

Executive director Diane MacDonald says the group has 1,280 members across Canada, including lawyers, financial planners and accountants. CAGP officials have arranged with some professional governing bodies for delegates to get appropriate continuing education credits for attending.

Delegates will discuss a report that will be released at the conference that looks at what factors motivate individual donors, MacDonald says. The report was done in conjunction with Statistics Canada.

"I haven't even seen details yet, but I can tell you everyone in the office here is excited about what it's going to tell us," she says.