There is no federal minister – or department – actively responsible for leadership on non-profit sector issues, other than the CRA, which has no institutional mandate to be concerned about the sustainability of charities. Canadian governments have made significant efforts over the past two decades to strengthen the Canadian economic union, as well as the social union. These have produced tangible results for Canadians – for example, internal trade barriers have been falling and social benefits are now more portable between provinces.

However, we have not expended similar effort on the non-profit sector. Now is the time to work on this third important pillar of the Canadian union. The misalignment between federal and provincial responsibilities is in urgent need of redress. Donations to charities are trending downward, but demand for services is growing. While the recession is partly to blame, this trend is likely long-term.

Experts predict that demographic pressures will mean higher demand for the sector’s services, and stagnating donation levels. This problem is not insignificant. Canada’s non-profit sector comprises over 161,000 charities and non-profits, and accounts for $106.4 billion or 7.1 per cent of our national economy.

In Ontario alone, the core sector provides 600,000 jobs, with the broader sector providing about one million. While our sector is one of the largest in the world, Canada is lagging its international peers in encouraging earned revenue generation – the sole potential source of revenue growth for the sector.

Social enterprise represents a key component of efforts to ensure sustainable community and social services in a growing number of countries. In the United Kingdom, for instance, the government has legislated a new hybrid corporate entity, the Community Interest Company (CIC). CICs are social purpose businesses aimed at generating both financial profits and public benefits. The British government further plans to establish a Big Society Bank that will increase access to finance for social enterprise.

The US and Australia are exploring similar initiatives. In Canada, the challenge is not just one of federal government rules and regulations in conflict with provincial strategies. Non-profit organizations are also constrained by different regulatory and legislative regimes between provinces that make it burdensome and complicated to expand activities into other provinces – with heavy administrative burdens placed on those that do.

Overlapping federal and provincial responsibilities and barriers are commonplace in Canada, but in other policy areas the federal and provincial governments have established processes where Ministers and public servants meet to coordinate their activities and reduce the number of overlapping and conflicting regulations. No such efforts exist with respect to the non-profit sector. There is no effort underway to streamline federal-provincial responsibility and coordinate policy, and there is no venue for provinces and territories to discuss issues affecting the sector, let alone begin the process of lowering interprovincial barriers to a strengthened non-profit sector.

Three main recommendations emerge from this analysis.

First, the federal government should consider legislative changes (namely to the Income Tax Act and the bureaucratic interpretations of that Act) to allow charities and non-profits more flexibility in how they use and generate funds. This would encourage provincial efforts to strengthen the sector. The UK experience represents a promising model.

Second, the federal and provincial/territorial governments should establish a formal intergovernmental process to coordinate their policies and approaches to the sector.

Third, provinces and territories should establish their own process to harmonize rules and regulations affecting the sector, similar to the processes they have established to facilitate greater labour mobility between provinces.

Governments in Canada have worked hard over the last two decades to strengthen our economic and social union. Unfortunately, no efforts have been made to strengthen the Canadian union for the non-profit sector. Given the fiscal pressures on the sector and on governments, now is the time to do so.