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Join ONN in calling for a dedicated Public Benefit Corporations Act in Ontario

The Ontario Nonprofit Network (ONN), expert working group has prepared three responses to the three consultation papers on the Corporations Act issued by the Government of Ontario. All three can now be found on the brand new ONN website.

Please check it out the new ONN site, sign up for their e-bulletins, and down load the ONN response documents. You will want to keep track of what the sector is up to and the ONN site is the place to do it.

If you are thinking … why bother responding to something as complex and boring as the modernization of the Corporations Act? Then Read this:

• We want legislation that meets our needs for a change. The ONN’s Expert Working Group is of the strong opinion that new, separate legislation is required to recognize and address the unique qualities, functions and purposes of Ontario’s public benefit sector. The legislation should be titled, “Public Benefit Corporations Act.”

  Public benefit corporations are different from other nonprofit groups, such as trade associations, and clubs, which tend to exist to serve only their members and do not have a broader public mission. True member Associations and the needs of public benefit organizations are so different as to warrant separate legislation.

• Level the playing field with business and cut the red tape. Help us ensure the legislation is flexible, responsive and enabling. ONN proposes that the revised legislation be structured enough to ensure certain minimum standards in organizations that serve the larger public benefit, but flexible enough not to seem to micro-manage. Many public benefit corporations serve very particular needs in communities, and in order for them to be responsive to those needs they require flexibility in their bylaws and their organizational and board structures.

  Enabling corporate legislation for public benefit organizations must not unduly disadvantage public benefit corporations. The legislation must provide similar rights and obligations provided business corporations such as “as of right” incorporation, “powers of a natural person”, and impose similar duties of care and director personal liability protections. The Act must provide flexibility in Director and membership size and structures to suit the wide diversity of public benefit organizations. The act also needs to provide for modern methods (e.g. electronic) of communicating with directors and members.

• Help us keep the Public Trust. We need to ensure transparency and accountability for public benefit. The unique nature of the Public Benefit Corporation is that it exists to serve the public good. As such it enjoys tax advantages, public recognition and trust. The Act must support this contract with the public by providing for transparency of corporate information, checks and balances on the operation of the corporation and robust financial constraints that ensure revenues are dedicated to the public good.

• Demand there be no limit on the capacity of public benefit corporations to earn money and join our call for increasing the capacity of public benefit corporations to raise capital funds.

These are new requests of government and they will not happen without broad based support from the field. We urge you to become active and write in support of these critical changes. Reply by May 31st, 2208 to:

Corporations Act Modernization
Ministry of Government Services
Policy Branch
777 Bay Street
5th Floor – Suite 501
Toronto, ON M7A 2J3
(416) 326-8877

Email: business.law@ontario.ca

The Ontario Nonprofit Network (ONN), expert working group has been hard at work on a more detailed study of the legislative options for public benefit organizations and drafting these briefing notes for the field.Act now! Make sure your organization participates in the consultation process and take the time to forward this brief to your networks.

The ONN has just released Revising the Corporations Act - A Brief to the Sector. The recommendations are found in the Recommendations at a Glance.

Highlights include a call for:

• A dedicated Not-for-Profit Act;
• Reform of charitable regulation and oversight in addition to revising the Corporations Act;
• No regulation or restriction on the capacity of a not-for-profit corporation to earn revenues;
• Clear distribution constraints on nonprofits to ensure public benefit;
• and more…..

You can read the full report or please consider passing the recommendations found on pages 3 and 4 to those who might be interested such as Boards of Directors.

Download the Full Report

A Study of the Administrative Burden Resulting From Funder Accountability and Compliance Practices.

My research on the administrative burden resulting from funder accountability and compliance practices is now available. Undertaken with the support of the Wellesley Institute, the studies findings will help nonprofit organizations and their funders improve their effectiveness and responsiveness.

Some excerpts:

“The findings are sobering. The administrative burden placed by funders on community nonprofit organizations is so heavy and so unrelenting, and places so many constraints on their ability to operate that it is a wonder they can deliver any services effectively.

The executive directors of these agencies describe an environment in which their key responsibility is to manage the demands of funders and the many constraints and problems funders impose on the organization so that the staff can actually get some work done and meet community needs.

In sum, the overload of information requests and filings, the lack of delegation of decision-making to the agencies, the problems caused by the granting processes, and the failure of funders to consult with grantees were all identified by participating organizations as contributing to the difficult administrative burden.

The data are clear: we can’t afford to do business this way. It is in everyone’s interest to reform the funding process by minimizing the administrative burden and maximizing the flexibility of agencies to adapt, respond, and innovate, with a focus on results, not controls. It is urgent that funders, nonprofit organizations, and local communities come together to create new administrative systems that can most effectively support the objectives of improving community well-being.”

Check out the eight page Executive Summary and the longer report containing the detail agencies and funders need to begin reforming the system.

Executive Summary - PDF File
Full Report - We Can’t afford to Do Business This Way - PDF File

If you need a black and white version of the report go to the Wellesley Institute Website www.wellesleyinstitute.com

Since my memo in June 2007 proposing that a network, rather than an organization, was a better fit for the nonprofit sector two things have happened.

Firstly, in contrast to my first paper which was met with a resounding silence, my network proposal generated many enthusiastic responses. Many of you contacted me to say what a great idea you thought it was and to count you in.

Secondly, an important cross cutting issue has emerged. In May 2007 the Ministry of Government Services Consumer and Corporate Affairs Branch issued a consultation paper on revising the Corporations Act (the legislation that governs nonprofit corporations.)

Read the short Building a Nonprofit Ontario Network to learn how we are moving forward and be sure to join us as we build together.

In my previous post I introduced the paper Advancing the Nonprofit Sector� in which I identified the key characteristics for successfully organizing the nonprofit sector as – independent (non-government) funding, cross sector involvement, experienced volunteer and staff leadership, and an open functional structure.

I then set out to speak with many people in the various sectors to assess interest in such an organization and found each sector deeply and passionately involved with their mission which, of course, is exactly what makes the nonprofit sector so effective and unique. I also found however, leaders in the various sectors could not muster the same passion regarding cross sector issues - it was not at the top of anybody’s agenda.

This however, does not mean that we cannot move forward. We just need to approach it differently. Read my Memo to the Sector to learn how and why we should build a network.

“The time has come to work together to address our common challenges and opportunities” Over 400 nonprofit leaders from 47 states gathered in Washington, D.C.in October 2006 to affirm the nonprofit sector’s shared values, identify the top three priorities and draft state action plans to address these priorities. We will find the report highlights very helpful as we consider how we want to move forward here in Ontario. Check out the website.www.nonprofitcongress.org . Their goals for the sector are to increase capacity, grow networks and inspire engagement. It seems nonprofit organizations everywhere have a lot in common.

If there is one galvanizing issue that should unite the nonprofit sector in Ontario, it is the financing and regulatory problems that currently threaten the sector’s well-being. Katherine Scott of the Canada Council on Social Development describes the cumulative impact of these problems as a “perfect storm” in the making.

The sector needs to take action, but it is faced with a dilemma. It has neither the capacity to mount a change initiative on the issues that affects the sector as a whole, nor does it have an umbrella organization that can effectively speak to its concerns at the provincial level. Yet the challenges facing the sector’s health are so critical that those interested in its long-term viability must explore new ways to act to influence change in the nonprofit financing and regulatory environment.

This report outlines promising strategies for creating change in the regulatory and financing of nonprofit organizations in Ontario based on a review of sector organizing efforts in regional, national and international contexts.

Download the Full Report

Advancing the Non-Profit Sector

Providing responsive, safe and effective programs in communities requires organizational capacity. Try the following quiz to help identify the organizational capacity you would like to see in your nonprofit partners.

Download the Quiz
The Nonprofit Organizational Capacity Quiz for Funders

Community service organizations are at risk – of failing their mandates, failing their communities, betraying the public trust, and fading away as viable organizations.

We now have a significant body of Canadian research that documents the vulnerability of community social service organizations. New funding practices, widely adopted by governments and others in the early 1990s, have had a devastating impact on the capacity of many Canadian charities or nonprofit organizations to meet the needs in their own communities. We now know unequivocally that community social service organizations are in serious distress as a direct result of changes in government funding and accountability practices (Scott, 2003; Eakin, 2004; Statistics Canada, 2004a; Statistics Canada, 2004b; City of Toronto, 2004; Saunders, 2004).

This article explores the circumstances that have led to the current crisis and seeks to understand why there has been so little action by government to correct problematic funding and accountability practices. What is it that funders in particular and concerned Canadians in general do not yet understand about this growing crisis? And why are government funders not yet moving to make significant changes in their relationships with the community nonprofit organizations that provide essential social services for so many Canadians?
Download Full Report

Community Service Organizations at Risk

A survey of voluntary sector organizations was undertaken as part of a larger collaborative problem-solving initiative between Social Development Canada and the Voluntary Sector Forum focusing on the Code of Good Practice on Funding. The survey focused on the funding of administrative costs in federal government agreements with voluntary sector organizations.

The lack of funding to cover administrative costs was identified as one of the most problematic areas of funding during the development of the Code. The Code was intended to strengthen and improve the sustainability of the Voluntary Sector – to shore up that “hollow foundation”1.

The funding of administrative costs is comprised of two main components:

• the first is the definition of allowable administrative expenses and the funding of those costs and,
• the second component is the process and practice of fund administration.

The two are interconnected. Adequate definition and funding of administration expenses can be undone by accountability and fund management practices. This survey therefore looked at the funding of administration expenses in the context of overall fund management.

Download Full Report

The Policy and Practice Gap: Federal Government Practices Regarding Administrative Costs When Funding Voluntary Sector Organizations.