What to Do about Taxpayer Funding of NGOs
Written by Joseph C. Ben-Ami Monday, 22 February 2010
David Murrell’s paper exposing how taxpayer money is being directed by government bureaucrats toward advocacy groups that then lobby the government for – you guessed it – more taxpayer money, is creating quite a stir. (You can read his article by clicking here.) I have been flooded with emails asking how, after four years in power, a conservative government could have failed to deal with this. I wish I had a good answer.
The default response from government representatives to all this has been that they can’t really do anything about it because of their minority status. A far more plausible explanation, however, and one that I have also heard a lot in the past few days from MPs themselves, is that although they knew there was a problem, they weren’t aware until now just how big that problem was.
But now that they do know, what can they do?
Here are three suggestions:
1. Replace organization funding with project funding.
NGOs can and do play an important role in assisting the government in fulfilling its policy goals. As Dr. Murrell’s report demonstrates, however, many of the transfers of public funds to NGOs have little if anything to do with that role. The Canadian International Development Agency (CIDA), for instance, gave out grants totaling almost a quarter billion dollars in 2008/09 for what it obliquely calls “public engagement initiatives”. Other departments provide grants for similar activities under different programs with different names. This should end.
Government can and should continue dealing with NGOs. Instead of funding organizations, however, it (the government) should fund specific projects. NGOs would still qualify to receive public funds under such a change, but that money would be limited only to the purchase of goods and/or services related to the project in question. Furthermore, in the case of CIDA, funding should be directed toward foreign aid projects only. There is simply no excuse for money allocated for foreign aid to be spent on domestic projects – it’s a misappropriation of funds.
2. Encourage “public engagement” through tax benefits.
Many NGOs provide a vital public service by stimulating public debate, and facilitating public participation in the development of government policy, and to the degree that they do, the government is justified in encouraging and supporting their activities. This support should not be given through direct grants, however. Direct grants discourage real “public engagement” by eliminating the need for NGOs to seek out and maintain public support for their positions and activities. What’s more, grants allow government bureaucrats to pick winners and losers from among the pool of applicants, a power that inevitably – if unwittingly – will be abused.
Instead, government should be encourage and support these activities indirectly by providing a tax benefit to citizens who donate to these NGOs. Tax benefits create an incentive for true “public engagement” by compelling NGOs to seek out and develop grassroots support, and by encouraging that support. Tax benefits are ideologically neutral.
3. Allow all not-for-profit organizations to qualify for a GST rebate.
At present, only those not-for-profit organizations with charitable status, or those that receive 40% or more of their funding from government, qualify for a refund of tax they pay on goods and services they purchase – those not-for-profit groups that eschew government subsidies, whether directly through grants, or indirectly through tax breaks to donors, do not. There is no reasonable justification for this. When it comes to the GST, all not-for-profit organizations should be treated equally; they should either all receive a rebate by virtue of their not-for-profit status (which is what we recommend) or none should.
Adopting these three simple recommendations across the board would accomplish four things: it would save taxpayers money, it would provide clear lines of accountability between taxpayers and NGOs in the area of funding, it would eliminate any temptation on the part of bureaucrats to make ideology a factor in choosing which NGOs get grants and which don’t, and it would create an even playing field in the area of “public engagement”.
