"Sinecure - an office or position that requires little or no work and that usually provides an income"
Merriam Webster online dictionary
Recently, I have been doing some research on foundations. As part of this work, I found two where each foundation made fewer than five donations in 2019. Both were private foundations. In both cases, administrative costs for "consulting fees" were over $100,000. Clearly, if an organization has an investment portfolio, there will be costs. Audits cost money. Legal oversight as well. But I would be hard pressed to think of why a foundation would need over $100,000 for consulting fees.
There are several troubling aspects to this situation. First, foundations are registered charities. Whether they have $1M in assets, $10M, or $100M, those assets are not taxed. So the government of Canada has said that the work of that charity is valuable enough to not have to pay taxes. That assumes that the charity will be using its money with a primary purpose of benefitting Canadians broadly not just benefitting a few family members related to the charity.
The other concerning part of this is that the payments were for "consulting fees." By paying people in this way, the charity does not have to disclose salaries. If you go onto any charity's T-3010 filing, you can see the salary range of the top 10 employees. Based on that you are reasonably estimate what people earn at that charity. If a private foundation pays people by contract, instead as full-time employees, the amounts paid are not disclosed. This creates a situation where some charities are transparent about personnel and salaries and others are not.
In addition, there is no reason why foundations can't pay family members. So assets that are not being taxed can benefit family members in the form of consulting contracts or other employment. To be clear, tax dollars are essentially bankrolling this behaviour.
To be fair, you might note that, if it is a family foundation, then why shouldn't the family use some of their money in this way? That is where the concern comes in. Once a charity is incorporated, the money for that charity no longer belongs to the donor. That money belongs to the charity. And the donor gets a substantial tax benefit for establishing this foundation.
In an era where the charity sector is rightly being scrutinized for discrimination and lack of diversity, private foundations are an area that requires much more attention. After all, if a private foundation spends nearly as much on consulting fees as they do on charitable gifts, should our government subsidize that sinecure?
Ann Rosenfield is the Editor of Hilborn Charity eNews.
