As Finance Canada presides over a highly contentious debate over raising the minimum rate at which charitable foundations must give away their money, officials are working under a conflict-of-interest screen to keep any mention of the file away from the department’s top civil servant.

The screen is in place because deputy finance minister Michael Sabia sits on the board of the Mastercard Foundation—Canada’s only “mega-foundation” and the charity with the most to gain or lose from any changes to that rate, as The Logic reported Tuesday.

Meanwhile, Sabia’s wife, Hilary Pearson, former president of Philanthropic Foundations Canada and an experienced charity board member, has a prominent voice in those consultations in her role as sector co-chair of the Advisory Committee on the Charitable Sector, which the government formed in 2019 and has invited to give advice on the matter. That advice, submitted Aug. 31, was that there was insufficient data to support an increase.

The conflict-of-interest screen puts Sabia in the clear from any legal issues resulting from his dual roles. But Gail Picco, editor-in-chief of The Charity Report, said it was “offensive to the nth degree” that Sabia has chosen to recuse himself from a crucial policy debate in order to sit on the board of a foundation—particularly this one.

“I’m sure it’s all perfectly legal, but it’s morally corrupt,” she said. “Why is that more important than him seeing that the taxpayers are getting a good deal from the charity sector?”

Finance spokesperson Kevin Maillet provided The Logic with a memo that went out to the department about the conflict-of-interest screen, advising staff that Sabia is “not to be made aware of any issue” involving the charitable sector in general or the Mastercard Foundation specifically.

“This goes beyond the usual meaning of recusal which would have permitted Mr. Sabia to be aware of, but not participate in, discussions or decisions on an issue,” Maillet said.

The screen is designed to involve conflicts related to both membership on the board of the Mastercard Foundation and “a number” of charitable boards on which Pearson sits, the memo said. According to charity-sector tax filings, Pearson is on the boards of five charities and foundations including Indspire and Care Canada.

The screen has not previously been made public because it “was instituted at Mr. Sabia’s request,” rather than being required by the conflict-of-interest and ethics commissioner, Maillet said.

Sabia himself, who was copied on the same request for comment, did not respond directly.

With the investable assets of foundations growing from $59 billion to $100 billion from 2015 to 2019 even as charitable spending dropped over the same period, the stakes of the consultations are high for both foundations and the causes they fund.

As The Logic reported Monday, in 2019 one in five of the country’s largest foundations and seven per cent of all charities failed to meet even the current minimum rate of 3.5 per cent of assets—known as the disbursement quota—resulting in a shortfall of $414 million in the money that would have flowed to frontline charities and into communities and projects. The Toronto-based Mastercard Foundation—one of the world’s largest charitable foundations, with US$39 billion in assets—was responsible for about 61 per cent of that shortfall.

Sabia became deputy finance minister in December 2020, six months after accepting a position on the Mastercard Foundation’s board. His storied career as an executive included leadership positions at BCE and the Caisse de dépôt et placement du Québec. In April’s budget, the federal government announced consultations on changing the disbursement quota and in August Finance Canada announced it would start accepting submissions on the subject.

In an emailed statement, Mastercard Foundation spokesperson Julie Gichuru said the organization has agreed not to have Sabia participate in any meetings or discussions related to law, policy or relations with the Government of Canada.

Despite the elaborate screens and rules that Sabia, the Mastercard Foundation and Finance have put in place, Charity Intelligence managing director Kate Bahen said the public interest would be better served by him simply stepping down from the charity’s board. “You are paid by the people of Canada to represent the public interest. But because you volunteer your time to sit on one charity board, you’re excusing yourself from your job?”

Members of the charitable sector whom The Logic interviewed said Sabia’s conflict-of-interest screen was just one example of the problems besetting the consultations. Critics have said the process is giving too much weight to the voices of advocates for large foundations that they argue are hostile to government-mandated increases to the amount they must give away, and have criticized the advisory committee that Pearson co-chairs for failing to recommend a disbursement-quota increase.

“Significant gaps in data make it difficult to support a change in the disbursement-quota policy,” the committee’s submission reads. “In the absence of other policy reforms previously recommended by the [advisory committee], an increase would be ineffective in delivering increased support to vulnerable members of society.”

In an email to The Logic, Pearson said the committee serves “an advisory function, not an advocacy function,” and that it had provided its “consensus advice.” But declining to support an increase to the disbursement quota makes the committee an outlier even among charity- and foundation-advocacy groups.

Philanthropic Foundations Canada—which Pearson once headed and which has lobbied for foundations on tax issues—is recommending the disbursement quota be increased to five per cent of assets from the current rate of 3.5 per cent. Imagine Canada—whose CEO Bruce MacDonald is sector co-chair of the advisory committee alongside Pearson—initially declined to recommend a specific increase but more recently indicated it would support increasing the quota to “above five per cent.”

MacDonald did not respond to a request for comment about criticisms of the advisory committee, or answer a question about why the committee’s submission differs from Imagine Canada’s.

John Hallward, a retired entrepreneur and founder of the Increase the Grants campaign, which advocates for the government to raise the disbursement quota, pointed out that six out of 14 sector members of the advisory committee represent foundations, with three more working as lawyers.

“They’re not representative. They don’t speak for anybody other than themselves,” Hallward said. “I think their arguments are misinformed.”

The advisory committee is positioned to play a prominent role in shaping government policy on a substantial part of the economy. The non-profit sector was responsible for about 8.5 per cent of gross domestic product in 2017, employing 2.4 million people, according to Statistics Canada data.

Yonis Hassan, chief executive of the non-profit Justice Fund Toronto, which is calling for reforms to Canada’s philanthropic sector, said Sabia’s conflict-of-interest screen means the head of Canada’s finance department is absent from a major economic file, “a sector that represents billions and billions of dollars in GDP revenue.”

Hassan said the make-up of the advisory committee—and Sabia’s dual roles—reinforce a larger problem with the power dynamics of the philanthropic sector. He said representatives of frontline charities and non-profit organizations are reluctant to speak up in favour of increasing the disbursement quota out of fear they’ll alienate their donors, even though such a policy change could make a big difference in their ability to fund their work.

“It’s really reinforcing this donor-centric approach that prioritizes donors at the expense of communities,” he said. “Nobody in the charitable sector wants to bite the hand that feeds them.”