Charity watchdog tells MPs its research raised red flags over WE

A House of Commons committee probing the government's ill-fated deal with WE Charity dove deeper into the organization itself with partisan swords being drawn around a watchdog group that testified on Thursday.

Liberals question findings while opposition MPs say they prove lack of due diligence by government

WE Charity co-founders Marc Kielburger, screen left, and Craig Kielburger, screen right, appear as witnesses via videoconference during a House of Commons finance committee in Ottawa on July 28. The committee is looking into government spending, and WE's involvement in the Canada Student Service Grant. (Sean Kilpatrick/The Canadian Press)

A House of Commons committee examining the government's ill-fated deal with WE Charity probed deeper into the organization itself Thursday, but with partisan clashes over witnesses from a charity watchdog.

Charity Intelligence Canada has been cited multiple times during finance committee hearings about the WE affair, but had yet to testify in the committee's probe of the Canada Student Service Grant program.

Greg Thomson, director of research at Charity Intelligence, told MPs that it dropped its rating of WE Charity after it looked closer at whether the organization was making the difference it intended.

Thomson said his organization's research raised a number of red flags, including that WE Charity has breached a financial covenant on millions of dollars in bank debt. He also raised questions about the fact that Craig and Marc Kielburger are listed as co-founders of the organization — not directors — which allows them to avoid fiduciary responsibility and disclosure requirements.

"WE Charity is an outlier. Normal metrics for assessing charities do not adequately reflect its suitability for donors," said Thomson. "It is not similar to the vast majority of Canadian charities."

Early last month, WE backed out of running the student volunteer program over a controversy around its ties to Prime Minister Justin Trudeau and members of his family, who have received speaking fees from the group totalling more than $500,000.

The controversy around the program has raised questions about WE's structure and accounting mechanisms, its use of high-profile corporate sponsors and celebrity endorsements and its workplace culture.

Partisanship takes over committee

The managing director of Charity Intelligence, which is a small charity itself, said she found issues over two days of reviewing WE's financial data that prompted her to call its management with questions.

"I would really hope that if someone were making an investment of this size, that the government would have felt confident to ask questions and pick up the phone and seek clarification on anything that they were unclear about," Kate Bahen said.

She spoke off the top of the meeting about the need to help cash-strapped charities seeing a decline in giving due to the pandemic, including raising the amount of money foundations have to disperse to charitable causes.

She then said her group had no partisan affiliation and outlined her disdain for partisanship itself — just before it took over the committee.

Kate Behan of Charity Intelligence told MPs she thinks a 'tier one' international auditing firm should audit WE Charity. (Submitted by Charity Intelligence)

Liberal MPs questioned her group's findings, and wondered why Charity Intelligence was even at the committee if it couldn't offer insight into the timeline of events surrounding WE and the student volunteer program.

"I have nothing against you or the organization," Liberal Peter Fragiskatos told Bahen. "It's hard for me to understand how an organization of four people can judge 250 organizations on a range of criteria, delve in and offer an enormous set of judgments and for us to look at that as MPs is a challenge."

Opposition MPs argued the group's conclusions, made from poring over publicly posted reports, raise new questions about how the Trudeau government decided to hand WE Charity the reins of the student volunteer program.

 "Absolutely no due diligence has been identified in terms of all of the myriad problems, things that should have been a red flag and things that for any other charity in the country would have meant that there was absolutely no possibility of them being considered for funding," said New Democrat Peter Julian.

The agreement with WE was to pay one of its foundations up to $43.5 million to administer a grant program designed to encourage students to sign up for volunteer work related to the COVID-19 pandemic.

Prime Minister Justin Trudeau appears via videoconference before the finance committee on July 30. (Sean Kilpatrick/The Canadian Press)

Ottawa budgeted $912 million for the program and Trudeau billed it that way, but the deal with WE was for $543 million. WE itself expected it would cost perhaps half that, the Kielburgers testified, emphasizing they only expected to dispense the money and have their administration costs covered.

In a statement issued after the meeting, WE said its multi-entity structure is partly because of its operations in numerous countries, partly because of "a small number of sub-entities to fulfil donor wishes or operational ease for allocating funds," and partly to manage liability risks.

WE had a foundation with no other activities sign the agreement with the government "to fulfill the government of Canada's request to assume the liability for up to 40,000 youth participants and not-for-profits during a global health pandemic," the statement said.

Conservative MP Greg McLean wrote National Revenue Minister Diane Lebouthillier on Wednesday, requesting that she commission an audit of the consolidated financial statements of WE Charity and all its many connected entities, including the formally separate WE Charity Foundation that was selected to administer the student grant program.

"Surely, as minister of national revenue, you and your officials must be curious as to the fluidity of expenses allocated between various WE entities," he wrote, suggesting that expenses of tax-exempt charitable events may have been improperly allocated to taxable WE entities.

Behan said an audit would give donors more confidence that their money is being put to good use.

"With so many allegations swirling around about the numbers, I believe that donors and the corporate sponsors would get a shot of confidence if an international tier one firm, auditing, came in to do the audit on these," said Behan.

Liberal ties to WE organization

A controversy has simmered since late June over the sole-sourced nature of the deal and the charity's ties to Trudeau and his family.

Trudeau has been a featured speaker at six WE Day events since becoming prime minister, and his wife hosts a podcast for the group, for which they have not been paid. However, Trudeau's mother and brother have been paid almost $300,000 for speaking at numerous WE event over the years and reimbursed for some $200,000 in expenses.

Finance Minister Bill Morneau has also been embroiled in the affair for his familial ties to the group, and his acknowledgement last month that he repaid WE about $41,000 in sponsored travel for him and his family to view the charity's humanitarian projects in Ecuador and Kenya in 2017.

Both Trudeau and Morneau have apologized for not recusing themselves from the cabinet decision to have WE Charity administer the student grants.

Opposition parties are hoping the imminent release of government documents will shed some new light on how the deal was awarded. The government has until Saturday to table with the committee all memos, briefing notes, correspondence and other documents related to the now-cancelled agreement.

"There's been so many contradictions through this that I think it's fair to say that the documents, hopefully, will start giving us some answers," Julian said in an interview Wednesday.

"I think in terms of the next witnesses to get answers, the documents will help point us in the right direction."

The committee is also looking to hear from WE Charity's chief financial officer, Victor Li, and Employment Minister Carla Qualtrough.

Another motion adopted by the committee seeks witnesses with knowledge of WE's operations and offers parliamentary privilege as a shield against potential lawsuits.

With files from CBC News