Navigating the Landscape of Charitable Grants

Written by Katłı̨̀ą (Catherine) Lafferty

It is no easy task to set up a charity, especially for organizations who want to make a difference but are not officially registered as a charity and are not seeking charitable status.

For a long time, legislation existed that prohibited charities funding non charities. The Government of Canada defines non charitable organizations as “non-qualified donees” – and unlike charities, these organizations are not able to issue charitable receipts. These non-qualified donees regularly require funding, support, and partnerships, and are often on the lookout for financial opportunities through collaborative efforts with other influential equitable networks.

The Government of Canada seems to have recognized the growing gap in services that has resulted directly from prohibiting qualified disbursements to grant funding to non-qualified donees and in 2022 out of Bill C-19 made it possible for charities to grant funds to “grantees” who are not necessarily registered charities, allowing for a more flexible approach around the common law rules of procedure when it comes to the fine line between a charity and a non-charity. However, since the slight change to the rules, there has been some lingering confusion around the accountability requirements coming out of the amendment to the Income Tax Act (ITA) , causing the Government of Canada to publish guiding principles on how charities can and should go about administering grants to grantees.

Among other relevant information such as defining accountability tools, the guide outlines how to go about ensuring due diligence in administering grants by breaking down low, medium, and high-risk factors including taking into consideration the type of structure of the grantee, the type of activity the grantee is conducting, whether the potential grantee is in a stable country or region, the amount requested (if over $50,000 it is considered of high risk value), and the grant duration(if short term it is considered low risk).

A charity must maintain control and accounting responsibilities at all times when granting money to grantees and if the charity is not able to keep adequate records,  they risk exposure to Canada Revenue Agency  compliance measures. Interestingly, a charity is able to expand their operational mandates to align with the vision and scope of the grantee and in fact the government strongly recommends that charities first amend their purpose or mission if they want to make a grant for a purpose that is not stated in its governing documents to meet compliance requirements under the ITA.

As I endeavor to help solve the current housing crisis, I was curious as to whether the new mechanisms for granting charitable grants to non-qualified donees could allow funding capital projects like long-term sustainable housing. While the guide does underline examples of charitable purposes that would be suitable for grants to grantees, including the relief of poverty, it is not clear as to whether the relief comes in the form of actual housing or home ownership opportunities that are separate from shelter or transitional housing. Regardless, this is one more way that the government is softening its stringent policies to allow for more resource sharing between organizations who may be categorized under different regimes and yet have similar visions.