CG-032, Registered charities making grants to non-qualified donees (draft) 30 November 2022

Donors can indicate their preferences, but charity must retain the final say

73. To avoid any concerns regarding conditional gifts, a charity should clearly communicate the following to its donors:

• Donors can indicate their program preference for how a charity will apply their donation, but ultimate authority on the use of resources must rest with the charity.
• If the charity does not use the donation the way the donors prefer, the charity will not return the donation to the donors.

74. For example, this message should be included on the giving page of the charity’s website and in any of its fundraising communications.

75. Provided a charity ensures it retains authority on the use of its resources, it will not be considered to be engaged in directed giving.

76. This provision is also intended to prevent a charity from acting as a conduit, which can be implicitly or expressly conditional when a donor makes a gift. For example, it will prevent situations where a charity solely exists as a fundraising arm in Canada of an affiliate organization in another country. In these circumstances, the affiliate would make all decisions around the use of resources, and the Canadian charity would not be in a position to act independently.

Public benefit test for charitable status

8. To be considered charitable, a charity must meet the “public benefit” test. This means that a charity must deliver a measurable and socially useful benefit to the public or a sufficient section of the public. It also means that a charity must not deliver a more than incidental private benefit. A private benefit is incidental when it is necessary, reasonable, and proportionate to the resulting public benefit.

9. Public benefit requirements apply when a charity makes a grant.

10. For more information about public benefit, see Policy statement CPS-024, Guidelines for registering a charity: Meeting the public benefit test.

Choice between maintaining direction and control over an intermediary, or making a grant that is a qualifying disbursement

1. … [R]egistered charities that wanted to work through a non-qualified donee [formerly] could only do this in one way. Charities had to show that the activities were their own, demonstrated by maintaining ongoing direction and control over the use of their resources.

2. … With [the enactment of the qualifying disbursement rules], charities can support the activities of non-qualified donees (grantees), provided charities can show that they meet accountability requirements set out below. …

12. … [A] charity continues to be able to carry on activities using an “intermediary”, provided the charity exercises “direction and control”. …

14. When a charity intends to work with another organization, it should consider at the outset whether it will do this through a grant to a grantee, a gift to a qualified donee, or by carrying on its own activities through an intermediary. This decision rests with the charity.

Tools for demonstrating compliance with “qualifying disbursement” rule

19. The accountability tools include:

• a due diligence review of the grantee, which does not necessarily apply to existing relationships
• a description of grant activity, including its intended outcome and charitable purpose
• a written agreement, including minimum standards, milestones, outcomes, and budgets
• monitoring and reporting, including final reports, and interim reports if suitable
• a transfer schedule, for longer-term or higher-risk grants
• separately tracked funds, such as a separate ledger

Adaptions where pooled grants made

82. A charity may wish to “pool” its resources with multiple organizations (other grantors) when it makes a grant. The CRA recognizes that joint initiatives such as pooled grants operate differently than one-on-one granting arrangements. While the CRA prefers that a written agreement be in place with all parties when charities engage in pooled grants, we recognize this may not always be feasible or practical. With pooled grants, the CRA’s requirements focus on the charity implementing the following accountability tools: …