While the barriers to funding traditionally under-resourced organizations and communities can be systemic, these foundations share how their partnerships transform community organizations that are often left out of the conversation.
The Canada Revenue Agency’s guidance on how registered charities can make grants to non-qualified donees mentions “risk” 31 times. Strict audit requirements in English were preventing Northern community groups from accessing granting dollars. As actors within the philanthropic sector continue to strategize around community-centred and trust-based giving, policies that focus more on risk than trust can get in the way, philanthropic leaders say. Recently, Philanthropic Foundations Canada’s Together 25 Ensemble conference provided a space for foundation representatives to discuss how their teams were working to incorporate perspectives from Northern Indigenous communities into grantmaking and partnering with non-qualified donees (NQDs).
Working amidst the CRA ‘risk’
A significant barrier faced by foundations and charities comes from the CRA’s guidance “Registered Charities Making Grants to Non-Qualified Donees.” NQDs are organizations without charitable status, such as non-profits and grassroots groups, that nonetheless engage in charitable activities and make important contributions to Canadian society. The guidance was introduced after the Income Tax Act was amended in 2022 to create an additional pathway for charities to work with NQDs, including Canadian and international organizations. The guidance explains how a registered charity can work with an NQD as an intermediary by supporting activities that the NQD performs on the charity’s behalf, and now also provide grants to NQDs so long as they fulfill one of the charitable purposes of the charity, are used on charitable activities to achieve that purpose, and there is sufficient documentation to demonstrate that requirements have been fulfilled. The CRA’s additional focus on assessing the risks a charity might invite when choosing which organizations to fund is causing confusion.
The guidance “has taken the legislation and has imposed on it requirements that are not in the legislation,” says Terrance Carter, who practises charity and not-for-profit law and is the managing partner of Carters Professional Corporation.
I think there is a risk-averse approach that the government is taking.
Terrance Carter, Carters Professional Corporation
“There’s requirements for risk management, risk assessment, risk matrix that are not in the legislation at all,” Carter says. “I think there is a risk-averse approach that the government is taking that they don’t want charities to be making gifts over to questionable groups, or even terrorist groups.” While Carter says these could be legitimate concerns, especially for charities that work in conflict areas, he says the risk assessment that would apply in working in a limited high-risk international context should not apply to working with all NQDs based in Canada.
In an email statement, the CRA says that the Department of Finance is responsible for legislation related to registered charities and other qualified donees under the Income Tax Act, while the CRA is responsible for interpreting and administering provisions. The CRA has separate guidelines for charities working with intermediaries within Canada and outside of Canada, in addition to its guidance about granting to NQDs.
Janine Manning, the executive team lead of the Indigenous Peoples Resilience Fund (IPRF), says it’s “off-putting” to see risk mentioned so many times in the CRA’s guidelines. “I am sure that it is deterring philanthropic organizations from going down this road of changing their charitable objects because it assumingly comes with this additional risk.”
Risk is a subjective concept when it comes to funding.
Sara Krynitzki, Philanthropic Foundations Canada
Sara Krynitzki, director of public affairs and research at Philanthropic Foundations Canada, writes in an email that “risk is a subjective concept when it comes to funding.”
For the IPRF, supporting NQDs is the standard. As a fund that emerged during the COVID-19 pandemic, IPRF has supported NQDs “through an emergency, urgency lens,” Manning says. “That’s one of our values, to be nimble. When [the] community needs something, we should be able to support.”
While the CRA’s guidance considers new grantees or charitable programs with little experience working with funding partners as medium or high risk, foundations that trust that communities – regardless of their organizational structure – know how to address their needs may not be deterred. “Our core belief is that [the] community knows what [the] community needs, and that in itself is an expertise,” Manning says. According to her, it’s the funders’ and fundraisers’ role to “absorb any perception of risk through the Western philanthropic lens,” such as not focusing on the NQD’s experience, organizational structure, or financial requirements.
But not all foundations take this position. “A large part of the challenge is lack of awareness and understanding about the legitimacy and impact NQDs have on all issues facing our society and across all communities in Canada,” Krynitzki writes.
However, the IPRF does “steer away from deficit language like ‘risk.’” Manning says that IPRF doesn’t use terms like “at-risk” youth or “at-risk” communities because they are equity-deserving and they are not marginalized by choice. “We really try to focus on the outcomes of the project. We’re really trying to look at it more from a ‘What is the risk to community without this program?’”
For registered charities that want to grant charitable activities by groups without registered charity status, their charitable purposes may be adequate. For others, it means changing their charitable objects or purposes to be able to grant to NQDs. CRA regulations state that foundations must ensure that their charitable purposes align with the activities they want to engage in before granting to an NQD, but there is no assurance their funding decisions will be approved by the CRA’s audits. During a Together 25 Ensemble session called “Q&A with the Canada Revenue Agency and Department of Finance Canada,” some attendees said that their organizations were waiting several months to get responses to questions they had about changing their purposes to fund NQDs.
The CRA has a standard 120 calendar days to review and respond to inquiries after receiving requests and supporting documents from organizations seeking clarification about their charitable purposes or granting plans. “We understand that these timelines can create difficulties for some organizations; however, complex inquiries are a comprehensive process, which includes in-depth research and analysis of an organization’s mode of operation,” the CRA writes. “This process is a critical component of safeguarding the integrity of the charitable sector in Canada.”
“The irony is that philanthropic organizations and their boards are now experiencing barriers to applications, to changing their charitable objects,” Manning says. “I think we should be taking a lesson from how we work with grantees – what kind of barriers are we putting in their way?”
Manning compares the difficulties that foundation boards and leaders experience as they navigate the CRA regulations to how organizations feel when they are forced to work with funders whose work is not community-centric or based in trust. “I think philanthropic foundations are feeling the frustration of being an applicant and trying to get support on the phone and trying to get a straight answer,” she says. “I think we really need to step back and analyze the situation we’re in as a sector and compare that to the applicants and remember these lessons.”
I think philanthropic foundations are feeling the frustration of being an applicant and trying to get support on the phone and trying to get a straight answer.
Janine Manning, Indigenous Peoples Resilience Fund
But time may not be on foundations’ side. During the “Q&A with the Canada Revenue Agency and Department of Finance Canada” session, Maggie MacDonald, director of communications and governmental relations at the McConnell Foundation, pointed out that with a federal election on the horizon, organizations should consider making changes sooner than later. “If funding priorities change at the federal level and suddenly there’s a new need for non-profits in your community to address an issue that used to be covered that isn’t now – if those changes come up suddenly, and it’s a grassroots NQD that’s doing the most effective work to address it, you’ll be ready,” she says.
Imagine Canada’s recent polling shows that 75% of Canadians know that millions of Canadians rely on the services of charities and non-profits every day, with 81% believing these services are essential to Canadians’ well-being. MacDonald says that having additional tools in your toolbox and greater flexibility to work with non-qualified donees is necessary.
The McConnell Foundation, in partnership with Fondation Lucie et André Chagnon, Inspirit Foundation, and Laidlaw Foundation, published a tool kit explaining how to work with NQDs to encourage funders who want to support NQDs.
Northern Indigenous perspectives trickling south
Virginia Mearns, the vice chair of Nunavut’s Annauma Community Foundation, also notes that risk has been the focus for professionals within the philanthropic sector. “We’ve become very accustomed to staying away from risk. We’ve become very accustomed to being comfortable in being stringent,” she says.
“Contemplating your own willingness to be vulnerable and to enable yourself to trust – I think that’s a really big component of what we want to maintain between our organization and our community. That extends to the relationships that we want to build going forward,” Mearns says. “Being able to see what comes out of that exercise of being vulnerable, being trusting, and seeing how incredible that can be, not just for yourself, but ultimately, what it means for our community, for our community members, for Inuit, that knowledge that somewhere out there – someone’s trusting them to bring forward their own solutions and opportunities for their community.”
Contemplating your own willingness to be vulnerable and to enable yourself to trust – that’s a really big component of what we want to maintain between our organization and our community.
Virginia Mearns, Annauma Community Foundation
“Annauma” is taken from the Inuktitut word “Annaumakkaijiit,” which means “helping people stay ahead.” As the territory’s only community foundation, Annauma acts as a bridge between organizations that are in the early stages of their work and established organizations. The grants from Annauma’s donors are determined through consensus decision-making among the community organizations, based on who is in need. For Annauma, it is just as important for the donors providing money to embrace the way the foundation is giving money to the community organizations.
Udlu Hanson, a founding member of Annauma, says that while they don’t want to set barriers for their partners, they want to ensure that their giving reflects their Inuit culture. “We want to reflect what sharing looks like in the North,” she says.
Hanson says that Annauma doesn’t have donor-advised funds or funds named after people because they are leaders or because of how much money they provided. “We don’t want that power dynamic,” she says. She says Annauma wants to provide a space for community members to access funding or support for their priorities and needs, according to where donors wanted to contribute.
We want to reflect what sharing looks like in the North.
Udlu Hanson, Annauma
“We wanted to ensure that if we were successful in receiving gifts from donors, or the prospective conversations we were going to have with donors, that there was a bit of an immediacy in terms of tangible outcomes,” Mearns says. “We were very purposeful in ensuring that we had some sort of mechanism that we based our granting off of, and that’s where the consensus-based granting was an approach that we felt was very appropriate, but also much more of an organic community-rooted, Inuktitut approach in making some key determinations and decisions at the community level about where the need is, where the solutions are, and how to ensure that the opportunities are there and supported.”
Annauma uses 40% of the funding it receives to fund its community partners, while 40% is set aside for long-term investment to be used within 10 years, and the remaining 20% is devoted to helping the philanthropic sector grow in Nunavut. “Our sector is very, very young, and it needs a lot of help and a lot of capacity-building,” Hanson says.
Nunavut’s non-profit sector employs 1,000 people out of its population of 40,000 – and 68% of them are women. Mearns says that a lack of fiscal support and access to services to help community organizations demonstrate their impact through reporting have been barriers to their success. “Meeting those types of reporting requirements has been, at times, the death of an initiative,” she says.
While conversations about decolonizing philanthropy are growing in the sector across Canada, foundations’ and charities’ work can go beyond mirroring Indigenous practices in their programs. It can be as simple as changing the way organizations interact and collaborate with Indigenous groups, or the expectation to collaborate on the funders’ terms.
Even being forced to fulfill auditing requirements in English has been a reason why their community organizations did not get funds for initiatives they applied for in the past. Mearns says that creating the space for participants to share obstacles and solutions with other people and organizations that are specific to Nunavut enables them to continue to do their work.
In addition to identifying and choosing Annauma’s priority areas when the community foundation first started (arts and culture, children and youth, education and learning, community well-being and health), the consensus groups also determine how much funding everyone will receive for their initiative when they reconvene to plan, report, collaborate over challenges, and co-create solutions.
“Recognizing that this approach is maybe a relatively new approach in this world of philanthropy and granting, we also recognize that we would have to hold firm our ground and really trust the process and encourage those that were wanting to partner with us to trust the process,” Mearns says. “We’re excited to continue that practice and hopefully gain and maintain the trust of our community.”
Hanson says she knows that many Canadians want to help communities in the North, but the limited organizations make it difficult to do so. Despite this, she says people have found “strange” ways to share, including the Northern Birthday Box Project, which connects Canadians who want to send gifts to children who may not otherwise receive birthday presents. (The project is currently being affected by the postal strike.)
Hanson says that Annauma is in the process of creating a sector-development strategy and that they want to learn from their community partners to coordinate what they need.
I really felt the frustration at the [PFC] conference from folks who have the desire to change their charitable objects to support non-qualified donees.
Janine Manning
Despite the hurdles that emerging community organizations and other NQDs face, foundations and funding partners are exploring different ways to redistribute money to those who know the communities they are trying to serve best. “I really felt the frustration at the [PFC] conference from folks who have the desire to change their charitable objects to support non-qualified donees,” Manning says. “I also heard people just saying they’re not ready to go there, or they don’t have the capacity to go there.”
But bureautic barriers don’t have to be the end of the line. Krynitzki points out that supporting advocacy efforts on issues that communities that the foundations are trying to serve care about is where “muscle can be developed and where foundations can show up as allies.”
As Manning says, “I think everyone’s got to move at their own speed, but so long as everyone’s moving, the sector will change.”
Editor’s note: The original version of this story misinterpreted Imagine Canada’s polling data. A correction was made December 11, 2024.
