Let me start by painting a picture. It’s the year 2030, and the greatest concern facing Canada’s nonprofits and charities is how to creatively collaborate to build more sustainable communities and better serve them, from Coast to Coast to Coast. Collectively, they pursue this mission without worrying about access to resources to pay staff or rent or to maintain any other assets. Nonprofit executive directors across Canada, from Nunavut to Saskatchewan to British Columbia, are consumed by questions and ideas of how to build inclusive partnerships with communities, government, and other players to contribute to thriving societies. With multi-year funding for core operations, organizations have the space and time to innovate, advocate and contribute to systems change and transformations.
That’s a pretty positive picture, isn’t it?
Creative collaboration and innovation cannot exist without equitable funding in the sector. The reality is that the nonprofit sector (collectively referring to nonprofits, charities, and foundations) does not have a scarcity of resources. We know that a segment of this sector holds at least $100 billion in investment assets. This reality moved the sector in 2022 to advocate for the disbursement quota (DQ) of granting foundations to be increased from 3.5% to at least 5%. Additionally, changes in the Income Tax Act made it possible for foundations to grant to non-qualified donees (non-CRA registered social impact organizations such as nonprofits and grassroots organizations). The goal was to have more resources available to the rest of the sector and unlock a new stream of revenue for non-qualified donees (NQDs).
Two years later, there is no evidence to indicate that we’re headed in the direction of the intended collective goal. Without a system to track how much of the increased disbursement is going to nonprofits or how many BIPOC (Black, Indigenous and People of Colour) organizations have benefited from this policy shift, the sector is in the dark about who is benefiting from the labour that birthed these policy changes. Nonetheless, the funding stories from Black-led and focused registered charities have remained the same, before the DQ increase and after. In some cases, it has only gotten worse.
So, if the DQ increase and the new guidelines on granting to NQDs are not going to help us realize the 2030 picture I painted above, what does the sector need to do or where else must it turn to? Some might say it will need to come from more government funding or social investment, or even the creation of a new sector fund by the very foundations that are holding power and hoarding resources. I believe that, unless we get out of the current paradigm of thinking about how we approach funding, we’ll be perpetually stuck in a pattern in which we run and run but never arrive.
Nonprofits and charities address some of the most urgent issues in our societies today – from climate change to women’s rights to healthcare, and many more areas. Current funding models are reactive, addressing only the symptoms of a broken and ailing system. Charities are prioritized in the funding system because of a long-standing regime that made it complicated and unsuitable to fund NQDs. Changing the learned behaviours of foundations is going to take time and requires foundations to be truly intentional about making this change.
While we have reliable CRA data for charities, we don’t have the same for nonprofits, meaning we have generally relied on fragmented research and reports to understand the trends for nonprofit organizations. We can change this, with proper funding, if the philanthropic sector wants to account for the impact they are having on nonprofits, as well as to anticipate their needs and strengthen their capacities to serve communities. Change is going to require proper funding of both charities and nonprofits because all are necessary. The shortcut is to require nonprofits to become charities, but we know that not all nonprofits or grassroots organizations desire to do so, for varying and valid reasons.
Holding funds in investment accounts in perpetuity is creating an artificial scarcity in the sector. Furthermore, we don’t talk nearly enough about where these funds are invested. We need to normalize having more conversations so that we can call ourselves in. Millions of Canadian taxpayers’ dollars are invested in unethical and harmful industries locally and globally. What shifts could we see in our communities if some of that money and those assets were divested from these industries and invested in local communities and social enterprises? Would the investments grow at the same rate? Maybe not, but would it achieve the philanthropic good that foundations were created for? Absolutely, yes.
The idea of growing investments infinitely in perpetuity is an obsessive behaviour fuelled by capitalism. It has gripped large and small foundations, and it should not be a surprise if we see the same thing happening with everyday Canadians who are opening Donor Advised Funds (DAFs) at really high rates. The projected growth of DAFs is $10bn by 2026.[1] The system and culture of managing DAFs train donors to invest the money for as long as possible in the hope of granting it out to charities of their choice in the distant future, when supposedly they need it most, or passing it down through generations. Within this structure, which primarily drives the growth of DAFs through tax and estate planning strategies, as long as donors receive donation receipts immediately, the question of when the donation will reach a charity or nonprofit is not relevant.
The culture and principles of philanthropy in Canada are standing in the way of the change we need today. We have proven that, at least to an extent, philanthropy can be forced to change its ways through policy, although it does make one wonder whether force is the only way to drive this much-needed change. As the saying goes, you can take a donkey to the water, but you cannot force it to drink. The policies to increase the DQ and new guidelines to grant to NQDS have been delivered – now it’s up to the philanthropic sector to prove that it genuinely wants these changes by getting serious about shifting their funding practices.
[1] Bonham, Mark. 2021. The Canadian Donor Advised Market. https://www.researchgate.net/publication/354684204_The_Canadian_Donor_Advised_DAF_Market
Minnie Njeri Karanja (she/her/elle) has more than a decade’s experience working in the charitable and international development sector. She served on the Advisory Committee on the Charitable Sector from Oct. 2021 to Dec. 2024. Minnie is a woman of African descent and lives in the unceded traditional territories of the xʷməθkʷəy̓əm (Musqueam), Sḵwx̱wú7mesh (Squamish), and səlilwətaɬ (Tsleil-Waututh) Nations), otherwise known as Vancouver in British Columbia.
She has several roles in the sector as:
Connect with her on Linkedin: https://www.linkedin.com/in/minniekaranja
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