What Can a Donor Do If a Charity Doesn’t Honour a Restricted Gift in Ontario?

TL;DR: Once a gift to a charity is complete, the donor cannot take it back or control how the charity runs the program. A restricted gift must be used for its stated purpose, and in Ontario the charity can change that purpose only with the Public Guardian and Trustee's consent under section 13 of the Charities Accounting Act or a court cy-près order. A dissatisfied donor can complain under section 6 of the Act, but a court will order an investigation only if it serves the public interest (Faas v. CAMH Foundation, 2019 ONCA 192).

You signed a donor agreement, made a major gift for a specific program, and now the program looks nothing like what you agreed to. This article is for Ontario donors and family foundations in that position. It is also for the charity staff who draft these agreements. It explains what the law lets a donor do, what it doesn't, and how both sides can avoid the dispute in the first place.

Key terms:

• Completed gift: a gift the donor has handed over in full. The property now belongs to the charity.
• Restricted gift: a gift the donor limited to a specific purpose, such as a scholarship or a named program.
• Donor agreement: the written document that sets out the gift's purpose and any reporting the charity promised.
• Public Guardian and Trustee (PGT): the Ontario office that protects the public's interest in charitable property.
• Cy-près: a court power to redirect a charitable gift to the closest possible purpose when the original one fails.

Who regulates how a charity uses donated money?

The provinces regulate charities. Section 92(7) of the Constitution Act, 1867 gives provinces power over charities. The Canada Revenue Agency (CRA) controls only tax status: registration, receipts, and annual T3010 returns.

In Ontario, the Charities Accounting Act gives the PGT power to supervise charitable property. Courts can also act when charitable property is misused. For a donor, this means the PGT and the courts are the right place to raise a misused gift, not CRA.

Does a gift stop being a gift if it comes with conditions?

No. A gift is a voluntary transfer of property for which the donor gets no significant benefit in return. A donor can still set conditions on how the gift is used, such as awarding a scholarship to the top student in a program.

Under the Income Tax Act, what matters is the donor's benefit, not the conditions on use. Subsection 248(30) lets a charity receipt a gift as long as the donor's advantage is no more than 80% of the gift's value. CRA explains these rules in Income Tax Folio S7-F1-C1. For a plain-language version, see our guide to split receipting.

Once accepted, a restricted gift binds the charity. It must use the gift for the stated purpose. This is why a charity cannot borrow from its restricted funds, even temporarily.

What options does a donor have?

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What happened in Faas v. CAMH?

The Faas Foundation gave $1 million to the Centre for Addiction and Mental Health and its foundation (CAMH) to build Well@Work, a workplace mental health program. The donor agreement required CAMH to give the donor an annual status report. The donor later disagreed with how CAMH developed the program and applied under section 6 for an order directing the PGT to investigate.

Justice Edward M. Morgan refused (2018 ONSC 3386). He found no grounds for an investigation and said it would be costly, would disrupt an important hospital, and would serve no identifiable public interest. The Court of Appeal dismissed the appeal on March 11, 2019 (2019 ONCA 192). It also held that the donor had no right to a detailed accounting of CAMH's program spending.

The lesson: a section 6 investigation needs evidence of real mismanagement that affects the public. A donor's disagreement with how a program was designed is not enough.

Can a court strike down a condition on a gift?

Yes, if the condition is contrary to public policy. In Canada Trust Co. v. Ontario (Human Rights Commission) (1990), the Ontario Court of Appeal struck racially and religiously restrictive conditions from a scholarship trust. The scholarship continued without them.

Most conditions raise no public policy issue. For those conditions, the court has no reason to step in on that basis.

Can a donor get the gift back?

Rarely. A completed gift belongs to the charity. A donor can recover it only if the gift's own terms provide for that. (We explain the charity's side of this in Can a charity return a donation?)

Donors who want this protection must build it into the agreement before they give. Expect careful legal and tax review, because a right to take the gift back can affect whether it qualifies as a gift at all.

How did the U.S. Princeton case turn out?

In July 2002, heirs of the A&P grocery fortune sued Princeton University. They claimed it had misused a 1961 gift meant to train students for government careers. The case settled in December 2008.

Princeton kept control of most of the endowment. The family's new foundation received less than 10% of its assets, and the family was reimbursed for its legal fees. The case shows that donor-intent litigation can be long and expensive and usually ends in a negotiated result. Canadian donors rarely sue on the same scale.

How can a charity change the purpose of a restricted gift?

A charity cannot simply redirect a restricted gift on its own. In Ontario, it has two routes:

• PGT consent under section 13 of the Charities Accounting Act, where the change is uncontested. The PGT publishes its procedures for a section 13 order.
• A court cy-près order, where the original purpose has become impossible or impractical.

A variation clause in the gift agreement can avoid both.

How should donors and charities write gift agreements?

A clear agreement prevents most disputes. Both sides should agree in writing on:

• the purpose of the gift, stated precisely
• what reports the charity will give and how often
• a variation clause saying who can change the purpose and when
• what happens if the purpose becomes impossible

Charities should also record restricted gifts accurately when they come in. Our donation recording and receipting policy is a starting point.

Frequently Asked Questions

Can I take back a donation if the charity doesn’t use it as promised?

Usually not. A completed gift belongs to the charity unless its terms provide for return.

Does attaching conditions to my gift affect my tax receipt?

Conditions on use do not stop a transfer from being a gift. Your receipt is affected by any advantage you receive, under ITA s. 248(30).

Who do I complain to if a charity misuses my restricted gift in Ontario?

Contact the Office of the Public Guardian and Trustee. You can also apply to court under section 6 of the Charities Accounting Act.

Will a court order an investigation into how my donation was spent?

Only if the investigation would serve the public interest. In Faas, the courts refused because the donor showed no public mischief.

Does a donor agreement give me the right to a full accounting?

Not automatically. In Faas, the Court of Appeal found the donor had no right to a detailed accounting of program spending.

Can a charity change what my gift is used for?

Only with PGT consent under section 13, a court cy-près order, or a variation clause in your agreement.