Can a Canadian Charity Donate Or Give Funds to a Non-Registered Charity?

Hey, everyone, and welcome to another deep dive with us. Today, we're going kind of behind the scenes Mhmm. Into the world of Canadian charities and specifically how they decide

Right.

You know, where to give grants.

Yeah.

And, you know, when you hear due diligence, it doesn't maybe sound like the most exciting topic.

But They're dry.

Yeah. It can be. It can be. But stick with us Yeah. Because it's actually really fascinating It is.

To kinda see how this whole process works.

Yeah. It's like a backstage pass Yeah. With the world of philanthropy.

Exactly. Yeah. So our focus today is on the model that the CRA Yeah. Recommends for due diligence.

The Canada Revenue Agency, for anyone who's not

sure. Acronym. Yeah.

Yeah. And we're gonna be drawing mainly from this really interesting article from BIG Charity Law Group.

Okay.

And they're a Canadian legal firm

Yeah.

That specializes in charity law, so they really know their stuff.

They do.

And they kind of break it down in a really interesting way.

Mhmm.

Yeah. They do a good job of Yeah. Making it accessible Yeah. In people who maybe aren't learning.

Yeah. Not immersed in this world all the time.

Exactly.

Exactly. So they make the point that this model is really there to help charities be more strategic and more responsible Uh-huh. With their funding.

Yeah. And it's not just about Especially with grants. Yeah. It's not just about legality. Yeah.

Right? It's about Yeah. Ensuring that charitable dollars Yes. Are actually having the biggest impact that they can.

So let's sort of walk through this a little bit.

Okay.

So imagine you're a charity

Yeah.

And you have a particular mission. Yeah. Right? Like, maybe you're dedicated to environmental conservation.

Okay.

The first thing that this article really emphasizes is alignment with charitable purpose.

Alignment with charitable purpose. Yes.

So, you know, that might sound pretty straightforward. But

Yeah. You'd be surprised how often organizations sort of lose sight of this fundamental principle.

I mean, imagine that same charity Yeah. Giving a grant to, like, a theater group.

Right. Yeah.

You know, both of those are very worthwhile things.

Totally. But if the connection isn't really there The

connection isn't there.

Yeah.

So the grant really needs to directly support

Yes. It has the

core goals of that charity.

Support the charitable purpose Exactly. Of your organization.

So once you've kind of gone through that process

Okay.

The next step is something called risk assessment.

Risk assessment.

Now this sounds a little bit more Yeah. It's getting detective work, wouldn't you say?

It's a little more exciting.

Yeah.

Yeah. You're starting to investigate a little bit.

Exactly. So you need to evaluate all the potential before you just

Before you hand out any money.

Hand over the money.

Exactly.

And they talk about these risks as being low, medium, or high Yeah. Depending on a variety of factors. You have the sliding scale. So it's like a sliding scale. Yes.

Definitely. So a of factors.

It's a sliding scale.

So it's like a sliding scale.

Yes. Definitely.

So a high risk grant is gonna require a lot more

Yeah. A lot more scrutiny.

The low risk grant.

A lot more checks and balances.

So, like, what kinds of things would would bump a grant up into that high risk category?

So, for example, you know, if you're a charity that's considering

Right.

Funding a project in a region

Mhmm.

With, you know, political instability

Alright.

That's automatically gonna raise some red flags

Right.

Because there's a higher chance of funds being misused Right. Or the project may be even failing

Yeah.

Due to external factors that are beyond your control. Yep.

Makes a lot of sense.

Yeah.

So you really have to ask a lot of

So you gotta do your research.

Tough questions before you sort of proceed. Absolutely. Even if everything checks

out Okay.

There's still the paperwork. Right?

Yes. The dreaded documentation. Yeah. Dreaded documentation.

It it might not be the most exciting part. Right. But it's incredibly important.

Yeah. And they really emphasize how

Thorough documentation is so crucial for Yeah. Transparency and accountability.

To protect both the charity

Yeah.

And the grantee.

Now it's not just about filing things away No.

No. No. It's not just about

And forgetting about it.

Shoving it in a drawer somewhere.

Yeah. This documentation is what helps charities actually track

Yes.

The impact.

It's about measuring

impact. Their grants.

Yeah. Did the project actually achieve its goals?

Yeah. Did it actually do?

Yeah. And if not, why not?

What it set out to do. Exactly. Yeah. And if it didn't, why not?

Yes. Exactly.

Like a really important feedback loop.

It is a feedback loop for more effective philanthropy. Exactly. Yeah.

So it's not just boring paperwork?

No. It's much more than that.

It's, like, really useful information.

It is.

Now one of the things I thought was really interesting in here

Yeah.

Was the benefits of due diligence section. Okay. So it's

like

what's in it for everybody? Yeah. What's

in it for me?

Yeah. Right. So for the charity, it basically provides, like, a safety net.

It does. It does.

So if for whatever reason Yeah. The grantee doesn't fulfill their obligations

Right.

Due diligence is there.

Yeah. The due diligence gives you recourse.

Exactly.

It gives you a course of action.

And it minimizes financial risk.

Yeah. It minimizes risk.

And then it increases the likelihood.

And it increases the likelihood of successful outcomes.

Of successful outcomes. And even the CRA recognizes that there's a cost

Yeah.

Associated with managing grants

It's not free to

to do all of this.

Yeah. Expenses are essential for Essential. Effective administration. Yes. So it's not just about, like, you know, being cheap and cutting corners.

It's about investing

It's about

in due diligence

due diligence.

As an investment in the success of the charitable sector as a whole.

So we've talked about how this model Yeah. Benefits charities. Mhmm. But what about the bigger picture?

No. Like, how does all of this due diligence actually impact

Right.

The causes that these charities are supporting?

Well, that's where it gets really interesting. Right? Yeah. Because by ensuring that grants are given strategically

Uh-huh.

That they're managed responsibly Right. That they're tracked thoroughly

Yeah.

You're essentially maximizing Yeah. The positive impact Yeah. Of those charitable dollars.

So whether it's, you know, providing educational opportunities.

That's due diligence.

Yeah. Whatever cause you're passionate about

I do.

Due diligence helps to make sure that money Just

to make sure.

Is making a real difference.

That the money is actually making a difference. Yeah. So it's not just about, like, ticking boxes.

No. It's not a bureaucratic exercise.

It's about creating a system where giving is as effective as possible.

Where charitable giving is as effective as possible.

Exactly. And it's about making sure that that money is being used and that the money is being used

to really help people in community.

To help people in communities in the best way possible.

In the best way possible. Now I don't wanna give you the impression that this CRA model is, like, the only thing Right. That matters in charitable grant making.

It's not the be all and end all.

Yeah. There are probably lots of other

There are definitely other factors.

That influence a charity decisions beyond this model.

Absolutely. Charities also have to consider their own Yeah. Internal policies, you know, their risk appetite

Right.

Their capacity to manage grants effectively.

So each charity will have

So it's not a one size fits all solution.

Its own unique set of circumstances.

Each charity has its own unique set of circumstances that influence their decision making.

Yeah. So it's like a balancing act.

It is a balancing act.

Weighing all these different factors.

Weighing all these different factors. Does

it come as yeah.

Best decision.

To make the most informed decision.

So before we get too deep into, like, those internal considerations

Okay.

I wanna shift gears a little bit

Okay.

And talk about a particular type of grantee Okay. That requires a slightly different approach. Alright. And these are the nonqualified Dunneys.

Nonqualified Dunneys.

And they're specifically mentioned in this article. Yeah. And I think it's worth

Yeah.

Exploring.

It's worth unpacking that a little bit.

It's a little bit more.

Yeah. For sure.

But before we do that Okay. Let's just take a quick pause

Let's let this all sink in.

To let all this information sink in.

So nonqualified dummies.

Okay. Yeah. Ready to dive into that.

Let's dive in. I

have to admit, though, like, when I hear the term Okay. Nonqualified dunny, it sounds kinda

It sounds a little scary.

Intimidating. Yeah.

Yeah.

So can you break that down for me? Absolutely. Or for our listeners.

In Canada Yeah. A qualified Dunny is basically another registered charity.

So a nonqualified Dunny is any organization or individual Right. That isn't officially registered as a charity with the CRA.

Okay.

So this could include international organizations Okay. Community groups

Mhmm.

Or even individuals carrying out charitable activities.

So why would a charity even consider giving

money? That's a great question

Yeah.

To an organization that's not

Somebody who's not

a registered chair.

A registered charity.

Right. Wouldn't it be easier and maybe even safer?

Yeah. Wouldn't it just be simpler

to Just stick with those who are already registered?

Two with the ones that are already.

Well, it's a great question.

Yeah.

And it gets to the heart of why due diligence is so important. K. Sometimes the most effective way for a charity Yeah. To achieve its mission is by partnering

Okay.

With groups that are working directly on the ground Right. Even if they don't have Yeah. That official charitable status.

Okay.

So imagine a Canadian charity Yeah. That's focused on providing clean water in a developing country.

Right.

Partnering with a local community group

Right.

That already has deep roots in the region

Makes sense.

Might be the most effective way to make a difference.

Yeah. That makes a lot of sense.

Even if that group isn't a registered charity in Canada.

So it's not about, like, ticking boxes. It's about

It's about finding the best partner.

Finding the best partner.

Partners to get the work done.

Yeah.

But I imagine giving money to nonqualified dunnies

Right.

Probably adds another layer of complexity It does. Whole due diligence process.

Absolutely. Right. The CRA is very clear

Yeah.

That charities need to take extra precautions

k.

When granting funds to nonqualified Denny's.

So that alignment with charitable purpose

Right. That we

talked about?

That becomes even more crucial here.

Yeah. That becomes even more important here.

Because the charity needs to demonstrate Right. A clear link between the grant Okay. And its own charitable objectives. So it's almost like the charity is vouching Yes. For the nonqualified done.

In a way, they are.

Yeah. Yeah. Saying, we trust this organization

We trust this organization to

use these funds responsible.

To use these funds responsible.

To further our mission.

To further our mission.

That's a big responsibility.

It is a big responsibility.

So walk me through it a little bit.

Yeah.

Like, what are some specific things that charities need to look for Yeah. When they're assessing risk

Okay.

With a nonqualified done?

First and foremost

Yeah.

They need to understand

Okay.

A nonqualified done's track record.

Okay.

So have they successfully managed

Right.

Similar projects in the past? Okay. Do they have solid financial practices in place?

Right.

Are they transparent and accountable in their operations?

So there's a lot of research.

It's a lot of research.

To go into this.

But remember, the charity is ultimately accountable to the CRA for ensuring these funds are used for charitable purposes Yeah. Regardless of who receives them.

Regardless of who receives them.

So they need to be comfortable with the level of control

Yeah.

They'll have over how the funds are used.

So it's not just about scrutinizing

Right.

The nonqualified done.

It's not just about that. Yeah. To dust it. Also about building

Building a relation.

A strong collaborative relationship.

Yeah. Based on

Based on shared values and goals.

Shared values and goals. Exactly. And I bet documentation even more stringent.

Is even more stringent in these cases. Yes. Absolutely.

Right.

Remember how we talked about documentation

Yeah.

Being important for transparency and accountability? Yeah. Well, that's amplified when working with non qualified dunnies. Right. The charity needs to keep meticulous records

Yeah.

Of everything.

Of everything.

The grant agreement

Yeah.

The due diligence process Yeah. The financial reports. Yeah. All communication.

So it's like creating this The paper trail. Paper trail.

To demonstrate Yeah. To prove that they've done their homework

You've done your due diligence.

And taken all the necessary precautions.

Now we've talked a lot about the challenges Yeah. And the potential risks, but let's not forget about the

But let's not forget about the potential.

Yeah. Incredible potential.

Very incredible potential of support

A nonqualified dunnies.

Nonqualified dunnies.

What are some of the benefits that come with these kinds of partnerships?

As I mentioned earlier k. Nonqualified dunnies are often working

Yeah.

Directly on the front lines

Right.

Of social change.

Okay.

They might have deep roots in their communities

Mhmm.

A unique understanding of local needs

Yeah.

And the agility to respond quickly Right. To emerging challenges.

So by partnering with these groups

So by partnering with them

charities can tap into

charities can tap into

like a wealth of knowledge and experience.

Wealth of knowledge, experience, and passion

Them passion

that they might not find elsewhere.

Yeah. That they wouldn't find elsewhere.

It's about leveraging the strengths of both parties

Yeah. It's such a to create

a more impactful outcome.

These grassroots organizations to do.

They're providing not just financial support

People more.

But also access to resources Yeah. Networks, and expertise.

It's a win win for everybody.

It is a win win.

So even though it comes with added responsibilities

It does.

The potential rewards seem

huge. The potential rewards are significant.

Okay. So the article we've been talking about really focuses on, like, the CRA's perspective

Right.

And the legal requirements for charities. Mhmm. What about the nonqualified Dunneys themselves?

That's a fantastic point.

Like, what should they know?

And it's something that's often overlooked. Yeah. Nonqualified Dunneys have a responsibility

Yeah.

To understand the expectations of the charities they're partnering with.

Okay.

They need to be transparent about their operations

Alright.

Accountable for how they use the funds Mhmm. And proactive in communicating with the charity Yeah. Throughout the grant cycle.

So it's really a two way street.

It's a two way street.

Open and honest communication.

Open and honest communication is essential for creating successful partnerships.

So to sum it up

Yeah.

Granting funds to nonqualified dunnies Yes. Requires a more nuanced approach.

A more nuanced approach to due diligence.

Due diligence.

But the potential for impact The potential is worthwhile endeavor.

For impact is huge.

It is.

So it's about looking beyond the labels.

It's about looking beyond the labels.

And finding the right partners.

And finding the right partners.

Make change happen.

To create meaningful change.

This has been really interesting.

Yeah. This has been a good conversation.

I feel like I'm starting to see

It's a fascinating world, isn't it?

The whole grant making process in a new light.

Full of challenges and opportunities.

Yeah. Definitely. Yeah. But before we wrap up, I wanna go back to something you mentioned earlier.

Right.

You said that due diligence

Yeah.

Is about maximizing the impact Yes. Of charitable dollars.

It is about maximizing impact.

And it got me thinking

Yeah.

About the potential ripple effects of all of this. Yeah. So if charities become more strategic

Bring it. They're more thoughtful. Then they're grant making. And And if nonqualified dunnies are empowered qualified dunnies. Are empowered to do even more.

Yeah.

I mean, the positive outcomes.

The positive outcomes could be transformative.

Could be really amazing.

Yes. Right.

Absolutely.

It's exciting to think about.

It is exciting to think about.

We've been focusing specifically on the Canadian context today.

Right.

But I imagine these principles

But these principles.

Of due diligence and responsible grant making are relevant globally.

Irrelevant, like, all over the world.

Absolutely.

I mean yeah. Like, the specific rules might be different in different countries The regulations. Might differ. Yeah. But the core principles remain the same.

Yeah. The core principles are the same.

Transparency, accountability Everywhere. Measuring impact.

Yeah. Those are, like, universal

These are universal concepts.

In this world.

In the world of philanthropy.

So it's not just a Canadian thing. It's like No.

It's a global

A global conversation.

We're all kind of working towards

We're all part of this movement

This movement.

More effective

And ethical philanthropy. And ethical philanthropy. And that movement needs all of us.

Yeah. It does.

It needs charities. Yeah. It needs nonqualified dunnies. It needs It needs donors.

The donors.

It needs the public.

That's the public. Everybody Should be

in them. Fall. We need to have these conversations.

Yeah. We need to We

need to share what we've learned.

Talk about this stuff.

And we need to always be looking for ways to improve.

Well, I think this deep dive has

Yeah.

Given our listeners a lot to think about.

I think we've challenged some assumptions.

Yeah. Definitely challenged some assumptions.

About charitable giving.

And shown how important it is.

And shown the potential.

Yeah.

Supporting nonqualified Denny's.

So before we go Yes? I just wanna encourage everyone listening

Please do.

To check out the

Check out the resources.

Resources that we mentioned I we mentioned From BIG Cherry Law Group.

From BIG. We'll be

sure to include

We'll include links.

Links in the show notes. And just remember

Remember. The world of philanthropy

This whole world of philanthropy is constantly changing.

There's always something new to learn.

And there's always more to learn.

That's the beauty of it.

So huge thanks to you for joining us Thank

you for having me.

On this journey

It's been a pleasure.

Into the world of grant making and due diligence.

It has.

I hope you've enjoyed it.

Yeah. Thanks for listening, everybody.

And until next time, stay curious.

Stay curious.

And keep exploring.