A toolkit for working with non-qualified donees 

Considering the importance of the work being done by non-qualified donees (NQDs), a group of funders — including ​Fondation Lucie et André Chagnon, Inspirit, Laidlaw Foundation and the McConnell Foundation — ​have come together to create a toolkit to help and encourage more funders to support NQDs. As a collective, our experience lies primarily in partnering with non-profit grantees; as a result, they are the focus of this toolkit.  

Many organizations doing impactful work in communities are non-profits without charitable status. These organizations are defined by the Canadian Revenue Agency (CRA) as “non-qualified donees,” an umbrella term that includes a broad range of non-charitable organizations, such as non-profits, grassroots organizations, international charities, and other groups. Following the 2022 federal budget, in 2023 the CRA issued new guidance to make it easier for funders to support NQDs.  

In addition to carrying out their own charitable activities and making gifts to qualified donees, a charity can now make qualifying disbursements to NQDs if they meet the following criteria:  

• The disbursement furthers the charitable purpose of the charity.  
• The charity ensures that the disbursement is exclusively applied to charitable activities in furtherance to its charitable purpose.  
• The charity maintains documentation sufficient to demonstrate:  

• 1. The purpose for which the disbursement is made.  
  2. That the disbursement is exclusively applied by the NQD to charitable activities in furtherance of a charitable purpose of the charity  

A qualifying disbursement may include financial resources, as well as physical resources such as staff, intellectual property and real property.  

Why work with non-qualified donees

We encourage funders to consider the following questions when deciding whether to support NQDs: 

• If you were choosing who to fund based on an organization’s ability to effectively deliver on your mission, is charitable status an important consideration?  

• If not, is the requirement of charitable status an arbitrary limitation that is preventing you from supporting people and organizations who can effectively advance your mission? 

NQDs can play an important role in achieving charitable impact. Partnerships between charities and NQDs can offer significant means and scale for impact. Further, when partnering with organizations internationally, it is nearly impossible to carry out charitable work through qualified donees alone.  

With the CRA disbursement quota set at 5%, it is estimated that an additional $200 million will flow to the charitable and non-profit sector.1 Research indicates that initiatives serving and led by equity–deserving groups, including Indigenous-led and Black-led organizations, tend to receive fewer charitable dollars.2 Many of these groups are also NQDs. If funders increase disbursement without diversifying grantees, inequities within the sector will only be reinforced.  

Addressing risk

In the past, funders may have been reluctant to work with NQDs out of a concern for greater administrative hurdles and risks. But funding NQDs does not need to involve significant extra work.   

Under new CRA guidance, organizations may now assess NQDs using the same rigorous processes and due diligence tools they have in place for qualified donees. This option exists in addition to previous processes, including the more restrictive direction and control.    

Funders may also be concerned that they are assuming risk for the actions of a grantee. However, under new CRA rules, funders that follow an existing due diligence process can discharge their obligation and avoid assuming additional risk, depending on the specifics of the situation. 

Working under new CRA guidance

Updated CRA guidance does not represent a checklist of rules for funders. Rather, it involves a holistic determination of what makes sense on a case-by-case basis given the funding amount and the level of risk.  

This toolkit includes an overview of NQDs, highlights of their important work, and tools and examples that can be used to facilitate working with these organizations. We hope this project can also help initiate internal conversations for funders who hold concerns and questions about partnering with NQDs. Finally, we have created this toolkit so NQDs themselves may share it as a resource with prospective funders or partners.  

 We look forward to engaging in conversations across the sector about how supporting NQDs can both facilitate progress towards a charity’s mission and purpose, and address inequities in the funding landscape.