Gabe Oatley’s journalism on this special report is made possible by the Future of Good editorial fellowship on transforming funding models, supported by United Way Centraide Canada and Community Foundations of Canada.

To many of Canada’s largest charities, the question of whether or not to hike the annual disbursement quota — the amount philanthropic organizations are required to give to charities each year — is an engrossing one.

A recent Finance Canada consultation process for charities, non-profits, and experts to give their two cents on whether or not to bring the disbursement quota up past 3.5 percent resulted in more than 200 submissions. Dozens of prominent Canadian grantmakers signed the Give5 pledge to give at least 5 percent of their assets to charity. Sector lobbyists like Imagine Canada take a more complicated view of the matter by arguing for a sliding scale disbursement quota based on a funder’s assets.

There have been  position papers, legal studies and op-eds on all sides of the disbursement quota debate. Most are from sector leaders of major national organizations with multimillion dollar budgets, long standing relationships with officials in Ottawa, and policy teams who spend all day analyzing the latest regulatory proposals.

Ask the executive directors of small or medium-sized charities without these advantages what they think about the disbursement quota debate and the answer is fairly lacklustre. “I wouldn’t say it’s something that’s been super high on the agenda,” says Stuart Taylor, CEO of iDE Canada, a mid-size international NGO in Winnipeg that mainly works on agriculture and sanitation-based development projects around the world.

He isn’t alone. In reporting for past stories about the disbursement quota — as well as this one — smaller non-profits and charities have declined to comment on the disbursement quota changes because they didn’t know enough about them to speak on the issue.

Why are smaller non-profits and charity leaders not terribly excited about a regulatory change that could mean billions of dollars in additional grant opportunities? Simply put, many of them have bigger day-to-day priorities — tackling other regulatory frustrations, dealing with endless waves of consultations that might not change anything about the DQ debate, or simply trying to do their jobs.

Tapped out

Overwork is the simplest reason why so many executive directors at small to medium-sized charities don’t follow or contribute to the disbursement quota debate. At a small agency with four or five staffers, an executive director might serve as a program director, HR manager, media relations specialist, and grant writer — while also running all operations. “Everyone wears three different hats,” says Alyssa Luttenberger, director of impact, development and granting at the Canadian Roots Exchange.

Cheryl De Paoli, director of strategic partnerships at the Pembina Institute, says non-profits or charities might also not know a lot about the disbursement quota debate because they don’t believe they have a role to play in it. “To be fair, why would they know?” she asks. “They’re the grant recipients.” Much of the disbursement quota discussion fixates on the community, private, and public foundations who may (or may not) be required to disburse more money to grantees. Plus, De Paoli says, there are so many crises to tackle: climate change, poverty, the COVID-19 pandemic. “People are so ingrained in their work of trying to solve the tough issues that learning about the disbursement quota is another thing to add on their plate,” she says.

Sector lobbyists like Imagine Canada have advocated for disbursement quota changes on behalf of smaller non-profits and charities. The same goes for Community Foundations of Canada and Philanthropic Foundations Canada on the grantmaking side, while agencies like the National Association of Friendship Centres, BGC Canada (formerly known as Boys and Girls Clubs of Canada) and YWCA Canada liaise with their federated partners on a variety of issues.

But smaller organizations or grassroots groups don’t find it easy to keep up with the disbursement quota debate. “It can be very difficult, especially in communities where there can be a lot of consultation fatigue,” Luttenberger says. “It’s a lot to manage, especially when you think about the ways that language can cause barriers – when you’re thinking about who’s present in those conversations, and who’s not sitting at the table.”

That’s not to say that smaller and mid-sized organizations don’t care about disbursement quota changes at all. “I think there’s excitement about the idea that we’re changing a system that, more often than not, leaves people out of it,” Luttenberger says. However, the disbursement quota issue may not always be the top priority of smaller non-profits and charities because of its abstractness.

The real pain points

Small non-profits and charities run up against obstacles every single day. The constant scramble for grant money certainly counts. Supporters of the disbursement quota increase say it could unlock billions of additional grants for organizations who consistently run programs, cover administrative overhead, and pay staff on shoestring budgets. Visualizing what a 1 percent or 2 percent DQ increase will mean for next year’s operating budget isn’t easy — and there are more pressing concerns.

Forty percent of Canadian charities are facing revenue declines, according to the latest Sector Monitor report from Imagine Canada in August 2021. Non-profits and charities are losing workers at an alarming rate — the result of burnout, higher wages in the private sector, or the need to care for children at a time of haphazard school openings. In provinces or territories with public health restrictions on businesses in place, social service agencies are once again carrying out frontline work as Omicron runs rampant through the population. These realities call for more money, but how much more can smaller organizations count on with a DQ change? Difficult to say.

At iDE Canada, frustration over ‘direction and control’ — the colloquial term for regulations that require Canadian charities that give funds to a non-qualified donee (i.e. any organization that’s not a registered charity) to exercise full control over how those funds are used — ranks higher than questions about the disbursement quota. INGOs have repeatedly criticized Canada’s direction and control

directive as being overly strict. As a midsize INGO that works on projects all around the world with businesses throughout the Global South, iDE Canada routinely runs into the limitations of direction and control. Another major issue for iDE Canada is the rules around mixing charitable funds with business enterprises.

“They’re pain points,” Taylor says of both the direction and control directive and Canada’s current rules on mixing charitable and business funds. Whereas raising the disbursement quota might present an opportunity for iDE Canada (it relies on grants from Global Affairs Canada as well as private grantmakers), “whether it would actually translate into a significant additional opportunity for us is unknown,” he explains.

Taylor isn’t the only one to ask this question. Many of the arguments around raising or maintaining the disbursement quota are entirely theoretical to smaller non-profits and charities who might not have access to conventional grantmakers in the first place.

Reaching the unusual suspects

Much of the discussion around Canada’s proposed disbursement quota comes down to whether more money will actually flow to non-profits and charities in need. That’s an open question. “I don’t know if [grantmakers] would do more funding to smaller informal groups, or if they would just give larger grants to larger organizations,” De Paoli says. “There’s one school of thought that a disbursement quota increase won’t help charities at all – it’ll just go to post-secondaries and hospitals.”

Hospitals and post-secondary institutions have the infrastructure to make multimillion-dollar grant applications to major foundations: fundraising and public relations departments, wealthy donors, and good ratings from Charity Intelligence. A small local charity likely has none of these things — and is likely in worse financial shape than an institution with government block funding and a major gifts department.

Given this context, Taylor says, the conversation on whether or not grantmakers should give a few percentage points more every year doesn’t matter to a smaller charity that could never hope to apply for those extra grants anyways. “If another million dollars from the MasterCard Foundation comes onto the market,” he says, “you’re not one of the organizations that’s positioned to go after that funding. It might be of interest, but not necessarily all that relevant.”

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