Learn the lexicon of the charitable sector

Your quick guide to the types of Canadian organizations carrying out charitable activities. 

In Canada, a registered charity “refers to a charitable organization, public foundation, or private foundation registered with the Canada Revenue Agency”. Each of these 3 charity designations has unique characteristics. 

According to recent estimates, there are over 170K non-profit organizations, of which more than 86K are registered charities. You can read more about what is a registered charity and how it differs from a non-profit organization here. So, what is a public foundation and how is it different from a private foundation? We’ll explore. 

If you are well versed in the lexicon of charitable organizations, it’s easier to know where you want to direct your charitable dollars. “Different types of vehicles can be used to carry out different or similar types of benevolent projects,” said John Bromley, founder and CEO of Charitable Impact. “Spending some time learning the fundamentals of these structures can bring more knowledge and confidence to your giving.”

Don’t worry, we got you covered with all the lingo and definitions. Read on!

Charitable organizations 

Charitable organizations primarily carry out their own charitable activities, both locally or globally depending on their individual mission. Charities can be large organizations employing hundreds of people, but the majority of charities in Canada operate on budgets of less than $200K annually.

Charitable organizations can raise money through fundraising and soliciting the public, and can receive monetary gifts from public foundations and private foundations. These organizations are also able to send donations to other qualified donees, although this is usually not their main function.

Public foundations 

Public foundations are registered charities that operate exclusively for charitable purposes. Public foundations mostly carry out the charitable purpose of making gifts to other qualified donees. Those qualified donees then carry out charitable activities.

The “public” designation indicates more than 50% of a foundation’s governing officials are “at arm’s length” with each other. That means they can’t be related by family or have controlling interests in the same corporations. 

Foundations can raise money from a number of sources. Typically, foundations give more than 50% of their annual income to charities or other “qualified donees” but they can operate their own charitable activities. Some public foundations also award scholarships and bursaries to students in need.

Qualified donees can include registered charitable organizations, registered Canadian amateur athletic associations, the United Nations and its agencies, and Canadian registered municipalities. 

Private foundations

Private foundations, are similar to public foundations, but may have 50% or more of their governing officials within arm’s length of each other. Wealthy individuals, business corporations, and families often establish private foundations to execute their charitable visions. Private foundations mostly give funds to other qualified donees (see above). 

Data about the activities of private foundations are reported publicly. Also, similar to all registered charities, private foundations come with a certain amount of annual legal maintenance and administrative work. A donor-advised fund is a giving vehicle that can provide an alternative to establishing a private foundation. 

So what is a donor-advised fund? 

A donor-advised fund (DAF) is a charitable fund advised by a donor, which is typically housed inside a public foundation. If you’re thinking about starting your own foundation, DAFs are a low-cost alternative that will save you the administrative hassle. 

Charitable Impact is a public foundation that operates as a DAF. We are unique in that we are the first accessible DAF available online. With an Impact Account, all of your contributions are clearly visible in one place and you receive an immediate tax receipt when you add money. 

With a DAF, like Charitable Impact, you can give even if you don’t know which charity you want to support. Then, take time and space to create your own giving journey. Get in touch with us to find out more!

Reach out to us anytime with questions about your giving. We are here to support you by email ([email protected]), phone (1-877-531-0580), or chat (www.charitableimpact.com).

We hope you find this material useful in learning about giving. However, you should never use this material without first reviewing it with your own lawyer(s) and tax advisor(s) to determine its suitability for your circumstances. This material is not legal, tax, or other professional advice.