When Lindbergh flew from New York to Paris in 1927, it was inspired by the $25,000 Orteig Prize. Also in the 1920s, when the International Math Union wanted to honour under 40-year-old rising mathematicians, Toronto math superstar J.C. Fields (under)funded a medal that has been awarded ever since.

Since the 19th century, charitable prizes have been a way to recognize accomplishments and create change by providing incentives to achieve the previously unachievable. Prizes can be modest – a book award at a high school – or grand. The grandest aspire to push the boundaries of science, medicine or humanitarian endeavors.  Charitable prizes are ubiquitous, but what does it take to establish one in the Canadian charitable system? Here are a few considerations.

Prize Structure

In terms of charitable law, prizes advance educational purposes, which makes them a close cousin of scholarships. Like scholarships, prizes are normally awarded to individuals in cash.  They may be endowed and perpetual, or funded on a time-limited basis with expendable funds. In Canada, charitable prizes are a “windfall gain” and are typically tax exempt.

A prize program is a charitable activity that needs structure.   Clear criteria and processes document that the prize is charitable and provides a public benefit.  Ideally, there should be set terms of reference, a defined class of eligible beneficiaries, public advertising and schedule, and disclosure about the selection committee.

Host Charity

Charitable prizes depend on the host charity and its charitable purposes. Educational institutions are the most common entities. A school or university can easily establish a prize, but it is often for students, although it could be for alumni, faculty or staff.

Prizes that wish to reach a wider public need a different kind of charitable infrastructure. Often this is a purpose-built foundation with educational purposes for prizes. There are several examples in Canada. For example, the Scotiabank Giller Prize is operated by The Doris Giller-Rabinovitch Foundation. The Griffin Poetry Prize is a project of the Griffin Trust for Excellence in Poetry. Both are private foundations. The Gairdner Awards focus on biomedical research and are run by the Gairdner Foundation, a charitable organization.  The Gairdner is often considered to be Canada’s pre-Nobel prize.

Health charities or professional associations also have prizes to recognize the accomplishment of members of the profession. Sometimes a professional association – maybe an international one – has the reach and credibility to establish a prize but does not have Canadian registered status.

If its charitable purposes allows, a Canadian foundation can work in collaboration with a third party that is not a registered charity to administer the prize.  The foundation can establish an agency agreement with the organization that outlines the terms of prize and responsibilities of the agent. The third party adjudicates the prize, but the foundation pays the award to the selected winner(s).  With the new ability for Canadian foundations to make grants to non-qualified donees, it is possible for the third party to run the prize program independently and receive a grant for the prize and any administrative costs.  Again, the foundation must have charitable purposes that allow it to offer prizes.

Estate Planning

Donors may want to fund a prize through their estate, which is what Alfred Nobel did.  Establishing a prize with an estate donation requires finding – or in ambitious situations, creating – the right foundation or charity. It’s not just about having the aligned charitable purposes, but the charity must have the capacity and commitment to administer the prize. That’s easy enough with educational institutions, but not so easy with specialized prizes intended to reach a larger public. Prizes require adequate funds and infrastructure to operate, especially long-term.