All About Estates

Charitable Donations – What Do You Get in Return?

Each December, we are reminded that this is the season of giving. As we are encouraged to lend our support to worthy causes, it is helpful to understand the extent to which donors can control the use of their funds and oversee the direction of a charitable project. Meddling in other’s affairs can be costly, as seen in Fass v CAMH, 2018 ONSC 3386.

The Faas Foundation and its founder had long supported the Centre for Addiction and Mental Health (“CAMH”), a hospital in Toronto specializing in mental health and addiction. In 2014, CAMH presented the Foundation with a proposal for the creation a workplace mental health program called Well@Work: Well@Work was to be a resource empowering employees and helping employers create psychologically safe and healthy environments. CAMH estimated that it would take three years to develop the program and identified the objectives and milestones to be achieved each year until completion.

In response to the proposal, the Foundation pledged $1 million to CAMH. The Foundation signed a Donor Investment Agreement confirming that it would make three payments of $333,333, beginning in January 2015. In return, CAMH agreed to provide the Foundation with annual reports. CAMH also agreed to name the training rooms after the Foundation and to acknowledge the donor in the lobby of the new CAMH building.

The donor made the first installment payment on schedule in January 2015. However, the donor soon became dissatisfied with the direction of the Well@Work program as well as the lack of “granular” detail in CAMH’s reports. The donor made several suggestions: that CAMH collaborate with two US based mental health institutions; that the Well@Work program not be used to implement the National Standard, Canada’s guidelines for psychologically healthy workplaces; and that the timeline for the project be extended from three years to five years. The donor’s suggestions were not adopted.

When CAMH did not submit a new grant proposal as requested (one in line with the donor’s objectives), the donor announced that he would not make the two final instalments and requested that the funds from his first installment be forwarded to another Canadian agency. However, the funds had already been spent. As a result, the donor brought an application under s. 6 of the Charities Accounting Act, RSO 1990, c C.10, requesting an investigation into how the donation was used.

The relevant portions of s. 6 of the Charities Accounting Act read:

(1) Any person may complain as to the manner in which a person or organization has solicited or procured funds by way of contribution or gift from the public for any purpose, or as to the manner in which any such funds have been dealt with or disposed of …

(3) Wherever the judge is of opinion that the public interest can be served by an investigation of the matter complained of, he or she may make an order directing the Public Guardian and Trustee to make such investigation as the Public Guardian and Trustee considers proper in the circumstances …

(5) The cost of any such investigation, when approved by the Attorney General, forms part of the expenses of the administration of justice in Ontario.

In a well written, accessible decision, the Court took the time to explain the purpose of the Charities Accounting Act:

  • Through the Charities Account Act, the courts have delegated their inherent jurisdiction to supervise charities to the PGT
  • The PGT’s mandate is narrow, focused on financial management
  • The PGT’s power to investigate is invoked only on reasonable and probable grounds and not on conjecture
  • The PGT’s investigation is at the public’s expense, so it must be a matter of public interest and not simply a matter that might interest the public
  • At the conclusion of the PGT’s investigation, a report is sent to the Attorney General and the judge ordering the investigation; there is no reporting to the donor of the charitable gift

Following this review, the Court explained exactly why the donor’s application for an accounting was misguided:

  • A philanthropic gift is not a business investment. While an investor is entitled to a high degree of financial disclosure and input into the direction of the company, a charity has no similar obligations to a donor
  • A charity’s duty is to ensure that gifts are use in accordance with its own charitable objectives, not in accordance with the donor’s objectives

In this case, the donor failed to provide any evidence that CAMH failed to use the funds in accordance with CAMH’s objectives. Nor was any evidence presented of financial mismanagement. Thus, the Court held: There are no grounds here on which to order an investigation by the PGT under s. 6 of the Act. Such an investigation would be costly, disruptive to an important health care institution, and would serve no identifiable public interest.”

The donor was ordered to pay $130,000 in costs to CAMH.

There are two messages to take away from this decision:

  1. Charities are subject to public oversight, and the Charities Accounting Act provides a pathway for reasonable suspicions of mismanagement to be pursued; and
  2. Donations are gifts, no strings (or Christmas bows) attached.
About Gillian Fournie
Gillian is a lawyer with de VRIES LITIGATION LLP. Her practice focuses on the area of trusts and estates litigation. gfournie@devrieslitigation.com

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