Many groups are doing special purpose fundraising for COVID-19 in which they are specifically soliciting or accepting for COVID-19 related programs.  Charities have to be careful of a number of issues when fundraising for a specific purpose.

After having worked with many groups in different types of disasters, the challenge is not only when you are fundraising you want to be successful in bringing in large amounts of money or gifts-in-kind but you also wish to be effective in spending those funds or distributing those gifts-in-kind.

We can see from what seems like ancient history – the recent Australian wildfires how well-intentioned fundraising can result in large amounts of funds being raised and not necessarily available to be appropriately deployed.   Some small organizations with very limited objects received tens of millions of dollars that they have neither the capacity nor the legal objects to appropriately spend.

For example, you may think it is a good idea to raise funds for a local health care clinic.  But what if you are very successful and raise say $10 million which is more than anticipated and COVID-19 becomes less of a concern in 6 months.  Now the clinic spent 2m of those funds and the other $8million will dribble out over many years.  Perhaps a few years later when COVID-19 is no longer a concern some lawyer is going to have to go to court to bring a cy pres application to try and repurpose those funds.  Or what happens if you raise a lot of money to buy PPE for COVID-19 and in a few weeks with planes landing almost every day in Canada with PPE, the hospitals are well stocked with PPE.

With major gifts, it is vitally important to have a good gift agreement that is consistent with the gift acceptance policy of the charity.  The gift agreement should have a clause allowing for amendments, especially if the funds are restricted in any way.  With smaller gifts raised for a restricted purpose, it is important to ensure that the purpose is not too narrow.  Additionally, there should typically be a secondary purpose if it is no longer possible or feasible for the funds to be spent on the first purpose.  We have reviewed the fundraising language of many groups over the last few weeks and it is vitally important that such language is carefully crafted to avoid possible problems down the road.

There are a number of ways in which special-purpose fundraising can be structured that are appropriate, and there are a number of ways in which it could be inappropriate. If it is structured poorly or inappropriately, this could have significant legal and reputational impacts on a Canadian charity.    It is in everyone’s best interest to ensure that not only is the structure appropriate, but that the communication of the structure is accurate.