Canada’s charitable sector is facing increasing financial pressure. Rising demand for services, declining numbers of individual donors, inflation, growing competition for gifts and grants — together they’ve created a challenging fundraising environment for charities of every size. 

At the same time, a significant pool of charitable capital has emerged through donor-advised funds, or DAFs, offering organizations an opportunity to diversify their revenue and strengthen long-term sustainability. Long established in the United States, DAFs have experienced remarkable growth in Canada. Although reporting in Canada is less comprehensive than in the U.S., DAFs now hold billions of dollars designated exclusively for charitable purposes. For Canadian charities, understanding and engaging DAF donors is not optional — it is an essential component of successful fundraising.

Richard Drury

Canada’s charitable landscape

According to the Canada Revenue Agency, there are more than 85,000 registered charities across the country. Statistics Canada reports that the charitable and nonprofit sector contributes approximately 8.2% of Canada’s GDP and employs more than 2.4 million people, making it one of the country’s largest economic contributors.

Canada’s philanthropic foundation sector has expanded dramatically over the past two decades. According to Philanthropic Foundations Canada, Canadian public and private foundations now hold well over $150 billion in assets; these assets have grown rapidly through investment appreciation and increasing charitable contributions from affluent Canadians.

While the foundation sector distributes billions of dollars annually to registered charities across Canada, much of this funding is concentrated among larger institutions such as universities, hospitals, museums and national organizations with sophisticated fundraising departments. Smaller and medium-sized charities often receive only a modest share of available foundation funding despite providing essential services.

Despite its size, the sector faces significant financial challenges as individual giving has declined for years. CanadaHelps’ annual Giving Report notes that although total donation amounts have remained relatively stable, the number of Canadians making charitable donations continues to decrease, particularly among younger generations. Fewer donors mean charities are increasingly dependent on larger gifts from high-net-worth individuals and families.

This shift makes donor-advised funds especially important.

The rise of donor-advised funds

Donor-advised funds have become one of the fastest-growing charitable giving vehicles in Canada. Organizations such as the Charitable Impact, the Jewish Foundation of Greater Toronto, the Vancouver Foundation, the Calgary Foundation, Aqueduct Foundation and many community foundations now offer donor-advised fund programs. Financial institutions and wealth management firms have also introduced DAF services for philanthropic clients.

Why?

Unlike private foundations, DAFs allow donors to establish charitable accounts without the administrative complexity and ongoing governance requirements of a separate foundation. Assets contributed to a DAF are also irrevocably committed to charitable purposes: donors receive an immediate charitable tax receipt, and they may recommend grants to registered charities over time.

As wealth transfers accelerate, many financial advisors increasingly recommend DAFs as an efficient philanthropic planning tool. DAFs allow a level of privacy, confidentiality and secrecy — a “veil” between the donor and the charity. A family foundation, by contrast, reports recipients with specific amounts per year and is publicly searchable.

DAFs matter to charities

Since every dollar held within a DAF has already been donated to charity, the burning question is no longer if a donor will give, but who will receive their gift or grant. This distinction is critically important.

Whereas traditional fundraising asks a donor to make a charitable commitment, DAF fundraising asks donors to direct charitable dollars they have already committed. For charities, this represents a significant and deep pool of available philanthropic capital.

An opportunity for smaller organizations

One of the longstanding challenges within Canadian philanthropy is the unequal distribution of charitable funding.

Large institutions benefit from established fundraising teams, dedicated grant writers, extensive donor networks and national visibility. Smaller organizations frequently operate with limited development resources while addressing urgent community needs. Imagine Canada has repeatedly highlighted the funding pressures facing community organizations, particularly those serving vulnerable populations.

Donor-advised funds offer smaller charities an opportunity to compete more effectively.

Unlike many institutional grant programs, DAF grants are typically initiated by individual donors. Existing supporters who hold donor-advised funds can recommend grants with relatively little administrative burden. In most cases, charities do not need to complete lengthy applications or participate in competitive grant processes. Rather, success depends on donor stewardship and relationship building.

The largest wealth transfer in Canadian history

Canada is in the midst of what economists describe as the largest intergenerational transfer of wealth in its history: an estimated $1 trillion changing hands this decade alone, with more to follow. 

Astute wealth advisors are incorporating philanthropy into estate-planning conversations, and donor-advised funds have become an attractive option because they offer tax efficiency, flexibility and the opportunity to involve multiple generations in charitable decision-making. As a result, donor-advised funds are expected to continue growing substantially.

Every charity should ensure that donor-advised fund giving is incorporated into its fundraising strategy.

Simple actions can make a significant difference:

• Include donor-advised fund information on their websites.
• Mention DAFs during year-end fundraising campaigns.
• Ask major donors whether they have established a donor-advised fund.
• Thank DAF donors promptly and personally.
• Work with professional advisors who serve philanthropic clients.
• Encourage donors to recommend annual grants from their DAFs.

Many donors simply need a reminder that they can recommend grants from their charitable account.

An evolving future

Canadian philanthropy continues to evolve. While private foundations remain an essential source of charitable funds, DAFs are playing an increasingly important role for charities of all sizes.

As charitable giving becomes more concentrated among affluent households, organizations that understand how donor-advised funds work will be better positioned to access these resources. For Canadian charities, the opportunity extends beyond securing individual grants: DAFs represent a chance to build lasting relationships with donors who have already demonstrated a commitment to philanthropy.

Randy Speigel is the CEO of Canadian Friends of Bar-Ilan University.