Introduction: empowering your clients through a time of crisis
As we all adapt to this unprecedented climate and consider how to best support our clients through the process, the STEP Philanthropy Advisors Special Interest Group (SIG) has developed this reference guide for STEP members containing timely and relevant information on mitigating the impact of COVID-19 through philanthropy. Global society is in a great time of need, and the opportunity to engage with clients on how they can support the response effort is critical. In times of considerable uncertainty, people often find solace in their ability to contribute meaningfully. For STEP members looking to engage with clients on the subject of philanthropy, the reference guide includes information on:
Please note that the purpose of this reference guide is for guidance only; please do not base any legal reliance thereon.
Why is it important to give now and in the longer term?
The role of charities and philanthropy is critical to support and enhance government efforts in the fight against COVID-19, and to meet the need to build the resilience of communities to weather this storm. Non-profits are central to our economy. They are significant employers and service providers and serve an essential function in society.
All charities are under immense pressure. Those delivering services to society’s vulnerable members are managing growing demand, and others such as the arts and culture, are suffering from reduced income due to event cancellation, operations cessation, and physical distancing. As the number of individuals affected by COVID-19 increases, the needs will be significant and reliance on charities even greater. There is a tremendous role for philanthropy to play in support of the sector, and donors can be a force for good to supplement government relief programmes.
Identifying current needs – vulnerable populations
Those in need of philanthropy are evolving as the impact of the pandemic grows. The definition of a ‘vulnerable population’ is expanding as the economic fallout of the pandemic is causing many to ask for help for the first time, applying for unemployment benefits, visiting food banks, and seeking other support. The vulnerable include, in part: the elderly, low-income communities, gig workers, self-employed, small businesses, individuals facing domestic and sexual violence at home, the disabled, immigrants and refugees, the homeless, arts and culture, animals, and developing nations. Examples of current urgent need include health and medical supplies and services, social services and economic security, support for small businesses facing employment layoffs or furloughs, education support for students, and region-specific funds.
How to support clients who want to help
The following toolkit can be adapted to guide your discussions with clients on how they can help:
1. What does it mean to be philanthropic?
Philanthropy can take many forms beyond donations and volunteering. Mutual aid through the voluntary reciprocal exchange of services and resources can be benevolent. Corporate giving programmes through gifts in kind, donating a portion of proceeds, or offering free services like free taxi rides to medical workers are other ways to provide support.
2. Take stock of clients’ current giving and consider how much further can they can go.
a. Guide your clients to review their current giving. Most likely, the organisations and causes they are already supporting are adversely impacted by the pandemic.
b. Consider if there is emergency aid funding available to existing grantees or to a new organisation or programme.
i. Help your clients to assess the right distribution level in light of market performance.
ii. Has the client already contributed to a donor advised fund that can readily deploy assets?
iii. Consider whether expanded tax incentives are a part of relief measures that will enable clients to increase their giving.
3. Where can clients give?
It is essential to identify organisations that are reputable and effective quickly. One way to do this is to look for reliable third-party stakeholders who have vetted and partnered with charities. Some ideas include:
a. Local Support. Seek out resources like community foundations and local government partnerships with charities, or charities with longstanding history operating in the community with a strong presence.
b. National Support. National government bodies and sector leaders are engaging in collaborations with the charities sector to create fundraising appeal initiatives. Look for initiatives organised by the government or partnerships between sectors to donate.
c. International Aid. Multilateral organisations such as the United Nations have launched fundraising appeal initiatives to provide relief around the world, particularly for developing nations who do not have sufficient resources to meet national demands
At each of these levels, we can also find examples of initiatives across well-known private foundations, donor-advised funds, community foundations, and philanthropy advisory providers who have launched collaborative fundraising appeals. For those looking to be more strategic and leverage their contributions, look to partner up with other funders to create collectives and increase impact.
4.Protect the client from being inundated with requests.
High profile wealthy individuals and those known for their philanthropy are inevitably going to be inundated with requests for funding and may need guidance on how to manage inflows of unsolicited applications.
Critical principles for emergency response
We must adapt our standard processes applied to philanthropic giving to accommodate the emergency need while protecting donors from fraudulent programmes. The following guidance can achieve this balance:
1. Balance due diligence requirement with trust.
Do as much due diligence on the charity as can be done independently.
a. Confirm the registration of the charity in your jurisdiction.
b. Look for experienced organisations and organisations that have received high scores from independent rating agencies.
c. For newer organisations, look to see if they are transparent, posting annual impact and financial reports online and whether established donors (e.g. private and community foundations) support them.
2. Allocate support for the immediate and longer-term.
The impacts of the virus will continue into the long run and will require both immediate and long-term relief, so consider a longer-term strategy than ordinarily adopted. In addition to gifts of charitable aid, support academic and field-based research initiatives to provide analysis of the effects of responses to COVID-19 and impacts on the charitable sector and philanthropic giving.
3. Relax restrictions on existing grants and new grants.
Trust the charity to utilise financial support in the way they know will generate the most significant impact.
4. Provide general operating support.
More than ever, charities need funds to pay for staff and operations to survive.
How to support fiduciaries of charities
Many of our clients act as board directors or trustees of operating and grant-making charities. They should seek independent legal advice on their fiduciary responsibilities during a time of crisis. Some issues facing board members of charities this time include ensuring:
1. That the objects or purpose of the charity are properly carried out;
2. The financial stability of the charity;
3. The operational performance of the charity; and
4. Proper management and protection of staff and volunteers.
In light of physical distancing, practical matters such as whether a board may hold meetings via telephone or other electronic means need consideration. For a look at this issue from the Canadian perspective, click here for Holding Directors’ and Members’ Meetings Virtually to Discharge Fiduciary Duties During the COVID-19 Crisis.
Giving through wills
Many people are updating their estate planning and wills. Ask your clients to consider leaving a charitable legacy gift in their will. It is one of the easiest and most effective ways to give. Legacy giving is extremely valuable to charities and can account for significant percentages of voluntary income. STEP members can use the opportunity to ask clients if they would like guidance or to be connected with any organisations to support.
With physical distancing restrictions in place, compliance with will execution formalities may be a challenge. Estate planning practitioners are working to support their clients through this process through permissible means such as virtual witnessing, and some jurisdictions are easing the execution requirements in the wake of COVID-19.
Legal developments impacting charities
As governments introduce relief measures in response to the pandemic, the below information highlights examples of country-specific legal developments that directly impact charities and philanthropy. We will update this list as new measures affecting the sector are introduced.
Country-specific legal developments
On 1 April 2020, the Government of Canada announces details of the Canada Emergency Wage Subsidy to help qualifying businesses, non-profits and charities keep Canadians employed. In other developments, deadlines for filing annual returns for charities and federal non-profit corporations were extended.
- Government Announces Details of the Canada Emergency Wage Subsidy to Help Businesses Keep Canadians in their jobs
- Corporations Canada extends annual return deadlines to September 30, 2020 for federal non-profit corporations
- Federal and Ontario measures in response to COVID-19 impacting charities and not-for-profits
On 27 March 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act) which represents the largest economic stimulus package in US history. The legislation includes programmes that support non-profits and also encourages charitable giving, in recognition of the special role of charities in addressing immediate and long-term community needs. Click here for more information.
- Coronavirus Aid, Relief, and Economic Security Act CARES Act (Pub. L. 116-136)
- CARES Act Increases Deductions for Certain Charitable Contributions
- Jason Havens, Kelly Hellmuth & Peter Blumeyer - Charitable Giving Tips to Provide Help and Hope During the COVID-19 Crisis
- CARES Act tax provisions aim to stabilize pandemic-ravaged economy
For further philanthropy-related guidance, please contact the Philanthropy Advisors Special Interest SIG.
COVID-19 Stories (see 'Partner Voices' section)