Mar 31, 2020
COVID-19: Public Guardian and Trustee Provides Relief for Charities in Ontario
By Linda J. Godel and Lauren Crosby
The Office of the Public Guardian and Trustee of Ontario (PGT) has released new temporary guidelines for charities to assist them during the current challenging economic climate. Accessing Restricted Purpose Trust Funds Prior to Obtaining a Court Order During the COVID-19 Pandemic (Guidelines) will enable certain charities in Ontario to utilize restricted funds for operating costs, contractual obligations and, in some cases, for the delivery of services.
The PGT is the protector of the public interest in charitable property in Ontario. When a charity receives funds for a designated restricted purpose, those funds are considered restricted purpose trust funds (Restricted Funds) and may only be used for the purpose for which they have been designated. For example, when a charity raises funds for a capital project (such as the construction of a new building), the funds raised are Restricted Funds and may only be used for that project. Endowment funds are also Restricted Funds as they are held under terms such as requiring the capital to be held in perpetuity and that only income can be spent. In the normal course, a charity must get permission from a court to use Restricted Funds for a purpose other than their designated purpose.
The Guidelines provide a temporary mechanism as a last resort for “charities that are in danger of closing to access the income and capital of [Restricted Funds] when necessary to enable them to continue their day-to-day operations” without first getting a court order, subject to certain restrictions. For example, only reasonable amounts necessary to pay operating expenses and to fulfil contractual obligations given the charity’s circumstances can be accessed. In addition, charities with purposes that allow them to provide services in response to the pandemic can use Restricted Funds for these services. Restricted Funds cannot be transferred to another organization, except to fulfil previously existing contractual obligations.
There are also a number of administrative steps that a charity must take to utilize Restricted Funds under the Guidelines. For example, before Restricted Funds can be accessed, the unanimous consent of the charities’ directors is required, and the charity must also notify the PGT in writing. Once the courts are operational again, a charity that used Restricted Funds under the Guidelines must also apply for a court order under the Charities Accounting Act “within a reasonable time after the pandemic has subsided.”
A charity that uses Restricted Funds should keep records relating to the expenditures, including the directors’ resolution or minutes of meeting approving the encroachment (which should include how the charity fits within the framework of the Guidelines), the notification given to the PGT, how much was spent, and what it was spent on.
Before using Restricted Funds for a purpose other than their designated purpose, a charity should ensure that it meets all of the requirements under the Guidelines. We would be happy to answer any questions that you may have about the Guidelines or any other matters involving COVID-19.
For legal advice on issues arising from COVID-19, please contact your Torkin Manes lawyer. For more information about dealing with COVID-19, please visit our COVID-19 Resource Center.