The growth of donor-advised funds (DAFs) has created a system where recipient charities increasingly accept gifts without knowing their origins
Canadian charities are operating under a quiet contradiction.
Most organizations maintain gift acceptance policies that prohibit donations from certain industries or sources of wealth, such as: tobacco, gambling, sanctioned entities, environmentally destructive industries and reputationally toxic corporations. These policies exist for legitimate reasons. They signal both organizational values and protect public trust.
At the same time, the growth of donor-advised funds (DAFs) has created a system where recipient charities increasingly accept gifts without knowing their origins.
Those two things cannot coexist without tension, and the sector has largely pretended they can.
The legal framework is straightforward
The CRA recognizes the DAF sponsor as the legal donor. The originating donor has already received their tax receipt and the recipient charity is receiving a grant from another registered charity.
Legally, nothing is wrong.
But the ethical question is a lot trickier.
Consider the following: a hospital foundation with a policy explicitly prohibiting tobacco industry gifts receives a $50,000 gift from a well-known DAF sponsor. The gift was recommended by a tobacco executive who contributed to a DAF and requested anonymity. The DAF sponsor conducted its own due diligence and approved the recommendation. The hospital foundation may have no idea where the gift actually originated. If that same donor had approached the foundation directly, the gift almost certainly would have triggered a review. The DAF structure changed the visibility but it did not change the underlying ethical question.
This is not an argument against DAFs
Donor-advised funds serve real purposes: philanthropic flexibility, administrative simplicity, family giving, privacy, long-term planning. Most Canadian DAF sponsors run serious governance review processes.
The problem is that recipient charities are increasingly relying on delegated due diligence they have no ability to independently assess. That is a governance gap worth taking seriously.
Modern philanthropy is no longer evaluated solely on legal compliance. Public trust now depends on transparency, alignment between mission and funding, and institutional consistency. The Sackler controversy changed this conversation globally; organizations that accepted gifts without scrutiny found themselves answering questions not about legality but about values. What did they know? What should they have known? And, what obligations existed beyond technical compliance?
DAFs complicate all of those questions.
The principle I would advocate for is simple: if a gift would trigger ethical review if made directly, the organization should reserve the right to know the originating donor, even when the gift is routed through a DAF. Not for public disclosure. Not for donor recognition. But internally, at the board governance level, for high-risk gifts.
A gift acceptance policy that can be bypassed by inserting an intermediary foundation is not really a policy, it’s a performance.
We’re heading toward a hard conversation on this and it’s not because CRA will require it (they might, eventually), but because of public trust. Organizations that fail to modernize their governance frameworks now may eventually discover they have also outsourced ethical accountability—and outsourcing ethical accountability, is a fantastic way to erode public trust.
Robert Fedderson is VP of Sales at CharityCAN, a donor intelligence platform built for Canadian fundraisers. He spends his days helping organizations across the country build stronger donor pipelines. A Trent University grad, Robert lives in New Tecumseth, Ontario, where he can usually be found reading, cooking, or watching the Blue Jays.
