I used to think that when it came to registered charities, there were two types of anonymous donors.
The first was an individual who really valued their privacy and did not want anyone to know that they had made the donation. It could be because they are extremely shy, or don’t want people to know they are wealthy, or don’t want people to contact them for donations, or don’t want media scrutiny. As well, some people, for religious or other reasons, value anonymous giving. Some people are controversial, and they worry that their involvement may undermine the charity they are supporting, or the charity itself may be controversial or politically polarizing, and their involvement may harm their reputation. Or they are worried that they will be perceived as influencing a sensitive area.
The second type of anonymous donor is a person who wishes to be labelled as an “anonymous donor”, but really wants everyone and their dog to know that they made the donation! Yes, that is my sense of humor! But there are probably more of this type of donor than the first type.
The key thing for a charity is to determine the type of anonymous donor it has and what systems will be put in place to ensure the appropriate level of anonymity. True anonymity can be quite complex and may lead to unintended consequences. Some of the complexity is that often, donors want an official donation receipt. Even if a donor-advised fund (DAF) or community foundation is used to make the donation, the DAF or community foundation still knows who provided the funds. Internal records of the charity typically include detailed information. There can also be other issues – for example, will the board of the charity know who the donor is? The board has a fiduciary duty to protect the charity. Is the donor providing a large percentage of the funds of the charity? How will anti-money laundering due diligence be conducted and satisfied if you don’t know who is the donor?
Well, it appears that there is a third type of anonymous donor. The third type is a person who wants anonymity and thinks that they have anonymity, but they just don’t understand the compliance framework for registered charities in Canada until it is too late.
For example, someone is sitting on the board of a private foundation and makes a suggestion to the board that a particular registered charity be funded, and that it be done as an anonymous donation. The receipient charity is told not to reveal the name of the donor. Obviously, the private foundation needs to file a T3010 every year, which discloses all the gifts that the organization made in which case it is hardly anonymous if it is publicly available to everyone. Yes, it is sad, but many directors don’t know that there is certain public information available on all registered charities in Canada. They think that their gifts are anonymous, but in fact, they are publicly available.
There are many advantages of having a private foundation (for example, compared to a donor-advised fund), but privacy/anonymity is not one of them.