Early Insights on Disbursement Quota Data

Foundations are a critical aspect of Canada’s charitable sector ecosystem. Understanding how the sector is adapting to regulatory shifts is essential for ensuring its vitality, and that charitable resources continue to flow where they are needed. PFC is committed to offering clear analysis and dependable guidance as the sector responds to the changes to the disbursement quota that came into effect in 2023, and as we prepare for an anticipated federal review in 2027.

Philanthropic Foundations Canada welcomes Imagine Canada’s early analysis of the disbursement quota rate which was increased to 5%, for assets over $1M. Their preliminary findings offer helpful insight into how foundations are adjusting to the updated policy. They also reinforce the importance of complete, accurate data and careful interpretation when assessing both the annual DQ requirement and longer-term compliance.

The updated rules have strengthened the quality of reporting on charitable property not used in charitable activities or administration. This is the asset base that determines a foundation’s DQ requirement. Clearer CRA guidance and stronger sector attention have reduced inconsistencies, improved comparability, and provided a better foundation for understanding sector behaviour. This shift ensures that reporting aligns with the law and creates a more reliable data environment for policy analysis.

It is also important to recognize that the DQ requirement and DQ compliance are related but distinct. The requirement is calculated every year based on a two year average of what charities report in Line 5900 in their T3010, the annual information return every charity must report the CRA. Compliance, however, can only be assessed once actual disbursements are compared with the requirement alongside any eligible carry forwards or rollbacks. Because these adjustments span multiple years, a correct compliance trends and a full picture cannot be drawn from a single year of data. That said, annual data provides helpful early signals.

What the Data Shows: Trends, Context, and Limitations

Imagine Canada’s findings suggest that many foundations increased their charitable and granting activity following the policy change. They suggest that increases were largely driven by higher disbursement rates, resulting in roughly $711M more charitable spending in communities across Canada.

They also show that foundations responded differently depending on size and type. Public foundations appear to show higher disbursement rates than private foundations, although many public foundations manage significant flowthrough funds which can obscure overall differences in long-term endowment granting behaviour. Disbursement rates specific to all donor advised funds are not captured in current reporting requirements, which limits our ability to understand their contribution to overall granting.

It is also unclear how many of the foundations identified as not meeting their DQ requirements are, in practice, inactive and no longer operating but still listed with the CRA. Each year, approximately 1,000 charities in Canada cease operations and voluntarily deregister.

At the same time, Imagine Canada notes that the first year of the new rules coincided with a period of weaker investment performance, which may have affected some foundations’ capacity to adjust immediately. These are important contextual factors that will require additional data to fully understand.

The preliminary analysis highlights significant limitations in the available T3010 data. Key information needed to fully assess how investment returns, asset changes, and granting patterns may be shifting is not consistently or clearly reported. These limitations underscore the importance of ongoing improvements in charity information reporting and the need for evidence informed interpretation as the sector moves toward an anticipated 2027 disbursement quota policy review.

Past data from PFC’s consultations leading up to the policy change indicated that foundations have a strong record of responding responsibly to regulatory requirements over time, generally exceeding minimum requirements, adjusting to policy changes as intended, and increasing disbursements during times of need. We found for instance, that between 2018 and 2020, 63 to 75 percent of foundations granted more than the disbursement quota requirement, and the average payout from 2010 to 2018 was 0.7 per cent higher than required by the rate. Based on a very early and preliminary analysis of 2023 data, most PFC members appear well above the disbursement quota, with about 80 percent meeting or exceeding an effective 4.25 percent rate, and about 63 percent meeting or exceeding 5 percent. This does not account for carry-forward rules, meaning some foundations could be below the requirement in 2023 and still meet the requirement overall.

As more complete data becomes available, we expect a clearer picture of the sector’s adjustment to the new rules.

PFC’s Commitment to Evidence-Informed Policy and Sector Stewardship

PFC remains committed to supporting our network as foundations continue to navigate these changes. We are preparing a detailed analyses to give foundations clear insights into how they are positioned under the revised rules. This work reflects our ongoing commitment to evidence informed policymaking, strong sector stewardship, and transparency.

This commitment is strengthened by the recent launch of PFC’s Philanthropic Impact Taskforce. The Taskforce is beginning work this month, mandated by our board, to prepare for the anticipated 2027 federal DQ review and to examine broader policy issues affecting philanthropy’s capacity for impact.

Guided by principles of evidence-based decision-making, collaboration, and transparency, the Taskforce will put forward recommendations grounded in data and shaped by diverse sector perspectives. The Taskforce also reflects PFC’s belief that effective policy requires rigorous analysis, modernized regulatory frameworks, and meaningful engagement with those who steward and utilize charitable resources.

PFC’s upcoming investment survey, to be launched later this year, will further strengthen this analysis and help inform PFC’s policy positions.

As more complete data becomes available, we will continue contributing constructive, informed insights to support a policy environment that strengthens philanthropy’s role in serving communities across Canada.

What This Means for Foundations

The updated rules and clearer CRA guidance have improved reporting quality, giving foundations a more consistent basis for understanding their DQ requirements.
Early analysis is helpful for identifying trends but does not provide a full picture of sector compliance. Multiyear data will be needed.
Foundations can expect more guidance and support from PFC as more data becomes available. The Philanthropic Impact Taskforce will help ensure that diverse perspectives are well represented in the 2027 review.

What This Means for Policymakers

Early results suggest that the policy change has boosting charitable spending in our communities, while interpretation must consider investment conditions and data limitations.
High-quality, complete T3010 data is essential to assessing the long-term impact of the policy. While compliance cannot be evaluated until multiyear data sets are available, annual data offers important early insights.
PFC will bring forward evidence-based recommendations and sector-informed guidance to support the review.

What This Means for Charities and Nonprofits

Early findings show that many foundations have increased their disbursements following the policy change.
As reporting quality improves, charities and nonprofits will have better visibility into granting trends and funding conditions.
PFC remains committed to supporting a strong and stable funding environment for Canada’s critical operating charity and nonprofit organizations.