COVID-19: Accessing Restricted Funds – Clarifications from the Ontario Public Guardian & Trustee

This entry is part 20 of 33 in the series COVID-19.

In an earlier post, we shared the Ontario Public Guardian and Trustee’s (OPGT) temporary guidance for accessing restricted funds.

Since then, a number of questions have arisen and the OPGT has provided a list of six Q&A’s to help clarify a number of situations. These are reproduced below.

  1. Question regarding how the charity can show it’s in danger of closing and what steps it should take prior to accessing funds:
  • The charity should be able to foresee that it will not be able to pay its bills due to a significant drop in its income. It does not have to be on the verge of turning off the lights and locking its doors. If after examining its financial situation and accessing all reserve and non-restricted funds and applying for government funding, the charity can say ‘we will have to file for bankruptcy or receivership in the next 30 to 60 days unless we get new funding’, then it could be said to be in danger of closing.
  • We do not expect staff lay-offs or selling assets prior to accessing the funds, however, temporarily halting programs and any other cost cutting measures (short of laying off staff) that are not pandemic response related is expected.    As an example, a contract with a cleaning company for daily cleaning that can be reduced owing to non-use of a facility should be renegotiated/cancelled.
  1. Can the charity use the funds to assist non pandemic-responsive programs to continue?
  • No, we expect that programs that are not responsive to the pandemic will be temporarily be halted. [more on this answer below]
  1. Will the charity be expected to replenish the fund? 
  • No. The guidelines do not require that the charity re-pay the funds to the restricted purpose fund, although it can be structured as a loan if the charity wishes and expects it will be able to re-pay the funds over time once the pandemic is finished.
  1. How will the PGT respond if the PGT disagrees with the charity’s decision to access the fund? 
  • This is difficult to answer outside of a specific fact scenario.  We will look at the reasonableness of the decision and the good faith of the directors at the time and decide what measures to take at that point.    Possible consequences could include requiring the charity to replace the funds, finding the directors in breach, requesting removal of directors (in cases of bad faith).    PGT counsel is available for discussions with directors/counsel if they are unsure.
  1. Is a charity allowed to use its restricted purpose funds for pandemic-response related programs if it’s not in danger of closing? 
  • All charities must fulfill the requirement to be in danger of closing prior to accessing any funds.
  1. If a charity administers a restricted purpose fund for the benefit of another charity, can it use the PGT’s temporary guidelines?
  • Yes. In this case the trustee charity would be required the contact the PGT and provide the requested information.   The trustee charity would have to review the circumstances of the beneficiary charity and satisfy itself that the criteria have been met and the funds will be used in compliance with the guidance.  Also, all of the directors of both charities would be required to consent.

Question and answer #2 may leave you wondering what it means for a program to be “pandemic-related”. It means that “the program responds to conditions caused, or exacerbated, by the pandemic.  Examples include: assisting or providing food banks, the provision or delivery of meals/groceries, providing medical supplies and equipment, providing financial assistance to the unemployed or under-employed, assisting health care providers or providing health services (both mental and physical)” (as per OPGT).      

Question and answer #2 may also leave you wondering what your staff can do if you’ve accessed restricted funds to pay their salaries. What if your programming is not “pandemic-related”? It is our understanding, upon seeking further clarification, that nothing would prohibit staff from continuing programming provided that the restricted funds are not used for the programming itself. For example, if a church needs to access restricted funds to pay for salaries and building, the pastor can continue providing virtual worship services.

As every situation presents a unique set of facts, the OPGT is encouraging you to reach out (look under “Charities”) if you have any questions.

Charity leaders are invited to share how they are responding to the COVID-19 pandemic within their organization in our online community forum, The Green: COVID-19 Response Room.

Posted April 30, 2020 @ 4:15pm

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Noteworthy is provided for general information purposes and does not constitute legal or professional advice. Every organization’s circumstances are unique. Before acting on the basis of information contained in this blog, readers should consult with a qualified lawyer for advice specific to their situation.