Why Trust Matters: Consequences for Canadian Charities
Why Trust Matters: Consequences for Canadian Charities
Introduction
Nonprofits undertaking charitable activities rely on philanthropic support to achieve their missions, and this support is grounded on beliefs in an organization's legitimacy and trustworthiness. Hence, trust is critical to the charitable sector. While individual charities might not influence the perceptions of trust in the sector at large, the potential is there. For example, recent scandals involving large charities (e.g. the WE Charity 2020 scandal) may have the potential to harm support for and perceptions of the sector overall. However, the public's trust in nonprofits is restorable in some cases.
In 2024, approximately 82% of Canadians reported trusting the nonprofit and charitable sector, with trust highest in Atlantic provinces (89%) and lowest in the Prairies (79%). However, only 61% fully trust charity leaders, and just 17% express “a lot” of confidence — a steep decline from earlier decades (27% in 2000). Canadians broadly expect charities to be transparent, accountable, and strategic.
The notion that charities are a trusted set of organizations has traditionally been well-established. The fact that charities raise money for the public good and provide important supports and services makes nonprofits more likely to be trusted than for-profit companies. Others have argued that organizations that are not for profit in and of itself does not guarantee that charities are trustworthy: surpluses could be used for higher salaries and privileges or result in shirking of efficiencies. However, over the years, many polls have found that people trust charities, although the overall level of trust varies both across countries and over time. Importantly, the public is also likely to trust nonprofits more than other institutions such as for-profits or government organizations and this is recognized as a competitive advantage that nonprofits have over other sectors. Finally, the empirical evidence of the philanthropic resources that charities garner year after year from private sources suggests that, at the very least, the donating public do trust the charities to which they freely give their money and/or time. In the face of this evidence, a fundamental question arises: what factors influence the perception of trust in charities?
As questions regarding nonprofit spending, oversight, and effectiveness arise periodically, it is important to understand what factors constitute the perception of trust. For example, is being honest in financial transactions a sufficient condition to establish trust? What about giving donors full information about how their donations are spent? Or, perhaps, is it the judicious use of resources or experience with charities that contributes to trust?
This report examines trust and the factors that constitute trust in Canadian charities. Canada provides an interesting case to explore the topic of trust in its nonprofit sector for two reasons. First, the sector is a substantial component of the Canadian economy. This sector constitutes an estimated 170,000 charities and nonprofits equally divided between registered charities and nonprofits – and employs 14.5% of the total Canadian labor force while adding more than $151 billion to Canada's GDP. It is also the second largest (behind the Netherlands) per capita nonprofit sector in the world when expressed in terms of the economically active population.
Second, although the Canadian charitable sector derives a substantial amount of its revenue from government transfers, the trend data suggests declining governmental support since the 1990s due to policies that aim to reduce government debt. In effect, many charities had to adjust to funding reductions, which were further exacerbated by the COVID-19 pandemic. Charities made up for the lost funding by generating revenues in multiple ways, relying on volunteer staff, and increasing fundraising efforts. A successful shift from public to private resources implies that there existed some level of trust, a precondition for attracting private resources – of both time and money – on a voluntary basis. It must also be said that government transfers to the nonprofit sector are also predicated in public trust, as democratic governments would not easily transfer large sums of money to charities that the public did not trust. Hence, trust in Canadian charities is an important factor influencing the charitable sector's existence and persistence. It is relevant and would be helpful to explore the determinants of trust in the Canadian charitable sector considering its non-trivial size and its changing funding dynamics.
The trustworthiness of the Canadian charitable sector has also been the subject of public debate and increasing scrutiny, resulting in demands for ceilings on nonprofit executive salaries, removing the charitable tax deduction, and developing charity watchdogs to separate "good" charities from "bad". This makes 'trust' a salient issue for Canadian charities and the Canadian public.
Discussion
In contrast to institutions like businesses, charities are legally precluded from distributing profits to stakeholders, greatly reducing the motivation to cut corners or deceive principals (i.e., donors, clients, government). Although this non-distribution constraint may mitigate some problems, it cannot completely erase problems. Thus, principals must rely on the charity's goodwill and trustworthiness to deliver promised societal benefits.
This reliance between the nonprofit sector and its various principals has been conceptualized both as trust and confidence, although some scholars draw strong distinctions between the two. Using this definition, knowledge (familiarity) is a critical factor in differentiating between trust and confidence. While this distinction is a useful frame for considering whether trust and confidence are truly separate concepts or exist on a spectrum, the vast number of studies using the terms interchangeably suggest that a relatively broad definition of trust is necessary. The definition of trust is the belief that an organization/sector and its people will never take advantage of stakeholder vulnerabilities by being fair, reliable, competent, and ethical.
Of course, trust in nonprofits does not exist within a vacuum; it must be contextualized within broader social and institutional trust. General social trust is often understood as trust in strangers or a broadly trusting attitude toward other people. Institutional trust – trust in community organizations as well as businesses – is also part of general social trust and can encompass confidence. Although the nonprofit sector is not solely able to address issues that weaken general social and institutional trust, trust in the sector is undoubtedly influenced by both of these broader forms of trust.
One argument suggests that the sector's unique characteristics (e.g., voluntary nature of support and the inability to distribute profits to shareholders) lead people to identify these organizations as inherently more trustworthy than their governmental and for-profit counterparts. These claims are supported, in part, by research demonstrating that general trust in institutions does not influence charitable giving and that the level of nonprofit trust is stable over time when compared to other forms of institutions.
Lastly, beyond institutional trust, studies have identified several demographic characteristics that influence trust of nonprofits. Researchers have found that individuals in higher social status categories related to race, education, and household income are more likely to trust charities than their counterparts with lower social status categories. Similar findings have been reiterated in other studies among racial minorities and with regards to both income and educational attainment. There are, however, no consistent findings regarding the influence of gender, age, political party, or religious affiliation on trust.
The competing demands of multiple stakeholders shape how organizations approach accountability, with most charities prioritizing upward accountability (i.e. to donors), a focus that makes sense given that many organizations' survival is dependent on resources from external funders. Charities demonstrate accountability (in the form of annual reports and financial statements) to alleviate information asymmetry that threatens trust between external stakeholders – namely funders – and the organization. Despite these actions, donors may still question the charitable sector's trustworthiness. The proliferation of nonprofit accountability mechanisms such as charity rating organizations, voluntary programs, and website disclosures, suggests that nonprofits and their stakeholders recognize that claims about trusting nonprofits do not sufficiently persuade stakeholders of the quality of nonprofits' products, governance, policies, and procedures.
Strategies to Build & Maintain Trust
To reinforce trust, Canadian charities and sector leaders emphasize:
Transparency: Publishing accessible financial statements, program outcomes, and use of funds. Simplified, jargon-free disclosure improves public trust.
Governance & Accountability: Strong governance structures, ethical leadership, and oversight from boards enhance credibility and public confidence.
Demonstrating Impact: Setting and reporting performance benchmarks, strategic planning, and measuring outcomes—public expectations align with this.
Embracing trust-based philanthropy: For funders, adopting practices such as unrestricted, multi-year grants, and lighter reporting burdens builds trusting, equitable relationships with nonprofit partners.
Crisis preparedness: Responding swiftly and transparently to any scandal or public concern can contain reputational damage and preserve trust.
Given that there is a strong and positive relationship between familiarity and trust, marketing efforts that enhance overall understanding of the sector are beneficial in two ways. First, public awareness campaigns that emphasize charities' unique and distinct contribution to the Canadian culture, economy, and safety net underscore its role as a critical sector and one deserving of support. Second, enhanced knowledge of the sector as a whole and charitable operations in general reduce misconceptions that ultimately damage trust.
Conclusion
Canadian registered charities play a vital economic and social role, addressing gaps not met by government or the private sector. Yet, public awareness of the sector remains limited —only one-third of Canadians know the sector’s scale. Trust underpins public support. A robust trust relationship strengthens charities’ ability to fulfill their mission and maintain public legitimacy and financial sustainability.
Academic research demonstrates that trust in nonprofits serves several critical functions:
Fostering civic engagement and volunteerism: When the public trusts charities, they are more willing to engage, volunteer, and participate in civic life.
Supporting advocacy and policy influence: Trust grants nonprofits legitimacy to lobby and advocate on social issues, extending their societal impact beyond direct services.
Securing financial support: Trust is strongly correlated with donor giving — higher trust leads to more frequent and larger donations.
Trust is vital for:
Financial Sustainability: Trust directly impacts donor behavior: lower trust typically leads to fewer donors, smaller gifts, and greater volatility in funding. This threatens the viability of essential services, especially in times of increased demand (such as during economic downturns).
Public Legitimacy & Advocacy Power: Trust amplifies a charity’s ability to influence policy and public opinion. Without it, charities may struggle to advocate effectively, weakening their social impact beyond direct services.
Partnerships & Institutional Collaboration: Governments, corporations, and foundations are likelier to collaborate with charities that demonstrate high trust and sound governance — including compliance with CRA rules under the Charities Directorate.
Volunteerism & Civic Engagement: Trusted charities attract volunteers and community partners. When public confidence is low, volunteer recruitment and community mobilization suffer, limiting outreach capacity.
In Canada, trust is the foundation of the charitable sector’s effectiveness and sustainability. It fuels:
public donations and volunteer support,
the legitimacy needed to advocate and influence,
deep partnerships and collaborations, and
the resiliency of nonprofits in the face of scrutiny.
Empirical evidence indicates that declines in trust coincide with drops in public giving; conversely, trust-rich environments foster robust support and social innovation. For Canadian charities, trust is not merely a virtue — it is a strategic asset. Upholding it through transparency, accountability, demonstrable impact, and responsive governance ensures that charities can continue to serve the public good effectively and sustainably.
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