AI use in Charitable Grant Writing: More harm than good?

With well over 170,000 charities, non‑profits, and community organizations in Canada, accessing grants or resources for charitable and community-serving purposes is becoming increasingly difficult due to competition for funding. More than ever, these organizations are turning to artificial intelligence (AI) tools to help them access funding for their activities and programs. With billions of dollars provided in funding annually, the issue for these organizations is not availability, but rather accessibility, of funding. The application process for most grants are lengthy and arduous, especially when grant writing is involved. For many organizations, especially smaller charities with limited administrative capacity, AI can feel like a welcome solution to the time‑consuming and technical nature of grant writing. However, while AI can be a helpful drafting assistant, its use raises usually several legal and ethical ramifications that potential donees must understand. This article highlights, at a high level, some key issues to consider, and recommendations to practice, when using AI in the grant‑seeking process

1. Inaccuracy and Reliability of Information

AI tools, despite its wonderful utility, usually generates content based on patterns in data, not verified facts – loosely called “hallucinations”. These hallucinatory AI‑generated responses may include inaccurate descriptions of donees programs, fabricated statistics regarding beneficiaries or activities, or incorrect legal or regulatory references. Submitting such inaccurate information in a grant application can lead to rejection of the application, and worse even, damage to the organization’s credibility.

Recommendation: Organizations should ensure that all AI‑generated content is reviewed, verified, and corrected by a knowledgeable individual member before submission.

2. Confidentiality and Privacy Concerns

Grant applications often require sensitive and confidential information, including financial statements, beneficiary data, and program participant demographics. Entering this information into a public AI tool may violate privacy legislation such as Personal Information Protection and Electronic Documents Act (PIPEDA) or provincial privacy legislation.

These organizations should bear in mind that though they are usually not subject to PIPEDA because they do not typically engage in commercial activities, their non-profit status does not automatically exempt them from its application. PIPEDA applies whenever an organization collects, uses, or discloses personal information in the course of a commercial activity. This means the nature of the activity – not the nature of the organization – determines whether PIPEDA applies. As a result, even charities and non‑profits may fall within PIPEDA’s scope if a specific activity qualifies as a commercial activity and requires compliance.

Recommendations: Organizations should seek adequate legal guidance to understand whether their activities may be classified as a commercial activity under PIPEDA, and beyond that, should avoid inputting any confidential, personal, or sensitive information into AI systems unless they have confirmed the tool’s data‑handling practices.

Note to Directors & Officers: Acting with the Required Standard of Care

There is a standard of care required by law for directors and officers of such organizations, more so when they involve AI in the exercise and execution of their duties. A key component of the standard of care, which is codified in both the Canada Not-for-profit Corporations Act and the Not-for-profit Corporations Act (Ontario), is the entwined concept of skill and diligence. Skill and diligence require a director or officer to utilize an appropriate degree of skill in carrying out their obligations. It requires directors and officers to act with the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances. When using AI, this translates into several obligations, such as:

• Understanding the technology: Directors must have a basic understanding of the risks and limitations of AI tools. Blind reliance on AI may breach the duty of care.
• Verification of outputs: AI‑generated content must be reviewed for accuracy, bias, and compliance.
• Risk assessment: Boards must assess risks associated with AI, including privacy, cybersecurity, misinformation, and operational reliability.
• Oversight of implementation: Directors must ensure appropriate policies, controls, and staff training are in place.

AI does not lower the standard of care; if anything, it raises expectations that boards will actively supervise its use. This is important because, where a director or officer breaches their fiduciary duty resulting in a loss to the corporation, they may be held personally liable for such loss.

Boards and senior leadership should consider adopting internal policies on AI use, including:

• when AI may be used;
• who may use it;
• what information may be entered;
• mandatory human review requirements; and
• documentation of sources and verification steps.

Conclusion

AI can be a powerful aid in preparing charity grant applications, but it must be used carefully. Potential donees should always consider ways to minimize the accompanying risks of AI use and ensure that the recommendations above (which are far from comprehensive) are followed as best they can be. 

Used responsibly, AI can support efficiency and clarity, but used improperly, it can definitely cause more harm than good. If your organization is using AI in grant writing, ensure you are doing so safely and in compliance with the law. Contact Mills & Mills LLP today to review your practices, mitigate risks, and protect your organization’s future.

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