COVID-19 pandemic has exposed deep flaws in Canadian philanthropy, fragility of non-profits

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Canadian doctor Samantha Nutt had big plans for 2020, hoping to raise more than $1-million extra to expand her relief work in war-torn countries.

Dr. Nutt runs a charity called War Child and, to celebrate its 20th anniversary, she’d organized a series of fundraising events, including a gala concert featuring Sting, Lyle Lovett and Sarah McLachlan. The extra money was going to bolster War Child’s award-winning programs, which help about 600,000 people in places such as Iraq, Afghanistan and Sudan.

Then COVID-19 came crashing down. Most of the events fell apart or moved online, including the concert. Instead of raising an additional $1-million, War Child is facing a drop of about $4-million in revenue this year and Dr. Nutt has had to slash office space and lay off some staff. And things could get worse.

“I don’t think there is anybody in the charitable sector who doesn’t believe that 2021 could potentially be worse,” she said from her home in Toronto. “Especially for international aid organizations. It could potentially be a bloodbath.”

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The same story is playing out at charities across Canada as donations dry up and organizations struggle to survive. So far, 372 charities have closed since April, according to figures from the Canada Revenue Agency. That’s down from 603 in the same period last year, but charity leaders say many non-profits are barely hanging on and they fear there will be a wave of closings when Ottawa ends its emergency support for wages and rent.

The charities that help struggling Canadians are struggling, too

The pandemic has hit charities on all fronts. The weakening economy has cut donations while government restrictions on social gatherings have ended fundraising events. And even as charities cut costs, close offices and lay off staff, they are being stretched further as demand for their services soars.

financial impact of the pandemic

(% of organizations)

Revenue

2008-09 crisis

Pandemic

Increase

31%

6%

Remain

the same

37

26

69

32

Decrease

-0.75

Avg. chng.

-30.65

2008-09 crisis

Pandemic

Expend.

Increase

15

42

Remain

the same

36

52

22

33

Decrease

4.53

-0.48

Avg. chng.

THE GLOBE AND MAIL, SOURCE: imagine canada

financial impact of the pandemic

(% of organizations)

Revenue

2008-09 crisis

Pandemic

Increase

31%

6%

Remain about

the same

37

26

69

32

Decrease

-0.75

Avg. chng.

-30.65

2008-09 crisis

Pandemic

Expenditure

Increase

15

42

Remain about

the same

36

52

22

33

Decrease

4.53

-0.48

Avg. chng.

THE GLOBE AND MAIL, SOURCE: imagine canada

financial impact of the pandemic (% of organizations)

Revenue

2008-09 crisis

Pandemic

Increase

31%

6%

Remain about

the same

37

26

69

32

Decrease

-0.75

Avg. change

-30.65

Expenditure

2008-09 crisis

Pandemic

Increase

15

42

Remain about

the same

36

52

22

33

Decrease

4.53

-0.48

Avg. change

THE GLOBE AND MAIL, SOURCE: imagine canada

There are larger issues at play as well. The pandemic has exposed deep flaws in Canadian philanthropy and revealed the fragility of many non-profits. Many charity leaders say the relentless pressure from donors to keep costs down left organizations without the technology they needed to cope with the pandemic. Other leaders worry that COVID-19 will exacerbate trends that have been working against charities for years: a shrinking donor pool and fewer volunteers.

“This is kind of a game changer,” said Pamela Valentine, chief executive of the MS Society of Canada, which has seen a $21-million drop in donations this year and has laid off nearly half its staff, or 165 people. “You are going to see tens of thousands of organizations fall.”

Canadians like to take pride in their generosity and they usually donate more than $10-billion a year to close to 90,000 registered charities. The vast majority of those organizations have less than $500,000 in annual revenue and more than half are run entirely by volunteers.

Most charities have learned how to cope with fluctuations in donations and some regularly have a hard time making ends meet. But none have experienced anything like COVID-19. Interviews with 30 charity leaders offered a glimpse into the scale of the impact.

Donations to The Canadian Cancer Society have fallen by 40 per cent, or $70-million. CEO Andrea Seale said the charity has had to lay off 300 people, or roughly 30 per cent of its staff, and it plans to close as many as 48 of its 59 regional offices.

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The United Way in Calgary has reduced its operating costs by 30 per cent and warned local organizations that its funding will drop by between 15 per cent and 30 per cent. Karen Young, the CEO, said the charity has also realigned its priorities and partnerships. ”We had to let some agencies know that we wouldn’t be investing in the future with them,” she said.

The Salvation Army has slashed the number of kettles it sets up as part of its traditional Christmas Kettle Campaign. The church usually has 2,000 kettle locations across the country, but that has dropped to 1,000 because of COVID-19 restrictions. This past week, it pulled all kettles out of Alberta. Spokesperson Lieutenant-Colonel John Murray said the organization is still hoping to raise $23-million this December, but he acknowledged it will be tough.

Hackergal, a charity created by venture capitalist Lucy Ho to teach girls how to code, has experienced an 80-per-cent drop in revenue to $300,000 this year. The Toronto-based charity works mainly in school classrooms, but Ms. Ho is reinventing its program online and hopes to be back at full strength within a few months. “We had a tremendous hit when the pandemic happened,” she said.

Staffing impact of the pandemic

% of charities with paid staff

LAYOFFS

30%

2008-09 crisis

23%

Pandemic

WORK REDUCTIONS

27%

2008-09 crisis

22%

Pandemic

THE GLOBE AND MAIL, SOURCE: imagine canada

Staffing impact of the pandemic

% of charities with paid staff

LAYOFFS

30%

2008-09 crisis

23%

Pandemic

WORK REDUCTIONS

27%

2008-09 crisis

22%

Pandemic

THE GLOBE AND MAIL, SOURCE: imagine canada

Staffing impact of the pandemic

LAYOFFS

% of charities with paid staff

Number of staff involved

Average

Median

2008-09 crisis

-44.4%

-33.3%

30%

Pandemic

-15.7%

-12.5%

23%

WORK REDUCTIONS

2008-09 crisis

-35.6%

-30.0%

27%

Pandemic

n/a

n/a

22%

THE GLOBE AND MAIL, SOURCE: imagine canada

“The crisis is at a scale that we’ve not seen before,” said Bruce MacDonald, CEO of Imagine Canada, which works to support other charities.

Last spring, Imagine Canada estimated that revenue had dropped by an average of 30 per cent across all charities, compared with a 1-per-cent drop during the 2008 financial crisis. Further research this fall showed that the situation had not improved, and a recent survey of 1,100 non-profits in British Columbia by Vantage Group, a Vancouver-based charity, concluded that almost one in five had closed or anticipated closing down. The Toronto Foundation also surveyed 237 non-profits, and 20 per cent of those with less than $500,000 in revenue said they were at a high risk of closing.

Canada’s 25 major medical charities also fund hundreds of research programs. That funding is expected to fall by more than 30 per cent this year, or $50-million, and some clinical trials have already stopped. “That’s really worrisome because we invest in research that is unique to patients and not typically funded,” said Connie Côté, CEO of the Health Charities Coalition of Canada.

The pandemic has not only ground up individual donations, it has also changed the focus of major foundations. Many have diverted their attention to COVID-19-related projects and cut back or even stopped making grants to other causes.

Stephen Lewis, Canada’s former ambassador to the United Nations, cited the Bill and Melinda Gates Foundation as a prime example. “Right from the outset, he said that the coronavirus was everything and that he was going to turn his entire apparatus over to COVID-19, and he’s done so,” said Mr. Lewis, who is co-founder of a charity called AIDS-Free World. “But in the process he has, in effect, given permission to others to mirror his approach and that has further complicated the raising of funds for things other than COVID-19.”

Olympic cross-country skiing gold medalist Beckie Scott has already felt the impact of the shifting priorities. Ms. Scott is the founder and CEO of Spirit North, a Canmore, Alta.-based charity that encourages Indigenous young people to get involved in sports. The charity runs programs in schools and communities across five provinces, and it receives about one-third of its $1.6-million in funding from charitable foundations. Spirit North has struggled to keep its programs operating amid ever-changing health restrictions, and donations have fallen by about 30 per cent.

revenue and expenditure

% of charities reporting changes

REVENUE

Decrease

Increase

About

same

ACTIVITY AREA

Arts, culture/recreation

…

…

87%

Education/research

…

33

66

Health

…

26

70

Social services

12

25

63

Philanthropic intermediaries

…

29

66

Other

…

31

65

EXPENDITURE

Decrease

Increase

About

same

ACTIVITY AREA

Arts, culture/recreation

…

47%

46%

Education/research

…

52

43

Health

21

44

35

Social services

23

50

27

Philanthropic intermediaries

13

60

27

Other

15

57

28

... Estimate cannot be released

THE GLOBE AND MAIL, SOURCE: IMAGINE CANADA

revenue and expenditure

% of charities reporting changes

REVENUE

Decrease

Increase

About

same

ACTIVITY AREA

Arts, culture/recreation

…

…

87%

Education/research

…

33

66

Health

…

26

70

Social services

12

25

63

Philanthropic intermediaries

…

29

66

Other

…

31

65

EXPENDITURE

Decrease

Increase

About

same

ACTIVITY AREA

Arts, culture/recreation

…

47%

46%

Education/research

…

52

43

Health

21

44

35

Social services

23

50

27

Philanthropic intermediaries

13

60

27

Other

15

57

28

... Estimate cannot be released

THE GLOBE AND MAIL, SOURCE: IMAGINE CANADA

revenue and expenditure

% of charities reporting changes

REVENUE

EXPENDITURE

Decrease

Decrease

Increase

Increase

About

same

About

same

ACTIVITY AREA

Arts, culture/recreation

…

…

87%

…

47%

46%

Education/research

…

33

66

…

52

43

Health

…

26

70

21

44

35

Social services

12

25

63

23

50

27

Philanthropic intermediaries

…

29

66

13

60

27

Other

…

31

65

15

57

28

... Estimate cannot be released

THE GLOBE AND MAIL, SOURCE: IMAGINE CANADA

“A lot of the grant funding available right now, and emergency funding, is for front-line workers and support services directly related to COVID,” Ms. Scott said. “We’re not first in line to receive that kind of funding.”

She and Mr. Lewis aren’t casting blame and they understand the need to concentrate on COVID-19. But they argue that these funding decisions can have unintended consequences. Mr. Lewis pointed out that around 700,000 people die from HIV-related causes each year and Ms. Scott said the at-risk kids who benefit from Spirit North might not return if the charity has to keep suspending operations.

The pandemic has also revealed the precarious state of many charities and the inadequate investments the sector has made in technology. Even large organizations such as the Cancer Society still rely on hundreds of small community events for fundraising, and many were caught flat-footed when the pandemic restricted public gatherings.

Others had trouble moving programs online. The Ottawa Rape Crisis Centre closed last month because its outdated IT system couldn’t handle video counselling or provide other services virtually. The organization has restarted its emergency help line, but the charity’s board has estimated that modernizing the IT system could cost $100,000 and it will be months before the centre reopens.

“The level of digital sophistication has become a matter of life and death for charities,” said Marina Glogovac, CEO of Canada Helps, a charity that provides fundraising services to 24,000 non-profits. “The reason we see this complete underinvestment is because it’s very unpopular to give to administration costs.”

Canada Helps now offers more seminars on online fundraising and has launched a Charity Adaptation and Innovation Fund to help 400 organizations improve their infrastructure. “We made the argument that especially now if charities do not invest into their capacity to retool and survive in the digital economy, forget it,” Ms. Glogovac said.

Many charity leaders say they have wrestled for years trying to balance the demands of donors against the need to modernize. They add that charities are constantly assessed on how little they spend on administration, and it can be a challenge convincing donors to fund buildings or equipment.

Tammy Moore, CEO of the ALS Society, said the society only managed a major upgrade to its financial system because of the Ice Bucket Challenge, a popular campaign launched in 2014 by New Yorker Patrick Quinn, who recently died from Lou Gehrig’s disease. The ALS Society raised $17.2-million from the challenge in Canada and some of that money went toward the new system. “That’s not pretty sexy for a donor. You put $100,000 in a finance system?,” said Ms. Moore. “If we had not had that opportunity to have made those investments, we would have been devastated.”

Ms. Moore said she’s frustrated with the fixation on administration costs. Charity leaders are often asked “Why buy the best technology for your organization? You’re just a charity,” she said. “Why wouldn’t you make sure you have the most effective, efficient tools for your organization to ensure they can make these pivots?”

Impact of covid-19 Pandemic on

Organization’s Programs,

Services, Activities or Events

Suspended, postponed or cancelled

29%

67%

4%

Increased or expanded

2%

44%

54%

Continued by transitioning to virtual

12%

66%

22%

Continued by modifying to lower-touch/increased

health and safety practices

16%

43%

42%

Cancelled/reduced programs or activities

involving in-person contact

48%

46%

6%

THE GLOBE AND MAIL, SOURCE: Volunteer

Canada; Ipsos and Volunteer Management

Professionals of Canada

Impact of covid-19 Pandemic on

Organization’s Programs, Services,

Activities or Events

All

Some

None

Suspended, postponed

or cancelled

29%

67%

4%

2%

44%

54%

Increased or expanded

Continued by transitioning

to virtual

12%

66%

22%

Continued by modifying

to lower-touch/increased

health and safety practices

16%

43%

42%

Cancelled/reduced

programs or activities

involving in-person contact

48%

46%

6%

THE GLOBE AND MAIL, SOURCE: Volunteer Canada; Ipsos

and Volunteer Management Professionals of Canada

Impact of covid-19 Pandemic on Organization’s

Programs, Services, Activities or Events

All

Some

None

Suspended, postponed

or cancelled

29%

67%

4%

2%

44%

54%

Increased or expanded

Continued by transitioning

to virtual

12%

66%

22%

Continued by modifying to

lower-touch/increased health

and safety practices

16%

43%

42%

Cancelled/reduced programs

or activities involving

in-person contact

48%

46%

6%

THE GLOBE AND MAIL, SOURCE: Volunteer Canada; Ipsos and

Volunteer Management Professionals of Canada

There are some signs of change. The urgency of the pandemic has led many donors to drop restrictions they normally place on gifts. Companies, in particular, often tie their giving to specific programs or outcomes. But since March, many donors have allowed charities to use the money as they see fit.

“In a normal year we would see a 50-50 split between restricted and unrestricted giving,” said Tania Little, the chief development and partnerships officer at Food Banks Canada, which supports 3,000 food banks across the country. “Up until July, we primarily saw unrestricted giving.”

Ms. Little said the charity has seen an increase in corporate donors – from 65 to 220 – and while some have continued giving freely, others have shifted back to traditional sponsorships. She hopes the trend won’t be completely reversed because tied gifts often leave less money for expenses such as trucks and gas. But she said charities need to build trust with donors, too. “If they would like to continue to see that openness by donors around how they are investing, then [charities] need to lead with their accountability and transparency.”

While charities try to win back donors and recover from the pandemic, they’re confronting some long-term challenges.

The number of donors and volunteers has been falling steadily for years, making the recovery from COVID-19 even harder. From 2010 to 2018, the number of Canadians who claimed a charitable donation on their tax return dropped to 5.3 million from 5.7 million, according to Statistics Canada. Over the same period, the percentage of Canadians who volunteered with charities fell to 41 per cent from 47 per cent.

Charities face a myriad of regulations that many leaders say hold back innovation in fundraising. Strict rules surrounding mergers, social enterprises and how charities interact with non-profits that aren’t registered charities also leave little room for collaboration. “We’re all having to scramble and compete for dollars and attention in theses dire times,” said Matthew Chater, CEO of Big Brothers Big Sisters of Canada. “I hope that instead of us competing in the way that we have, we look at different models of philanthropy and we look at different models of investment in charities.”

Predicted length of

continued operations

% of charities

1 to 2

months

3%

3 to 6

months

20

6 to 12

months

25

Longer than

12 months

19

Indefinitely

17

17

Don’t know

THE GLOBE AND MAIL, SOURCE: imagine canada

Predicted length of continued operations

% of charities

1 to 2

months

3%

3 to 6

months

20

6 to 12

months

25

Longer than

12 months

19

Indefinitely

17

17

Don’t know

THE GLOBE AND MAIL, SOURCE: imagine canada

Predicted length of continued operations

% of charities

1 to 2

months

3%

3 to 6

months

20

6 to 12

months

25

Longer than

12 months

19

Indefinitely

17

17

Don’t know

THE GLOBE AND MAIL, SOURCE: imagine canada

Attracting young donors and volunteers is a particular challenge. Researchers say young people have shied away from traditional charities and opted for more informal ways of giving money and time. Statistics Canada figures show that the percentage of people over the age of 65 who claimed a donation has increased to 31 per cent from 24 per cent in the past decade. But other studies have shown that young people often give to non-profits that don’t issue tax receipts.

“Our sense is that young people have social good in their DNA, it’s being expressed differently,” said Mr. MacDonald of Imagine Canada. “They are more drawn to causes than organizations. They’d rather give money to support a friend who has got cancer than the Canadian Cancer Society.”

Some charities have begun to adapt by forming youth committees and reaching out on social media. Most of the staff at Islamic Relief Canada, which focuses mainly overseas, are under the age of 40 and the Toronto-based organization has started more projects in Canada. “We find that the younger generation want to give to causes that are more local,” said Reyhana Patel, head of communications. “Not only do they want to donate but they also want to do something. They want to have their voice heard. We like to tie in our advocacy and our fundraising.” That’s one reason the charity’s revenue has quadrupled from 2014 to 2019, to $65-million, and remained largely steady this year.

How has Your Volunteering Changed

since COVID-19?

Stopped volunteering completely

39%

Volunteer remotely now

20

Continue to volunteer for my charity

and help out in my neighbourhood

8

Chose to volunteer for a different

charity because of COVID-19

7

Reduced my volunteer hours

7

No longer volunteering for my charity,

and helping out in my neighbourhood

7

Increased my volunteering

with the same charity

6

No change

6

THE GLOBE AND MAIL, SOURCE: Volunteer Canada;

Ipsos and Volunteer Management Professionals

of Canada

How has Your Volunteering Changed

since COVID-19?

Stopped volunteering completely

39%

Volunteer remotely now

20

Continue to volunteer for my charity

and help out in my neighbourhood

8

Chose to volunteer for a different

charity because of COVID-19

7

Reduced my volunteer hours

7

No longer volunteering for my charity,

and helping out in my neighbourhood

7

Increased my volunteering

with the same charity

6

No change

6

THE GLOBE AND MAIL, SOURCE: Volunteer Canada; Ipsos

and Volunteer Management Professionals of Canada

How has Your Volunteering Changed since COVID-19?

Stopped volunteering completely

39%

Volunteer remotely now

20

Continue to volunteer for my charity

and help out in my neighbourhood

8

Chose to volunteer for a different

charity because of COVID-19

7

Reduced my volunteer hours

7

No longer volunteering for my charity,

and helping out in my neighbourhood

7

Increased my volunteering

with the same charity

6

No change

6

THE GLOBE AND MAIL, SOURCE: Volunteer Canada; Ipsos and

Volunteer Management Professionals of Canada

The news isn’t all bad. Many charities have shown remarkable resilience and donors have opened their wallets for COVID-19 relief programs. Canada Helps has seen a 54-per-cent increase in new monthly gifts. Charities such as the UJA Federation of Greater Toronto have surpassed fundraising goals by refocusing on the pandemic. The UJA expects to raise $85-million from its annual appeal this year, $25-million more than usual. Toronto’s Anishnawbe Health Foundation has raised $170,000 for its COVID-19 relief programs.

But some of the rush to help with COVID-19 relief might not last. “I don’t know if people will stay engaged or how many of those new donors will say, ‘Okay, I did my part and now it’s done,’ ” said Karen Theriault, director of development at Feed Nova Scotia, which works with 140 food banks and has attracted 3,000 new donors. “Yes, the pandemic, and the food insecurity it has heightened, is a crisis. But it was there before.”

All charities can take comfort from people such as Shauna Bookal, a volunteer with the Cancer Society and executive director of the Ontario Field Hockey Association. Ms. Bookal sees the pandemic as an opportunity to become more active and innovative. “If anything, the pandemic is just helping me get out of my comfort zone,” she said from her home in Toronto. “Now’s the time to explore. Now’s the time to get creative.”

The big hit facing some charities

The COVID-19 pandemic has been a blow to the non-profit sector and many are struggling to survive. Here’s how some are coping:

Rainbow Stage: The 2,300-seat outdoor theatre in Winnipeg cancelled its summer season and instead played host to school graduations, memorial services and music recitals. Julie Eccles, the executive director, said the theatre had insurance that covered pandemics and helped mitigate the $3-million in lost ticket sales. Finding a similar policy for the future has been difficult, however, and the cost could climb by 200 per cent, or $30,000.

Open this photo in gallery:

Cystic Fibrosis Canada: Revenue is expected to fall by about $6-million this year to $10-million. The charity has cut 10 staff, out of about 69, and it’s considering terminating the leases on around half of its 10 community offices. CF Canada has maintained most of its services to the 4,300 Canadians who live with cystic fibrosis and it has continued its drive to get the groundbreaking drug Trikafta approved in Canada.

Big Brothers Big Sisters of Canada: Donations have fallen by $13.5-million, or just over 20 per cent of annual funding. Chief executive Matthew Chater said the charity has managed to switch to online mentoring but some of its 98 agencies may have to merge or close. He added that BBBS’s waiting list of 15,000 young people seeking a mentor has grown considerably during the pandemic.

Arts on the Ave: The Edmonton charity cancelled the festivals it runs in an inner-city neighbourhood and revenue at its coffee shop, The Carrot, fell 95 per cent when the pandemic hit. The organization improvised with impromptu performances on flatbed trucks but executive director Christy Morin says they’re hanging on by a shoestring. “I think every single arts organization in Edmonton is wondering: Are we going to be here next year?”

Open this photo in gallery:

Wilderness Committee: Donations have fallen by about $300,000, or less than 10 per cent of the charity’s annual budget. Three of 30 staffers have been laid off and some activities were cancelled. The charity relies on hundreds of small donations and many donors have increased their giving. “They write little notes to us and say ‘Here’s a bit extra,’ " said Beth Clarke, the executive director.

Friends of the Earth Canada: The organization receives up to 50 per cent of its annual donations in December. “We don’t know what scale we’re looking at,” CEO Beatrice Olivastri said. “It might be more modest this year, but we have loyal supporters.” FOE had to cancel the Great Canadian Bumble Bee Count, which encouraged people to track bees around their homes.

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