Funding Matters

A new report by the Canadian Council on Social Development (CCSD) and the Coalition of National Voluntary Organizations (NVO) indicates that recent changes in funding models are affecting the ability of the non-profit and voluntary sector to fulfill its important role in Canadian society. Funding Matters: The Impact of Canada's New Funding Regime on Non-profit and Voluntary Organizations, by Katherine Scott, warns that the sector as a whole is at serious risk if action is not taken immediately. The report is based on a series of focus groups held in different regions of the country as well as roundtable discussions and interviews with funders, a written survey of nonprofit and voluntary sector organizations, in-depth case studies, and a review of existing research.

The report stresses that non-profit and voluntary organizations participating in the study were generally supportive of the aims of funders to increase accountability, support partnerships, promote diversification of funding sources, and foster efficiency and innovation in the sector. But the study found that changes in funding models have had unforeseen consequences for non-profit and voluntary organizations.

In particular, moves towards more targeted and project-based funding initiated in the 1990's have left non-profit and voluntary organizations scrambling to come up with money for administrative costs and core programming. Administrative costs not attached to a project are considered less and less "fundable." Funding is now provided for shorter periods of time, and is increasingly unpredictable. The resulting swings in revenue can undermine organizations' capacity to provide consistent quality programs and services, to plan ahead, and to retain experienced staff. The report warns that some organizations are losing their basic infrastructure and are becoming "a series of projects connected to a hollow foundation."

As organizations move toward more project-based funding, some are falling prey to what the report calls "mission drift," a move away from the organization's core mandate, in order to fulfill funding requirements. Not only does this mean the organization's primary reason for existing is not being addressed, but it can also damage an organization's credibility in the community. In addition, funders' increased emphasis on funding programs based on partnerships and in-kind contributions means that organizations often need financial commitments from other sources in order to be eligible for funding. This can lead to a financial "house of cards" where the loss of one partnership can bring down a whole interlocking funding structure. And when organizations must cobble together projects and partners to survive, being seen as an outspoken advocate on behalf of one's client group can be regarded as too risky, leading to an "advocacy chill" in the non-profit and voluntary sector.

Finally, the report notes that- partly as a result of the new funding models- the non-profit and voluntary sector is suffering from "Human Resource Fatigue." Increased reporting requirements, the necessity of seeking funding from multiple sources, and the move towards project-based programming is stretching paid staff and volunteers to the limit.

All this in a sector where human resources are already in critical condition due to lower pay levels, fewer benefits, and less security than in government and for-profit sectors.

While the report warns that the non-profit and voluntary sector as a whole is at serious risk, it also emphasizes that immediate action on the part of funders and non-profit/voluntary organizations could help reverse some of the alarming trends noted in the study.

You can read the full study at www.ccsd.ca (under publications). For more information, contact the Canadian Council on Social Development at tel: 613-236-8977 or email: council@ccsd.ca.