By Duke Chang

This is our sixth iteration of The Giving Report, a raw and honest look at the state of the charitable sector in Canada. Historically, we balance the narrative by sharing important impact stories about the vital work charities do to create societal change — but not this year.

The issues CanadaHelps uncovered are simply too concerning and our focus is to ensure the gravity of the situation is understood and acted upon by Canadians and charities.

As the newly appointed President and CEO of CanadaHelps, this is the first time I have worked with the team to develop The Giving Report, and it is arguably our most hardest-hitting one yet. We dig into the painful issues and obstacles we often want to ignore, surfacing the most critical insights that Canadians need to know as we navigate a difficult period ahead. These are issues that we must ensure are understood and acted upon, otherwise jeopardising the effectiveness of the sector. This year’s edition is separated into three key areas:

1. A focus on the needs of Canadians and how they give reveals net-new insights, alongside updates on long-standing threats. Our top findings include:

• 22 percent of Canadians expect to rely on charities for basic needs (+8 percent in nine months)
• 4 percent of Canadians that give per tax filings (down five percentage points in 10 years)

2. A deep dive into the largest and most urgent struggles, as uncovered in our survey of nearly 3,000 charities. These alarming insights include:

• 3 percent of charities have experienced a lasting increase in demand since the pandemic
• 8 percent of charities are highly concerned about staff burnout
  (2nd highest concern of 24 issues surveyed)
• 3 percent of charities cannot meet current levels of demand
• 5 percent of charities raised few funds in 2022
• 2 percent of charities have fewer volunteers than before the pandemic

3.The final section is a call for change. We discuss how the infinite optimism of those who work in the sector must be checked. Now, more than ever, we need to take an objective look at the issues that threaten our sector. There is urgent need to engage in hard conversations and develop course correction plans. In the wise words from Lao Tzu, “If you do not change direction, you may end up where you are heading.”

We open the discussion outlining the five most impactful steps charities can take action on in these uncertain times. But, before diving in, it’s important to remind ourselves of our purpose, which includes the work we do.

The health of charities doesn’t just mean the health of the charitable sector, it means the health of our country.

A healthy charitable sector means that the 22 percent of Canadians who expect to rely on charitable services for their basic needs will continue to be sheltered and fed. It means that Indigenous communities will have continued access health care in remote areas. It means that people living with mental illnesses will have the resources and safe spaces so they can heal. The gaps that charities fill are diverse and invaluable, but charities can’t protect our sector alone. It involves all Canadians actively supporting the causes we all care about to create the change we want to see in the world.

It’s been a difficult few years, and even still, we’re headed towards more turbulent waters. It’s time for a conversation. It’s time for a change. And for the sake of society, I hope you’ll join us.

Duke Chang is the President and CEO of CanadaHelps.

 

 

 

Trouble in the Sector: 10 Concerning Charity Issues You Need to Know

In November 2022 we surveyed 2,948 charity professionals representing 2,860 unique charities. With participation of 3.3 percent of Canada’s charities, and representation across charities of all type and sizes, to assess the state of the charitable sector.

Our research identified 24 potential issues and asked respondents to rate their level today and then looking forward into the next five years. Ten key concerns rose to the top. More concerning, our research found the top 10 concerns for charities today will still be their top 10 concerns in five years. This sends a strong signal that while we know what our biggest problems are today, we are not confident that we’re on the right path to correcting them.

Charities indicated a wide range of issues and challenges, spanning from financial support to pandemic resurgences, but the most prominent areas of strain had four key recurring themes:

Throughout this section, we’ll look at Canadian charities’ top 10 issues, who they’re affecting the most, and what is at risk if change doesn’t come.

1. Increased Demand Has Created Unprecedented Strain on Charities

Overnight, the pandemic created unprecedented challenges for charities. Now, three years into the pandemic, charities are still adapting to the changed demand for their services. Three of every four charities faced changes in demand early in the pandemic. For 51.5 percent of charities, demand has not returned to pre-pandemic levels (see Figure 7). Of those, eight out of every 10 charities (40.3 percent of all charities) continue to experience demand above pre-pandemic levels, with over half reporting that demand continues to increase. While the other two of 10 of these charities report demand is below pre-pandemic levels, it is important to note that a decline in demand is not always good.

Three years into the pandemic, many individuals, and in particular seniors or individuals with conditions that put them at higher risk, continue to take precautions. A drop in demand for seniors’ services that promote community, connection and well-being would be an example of an area where a decline in demand may come at a cost.

When asked about their charity’s ability to meet current service demand, just 29.6 percent of respondents say that demand is met with their organization’s current resources. 57.3 percent of respondents report that demand exceeds the capacity of their organization, with 22.5 percent reporting that demand significantly exceeds capacity.

The number of charities that experience higher levels of demand today than prior to the pandemic (40.3 percent) is less than the number of charities unable to meet current demand (57.3 percent). This highlights that while there are now more charities unable to meet demand, many Canadian charities were already under tremendous stress.

While later in this report we highlight the added pressure small charities face, when it comes to their current ability to meet demand, even very large charities are struggling.

The pandemic triggered a demand crisis for more than 57 percent of charities. Inflation in Canada has reached its highest levels in 30 years, peaking at 7.7 percent in May 2022. Canadians are not strangers to the effects — according to Statistics Canada, three in four expect rising prices to negatively impact their financial situation. But what donors may not be aware of is just how hard the rising cost of goods and services have hit charities.

A staggering eight in 10 charities report that inflation has impacted their service delivery costs while funding has not increased to match (see Figure 9). In addition to the costs of program delivery, staff costs are part of the inflationary challenges facing charities.

44.5 percent of charities say that staff salaries increased due to inflation. But without an increase in funding, the only option for many organizations is to reduce staff. A study of CanadaHelps charity clients conducted in August 2022 revealed that 17 percent of small charities believed inflation will be a contributing factor in their need to reduce staffing. This is further compounded by the fact that 55 percent of charities have seen a decline in volunteers.

From staffing to program delivery, charities are being negatively affected by inflation across nearly all areas of their operations.

2. Inflation is Intensifying Demand for Services, Increasing Service Delivery and Staffing Costs

Inflation in Canada has reached its highest levels in 30 years, peaking at 7.7 percent in May 2022. Canadians are not strangers to the effects — according to Statistics Canada, three in four expect rising prices to negatively impact their financial situation. But what donors may not be aware of is just how hard the rising cost of goods and services have hit charities.

A staggering eight in 10 charities report that inflation has impacted their service delivery costs while funding has not increased to match (see Figure 9). In addition to the costs of program delivery, staff costs are part of the inflationary challenges facing charities.

44.5 percent of charities say that staff salaries increased due to inflation. But without an increase in funding, the only option for many organizations is to reduce staff. A study of CanadaHelps charity clients conducted in August 2022 revealed that 17 percent of small charities believed inflation will be a contributing factor in their need to reduce staffing. This is further compounded by the fact that 55 percent of charities have seen a decline in volunteers. From staffing to program delivery, charities are being negatively affected by inflation across nearly all areas of their operations.

3. While Demand is Up for Most Charities, Funds Raised are Down

The startling increases in demand and inability of the majority of charities to meet current levels of demand has not been proportionally rightsized financially. 45.5 percent of respondents report that fundraising levels are equal to pre-pandemic levels, and for 31.3 percent, funding is below. Just 12.7 percent of respondents report that their current fundraising results are higher than pre-pandemic levels.

The gap between demand and funds raised exists across charities of all sizes, but it is more significant for smaller charities. Figure 10 shows that funds raised today are lower than before the pandemic for 35.7 percent of charities with less than $100,000 in annual revenue, while the same is true for only 22.7 percent of charities with over $2,500,000 in annual revenue. Moreover, funds raised today are higher than pre-pandemic for only 10.2 percent of charities with less than $100,000 in annual revenue, while the same is true for 21.3 percent of charities with over $2,500,000 in annual revenue. This is one of the many challenges disproportionately impacting small charities. Others are discussed as part of issue numbers four and five.

4. Gifts from Individuals, Corporations and Government are all Down.

Across all key funding sources, significantly more charities reported declines in donations than those reporting increases. The net score (charities reporting a decrease less those reporting an increase) is a sizable concern at -30.7 percent, -19.3 percent, 4.3 percent, and -11.6 percent for donations from individuals, corporations, government, and charities, respectively. Smaller charities are roughly twice as likely to report a decline in donations from government, individuals, and corporations. Moreover, nearly half of small charities say they did not receive donations from the government or gifts from other charities at all. This reliance on fewer types of donors leaves smaller charities more vulnerable to economic events affecting one or more donor types.

5. Smaller Charities are at Risk

Overall, more charities increased their investment in fundraising to help weather challenging times. This is true across all types of fundraising programs, with 12 percent of charities increasing spending on major donor program, 24 percent of charities increasing spending on events, and 30 percent increasing spending on digital storytelling (see Figure 12).

However, those same levels of increased investment were not seen for the 78 percent of charities smaller charities (defined as charities with less than $500,000 in annual revenue). In fact, incredibly high numbers of small charities report having no investment at all in key fundraising areas, including:

Limited diversification of their fundraising programs is likely a contributing factor to why small charities did not adapt as well as large charities to the financial strains of year one of the pandemic. In 2020 (the most recent year data is available), small charities with less than $500,000 in annual revenue experienced a 8 percent decline in margin (the difference between total revenue and expenses) compared to 2019. In contrast, medium and large charities with annual revenue above $500,000 were able to better adapt to year one of the pandemic, experiencing a decline of only 4 percent.

6. Staff Burnout and Salaries are Top Concern

While many Canadians experienced burnout to varying degrees throughout the sustained pandemic, charitable sector employees have been it particularly hard. Out of 24 issues, after inflation, staff burnout was ranked the second highest concern for charities today. Looking ahead to 2028, charities rank staff burnout their third highest concern.

Burnout is a key indicator for staff turnover. Adding to the risk of staff turnover is the issue charities ranked as their sixth highest concern both today and in 2028: their ability to offer competitive salaries to retain staff and attract new staff.

While some organizations are trying to address the problem by providing wellness solutions, tools, and programs for staff, the sector as a whole doesn’t seem to be doing enough to address the problem. When asked about staff health and wellness, only three in 10 charities say they have increased their investment, and another three in 10 have kept their investment the same. Moreover, 5.4 percent, have actually decreased investments.

In a survey CanadaHelps conducted in August 2022, small charities said that staff burnout was in part a result of the increased demand for services, but it doesn’t look like charities of any size are in a position to provide relief to their staff with additional support. As noted previously in this report, 57 percent are unable to meet their current demand levels, yet staffing isn’t keeping pace. Close to 60 percent of charities have the same number of paid staff working with heightened service demands, and 15 percent have decreased staff since the pandemic started. Only 24 percent report more paid staff.

With an increased demand for services and charities having either the same or fewer staff members available to do that work, the sector remains vulnerable to high attrition rates as staff seek a more balanced workload.

7. Charities are Struggling to Rebuild their Volunteer Programs

Volunteer programs play a critical role in meeting demand for service for most charities. In fact, 58 percent of charities are solely run by volunteers in Canada. Our data also shows that 92 percent of respondents represent a charity with a volunteer program that has been in operation since before the pandemic. That said, many charities continue to struggle to rebuild their volunteer programs post-pandemic.

55.2 percent of respondents with volunteer programs that existed prior to 2020 report that the total number of active volunteers in the last year is below pre-pandemic levels, with 22.4 percent reporting total active volunteers are significantly below pre-pandemic levels (see Figure 13).

Unfortunately, the sector isn’t expecting a rebound any time soon. On a 0-10 scale, where 10 is very concerned, 41.8 percent scored “Attracting Volunteers” as an eight or higher today. That number slightly increases in five years’ time.

The struggles that charities are experiencing with rebuilding their volunteer programs, combined with the declining giving participation rates discussed earlier, are two very concerning issues. To thrive, a charitable sector needs a caring and engaged society.

8. The Majority of Charities Who Relied on COVID Relief Funding Are at Risk Without it

Fifty-six percent of survey respondents work for a charity that received government COVID relief funding. That number increases to 70 percent for charities with paid staff (See Figure 14). Of survey respondents at charities who received the funding, the large majority, 93 percent, say the funding was important or somewhat important to their organization. 48.3 percent categorise the risk posed to their organization from the loss of COVID relief funding from the government as moderate to high risk  to their organization’s continuity.

The Community Services Recovery Fund (CSRF) is scheduled to end on March 31, 2023. Based on this study, it is clear this poses a serious threat to many Canadian charities struggling post pandemic, and in the thick of inflationary times.

9. Charities Have Lost Fundraising Momentum With Younger Supporters

Each year we seek to bring awareness to the approaching Giving Gap, a term we use to describe the gap in fundraising between younger and older demographics. To avoid the Giving Gap, charities need to attract younger supporters but the data shows we are failing to make progress with younger supporters. 49.5 percent of respondents say they’re either dissatisfied or somewhat dissatisfied with the engagement their charity has seen with Canadians aged 18 to 30 years old.

As concerning as this is, potentially even more so may be the fact that this is in large part to do with our own efforts as a sector. Only 21.9 percent of respondents say they have implemented a strategy intended to engage with younger Canadians.

Social media was the one area with an upturn in youth engagement. One in three charities saw an increase in following, sharing content, commenting and liking their organization’s posts. This remains to be a considerable opportunity to build awareness and connections with a demographic known for using social media platforms as research sources.

With a majority of Gen Z and Millenials using social media on a daily basis, this provides charities direct access to reach this critical segment. 13 percent of respondents said donations from young people decreased  compared to only 5 percent who saw an increase. 13 percent saw youth fundraising on behalf of their charity decrease while only 7 percent saw an increase. 19 percent saw volunteering decrease while only 14 percent saw an increase Charities who report a decrease with the Youth audience in areas regarding engagement on volunteering, fundraising and donating are more than double that of charities who report  an increase.

10. Working Structures are in Flux

Much like the rest of the Canadian workforce, the location of “work” evolved over the pandemic as offices adapted to work-from-home. 45 percent of charities have changed their working structure since the pandemic. Of those, before the pandemic 85 percent of charities were fully in person, 14 percent hybrid, and 1 percent fully remote. Today, 39 percent are fully in person, 49 percent hybrid, and 12 percent fully remote.

The divided composition of today’s workforce largely reflects the essential need for in-person to provide many charitable services, like community health, shelter and animal care. The good news? For charities that have changed their working structure, 40 percent see the change as positive while (a score of eight or higher out of one) 48 percent are neutral (a score of four to seven) and the remainder split between unsure or seeing the change as negative.

According to a report by Own + Global Workplace Analytics, 86 percent of people said remote work would make them happier and 62 percent said it makes them feel more productive. So although charities may feel they’ve settled into a new normal, continued evolutions of working structures could be necessary to avoid retention rates from declining.

 

To download the full report, go to the CanadaHelps website via this link. The Full 58-page Giving Report looks at what donating looks like in Canada for 2023, answering questions such as When Does Optimism Become an Issue?…What Canadian Charities Need to do in this Time of Uncertainty…and why It’s Time for a Change.

www.canadahelps.org/en/the-giving-report/download-the-report/