Non-profits busy chasing short term funds, "worrisome trend" says report

Community Action, July 14, 2003

OTTAWA -- The non-profit, voluntary sector is devoting more time to chasing short-term sources of money at the expense of organizational mission and core activities warns a recently released report from the Canadian Council on Social Development.

The report points to "some worrisome trends," which are:

* Volatility as organizations struggle to diversify funding sources while often experiencing huge swings in revenue,

* Mission Drift as a result of increased financial pressure to win government contracts or prescribed program funding,

* Loss of infrastructure due to project funding models and restrictions on administrative costs,

* Reporting Overload caused by short-term project-based funding that often requires multiple reports with fewer and fewer core staff, and

* Advocacy Chill where organizational survival precedes "being seen as an outspoken advocate on behalf of one's client group" because funders might view it as too risky.

The report, Funding Matters: The Impact of Canada's New Funding Regime on Nonprofit and Voluntary Organizations, which was written by Katherine Scott from CCSD, was completed in partnership with the Coalition of National Voluntary Organizations. It was commissioned by the Working Group on Financing under the auspices of the Voluntary Sector Initiative, and financed by the federal government through the VSI.

Cautioning that the non-profit and voluntary sector's capacity to "fulfill its important role in Canadian society is being undermined and eroded by new funding strategies that are intended to increase accountability, self-sufficiency and competition," the report stressed the "sense of alarm" raised by sector participants in the study.

The report is based on a number of sources, including a series of focus groups held in different regions across Canada with more than 100 non-profit and voluntary organizations represented, a roundtable discussion with funders along with interviews with key informants, written surveys within the sector combined with in-depth case studies and a review of other research.

The report indicates that funders are adopting an increasingly targeted approach to funding. The project-based funding model allows funders more control over organizations. Further, funders are reluctant to fund administrative costs unless they can be tied directly to a project or a program while overall reporting requirements have increased substantially.

Although the majority of participants within the study were "generally supportive of the stated motives of funders to increase accountability, support partnerships, promote diversification of funding sources, and foster efficiency and innovation within the sector," there was a "major disconnect between the stated intent of funding reforms and the consequences of these changes for non-profit and voluntary sector organizations across the country."

Link to this report, go to www.communityaction.ca