Community service organizations are at risk of failing their mandates, failing their communities, betraying the public trust, and fading away as viable organizations.

We now have a significant body of Canadian research that documents the vulnerability of community social service organizations. New funding practices, widely adopted by governments and others in the early 1990s, have had a devastating impact on the capacity of many Canadian charities or nonprofit organizations to meet the needs in their own communities. We now know unequivocally that community social service organizations are in serious distress as a direct result of changes in government funding and accountability practices (Scott, 2003; Eakin, 2004; Statistics Canada, 2004a; Statistics Canada, 2004b; City of Toronto, 2004; Saunders, 2004).

This article explores the circumstances that have led to the current crisis and seeks to understand why there has been so little action by government to correct problematic funding and accountability practices. What is it that funders in particular and concerned Canadians in general do not yet understand about this growing crisis? And why are government funders not yet moving to make significant changes in their relationships with the community nonprofit organizations that provide essential social services for so many Canadians?