Lynn Eakin

Since my memo in June 2007 proposing that a network, rather than an organization, was a better fit for the nonprofit sector two things have happened.

Firstly, in contrast to my first paper which was met with a resounding silence, my network proposal generated many enthusiastic responses. Many of you contacted me to say what a great idea you thought it was and to count you in.

Secondly, an important cross cutting issue has emerged. In May 2007 the Ministry of Government Services Consumer and Corporate Affairs Branch issued a consultation paper on revising the Corporations Act (the legislation that governs nonprofit corporations.)

Read the short Building a Nonprofit Ontario Network to learn how we are moving forward and be sure to join us as we build together.

In my previous post I introduced the paper “Advancing the Nonprofit Sector” in which I identified the key characteristics for successfully organizing the nonprofit sector as – independent (non-government) funding, cross sector involvement, experienced volunteer and staff leadership, and an open functional structure.

I then set out to speak with many people in the various sectors to assess interest in such an organization and found each sector deeply and passionately involved with their mission which, of course, is exactly what makes the nonprofit sector so effective and unique. I also found however, leaders in the various sectors could not muster the same passion regarding cross sector issues - it was not at the top of anybody’s agenda.

This however, does not mean that we cannot move forward. We just need to approach it differently. Read my Memo to the Sector to learn how and why we should build a network.

“The time has come to work together to address our common challenges and opportunities” Over 400 nonprofit leaders from 47 states gathered in Washington, D.C.in October 2006 to affirm the nonprofit sector’s shared values, identify the top three priorities and draft state action plans to address these priorities. We will find the report highlights very helpful as we consider how we want to move forward here in Ontario. Check out the website.www.nonprofitcongress.org . Their goals for the sector are to increase capacity, grow networks and inspire engagement. It seems nonprofit organizations everywhere have a lot in common.

If there is one galvanizing issue that should unite the nonprofit sector in Ontario, it is the financing and regulatory problems that currently threaten the sector’s well-being. Katherine Scott of the Canada Council on Social Development describes the cumulative impact of these problems as a “perfect storm” in the making.

The sector needs to take action, but it is faced with a dilemma. It has neither the capacity to mount a change initiative on the issues that affects the sector as a whole, nor does it have an umbrella organization that can effectively speak to its concerns at the provincial level. Yet the challenges facing the sector’s health are so critical that those interested in its long-term viability must explore new ways to act to influence change in the nonprofit financing and regulatory environment.

This report outlines promising strategies for creating change in the regulatory and financing of nonprofit organizations in Ontario based on a review of sector organizing efforts in regional, national and international contexts.

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Providing responsive, safe and effective programs in communities requires organizational capacity. Try the following quiz to help identify the organizational capacity you would like to see in your nonprofit partners.

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The Nonprofit Organizational Capacity Quiz for Funders

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?

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A survey of voluntary sector organizations was undertaken as part of a larger collaborative problem-solving initiative between Social Development Canada and the Voluntary Sector Forum focusing on the Code of Good Practice on Funding. The survey focused on the funding of administrative costs in federal government agreements with voluntary sector organizations.

The lack of funding to cover administrative costs was identified as one of the most problematic areas of funding during the development of the Code. The Code was intended to strengthen and improve the sustainability of the Voluntary Sector to shore up that “hollow foundation”.

The funding of administrative costs is comprised of two main components:

• the first is the definition of allowable administrative expenses and the funding of those costs and,
• the second component is the process and practice of fund administration.

The two are interconnected. Adequate definition and funding of administration expenses can be undone by accountability and fund management practices. This survey therefore looked at the funding of administration expenses in the context of overall fund management.

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Community-based nonprofit organizations operate in a complex and complicated funding environment. This report presents a picture of the various revenue streams organizations depend on to fund their programs. It also analyzes the details of their expenditures, including the extent to which program funding covers core costs. This information is enriched with information on the use of volunteers, staff overtime and gifts in kind to support the work of the organizations participating in this study. The study concludes with recommendations for future action and research.

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Metro Agencies Resource Council agencies are having significant difficulty balancing their budgets while maintaining service levels. This review was undertaken to explore factors contributing to the financial pressures, what agencies have done to mitigate these factors and what next steps need to be taken to ensure the agencies financial health.

Research indicates there is no single factor, but rather a convergence of financial, service and client-related factors that result in the current pressures faced by the sector. Strategies agencies employed to balance their budgets have eroded any flexibility they had to accommodate the changing and increasing service needs of aging residents. The sector faces pressure to meet urgent need for residential care from elderly parents who find themselves no longer able to care for their adult children at home.

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The revenues and expenditures of ten non-profit community organizations were analysed using a structured framework and common definitions. Data was collected on 155 discreetly funded programs totalling 36.5 million dollars (96% government funded). The analysis found that service programs were under-funded on average 14%. Chief areas of under funding are employee benefits, front-line supervision and core organizational functions. Agencies are using their “other income” from charitable and other sources to cover the deficits in government funded service programs. As a result, they are not able to undertake local community projects and initiatives. Unable to fundraise sufficient resources they have been reducing staffing. Salaries and benefits are down to 71% of total expenditures (in other sectors staff costs are well over 80%).

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