We Have To Get Over How Much Charity Funding Goes To ‘Administration’

As Canadians, we pride ourselves on giving back. But while generosity has always been a shared value in this country — and a large part of our national identity — is it still true? Are Canadians as generous as we think we are? The Giving Report, a new annual report examining the state of our charitable sector, delves into Canadian income tax returns to find out.

According to the report, Canadians donated seven per cent less in 2015 than we did in 2006, when accounting for inflation — a drop of roughly $600 million. The proportion of Canadian families who donated to charity also eroded over the past decade from 45.3 per cent of families in 2006 to 39.9 per cent in 2015.

This steep decline in charitable giving is perhaps coming at the worst possible time for Canada. Today, many of the services we expect from our municipal, provincial and federal governments are in fact performed by charities. And with an aging population and a shrinking social safety net, we’re now more reliant on the charitable sector than at any point in our history.

Small charities, in particular, support an incredible diversity of issues and causes in communities across the country, doing vital work that is often left unnoticed until you or a person you care about needs help. Just as small businesses are considered the backbone of the Canadian economy, small charities are the backbone of the charitable sector, providing many of the on-the-ground programs and services communities rely on, addressing unmet needs and working to solve social problems.

By showing people just how consequential their contributions are for Canada, we can inspire them to engage with the charitable sector in a more meaningful way, and to give more generously.

However, unlike larger charities, especially hospitals and universities that deservedly receive a healthy amount of government funding, small charities rely on receipted gifts (individual and corporate donations). In 2015, these donations accounted for more than half (53 per cent) of total revenue to very small charities (revenues under $99,999), and 41 per cent of all funding to small charities ($100,000-$499,000).

This helps explain why a $600-million annual void in charitable donations over the past decade is hurting smaller Canadian charities today.

So, what can be done to reverse the decline in charitable giving?

For charities, online outreach will continue to be key. While Canadians are making fewer charitable donations overall, online giving increased 22.5 per cent annually on CanadaHelps’ platform from 2006 to 2015. And, with online giving becoming increasingly commonplace, more Canadians are using our online platform to set up monthly donations to causes they care about, rather than scrambling at year’s end for a charitable tax receipt. For instance, the average contribution ($669) from people who made monthly donations was over two times higher than those who made one-time donations ($322) in 2015.

In addition to being proactive online, charities must reframe how they communicate their mission by taking a greater mid- and long–term impact-orientation. They must be able to report their progress on an ongoing basis and not just in annual reports. In a recent survey of charitable donors across the country, almost three-quarters (73 per cent) of Canadians said they would likely donate more if they had access to a charity’s impact results more readily. For this reason, CanadaHelps launched an impact tool just over a year and a half ago to help charities measure and share their results. As a charity ourselves, we want to promote greater visibility of impact within the charitable sector, so we can inspire Canadians to give more and invest more strategically in the causes they care about.

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The Giving Report is a continuation of these efforts. We believe opening a dialogue with Canadians about our charitable sector — its connection to each one of us, as well as the impact of our giving — is the best way to ensure a better future for all of us. By showing people just how consequential their contributions are for Canada, we can inspire them to engage with the charitable sector in a more meaningful way, and to give more generously.

In recent years, many Canadians may have been dissuaded from giving by the persistent, and frankly, incorrect belief that what charities spend on administration, versus the causes they support, is the single biggest determinant of their effectiveness. However, our annual report shows that management and administration accounted for only nine per cent of all charity spending in 2015. Similarly, fundraising comprised only one per cent of a charity’s total expenditure, with the vast majority (81 per cent) of funds being spent on charitable activities.

After crunching all the numbers, it’s clear our charitable sector is not only operating effectively, it’s offering more to Canadian society than most of us even realize. And while it’s only natural for donors to fear their money won’t be spent efficiently, we must recognize that charities must spend to build their capacity. Doing anything less would be short-sighted and damaging.

Together, we must move past our unhealthy obsession with admin ratios and understand the collective impact we all make when we decide not to give. If we are no longer a generous nation, then we must become a strategic nation. One that recognizes that investing in Canada’s charitable sector is an important insurance policy for our future and our children’s futures.

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Author: Marina Glogovac