Funding Trends Threaten Non-profits

Source: United Ways of Ontario's Government Relations Bulletin - Issue dd June 18, 2003

A new report raises disturbing questions about the impact the trend towards short-term or project funding is having on the non-profit and voluntary sector. Commissioned as part of the Voluntary Sector Initiative, Funding Matters, assesses the impact these shifts in funding are having on the financial capacity and long-term sustainability of non-profit and voluntary organizations, and on their ability to fulfil their mandates.

In terms of funding, the research indicates:

• Funders are increasingly adopting targeted funding approaches.
• Project-based funding is replacing core funding, and has given funders significant control over organizational priorities.
• Funders are reluctant to fund administrative cost.
• Funding is provided for short periods, and is increasingly unpredictable.
• Reporting requirements have increased.
• Funders increasingly demand demonstrations of secured funding from other sources.
  

While the report found widespread support for the often-cited rationale – improved accountability, efficiency, and fostering innovation – it also found that the changes were having a negative impact on organizations, their staff and the services provided. These include:

• Degradation of program and service quality as organizations attempt to cope with huge year-to-year swings in revenue.
• The loss of basic organization’s infrastructure, particularly administrative capacity, and the inability to retain experienced staff.
• Many organizations, particularly small ones, suffer from report and proposal overload, as a result of continually having to prepare funding submissions or progress reports for funders.
• Programs and services put at risk or lost by withdrawal of one funder precipitating a chain reaction.
• Advocacy organizations have been effectively marginalized by the focus on projects and the growing aversion to fund advocacy.

The report notes that governments have traditionally been the main funder of non-profit organizations, and many of the new funding arrangements were introduced during years of government retrenchment and funding cuts. Non-profits were forced to diversify their funding sources, while governments moved to reduce spending and avoid long-term financial commitments. It also notes that private funders including some United Ways are becoming more selective in what they fund, and that competition for donor dollars has intensified.

For more information or to obtain a copy of the Funding Matters report please visit: www.ccsd.ca

Source: United Ways of Ontario's Government Relations Bulletin - Issue dd June 18, 2003

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Page last updated June 19, 2003