Charities and churches are facing a new reality
Even a series of small changes can make a big difference in this rapidly changing world
It’s well known Canada’s charities and non-profit organizations experience falling attendance and donations.
During the virus pandemic they’re needed more than ever. That’s difficult, as they must also plan for their survival.
Throughout their long history, philanthropic organizations changed considerably and they continue to evolve.
Their record extends back to biblical times when the Good Samaritan practised the first charitable act. Tithing was mentioned in early Hebrew scriptures. Early charitable activity was practised by many creeds in Europe, Asia and India. English charitable services date from the 17th century.
Canada’s history of charitable practice started with the building of places of worship, financed by collection plates and personal giving. They numbered a few dozen in early French- and English-speaking communities. The trend of voluntary giving through subsequent years ran parallel with our population growth and the rises and falls of our economy.
Altruism was the motivation then. Canada’s Income War Tax Act in 1917 started governmental regulation of private organizations for patriotic and war relief. Through the following century, deductibility of a part of contributions from income tax encouraged funding of disaster and welfare relief. Charities supplied welfare, religious, educational and social services that governments did not provide.
Since the Second World War, the charitable sector expanded rapidly in line with our growing economy, increased immigration and rising household incomes during the baby boom.
Today, 85,000 charitable organizations hold required registration with Canada Revenue Agency, enabling them to issue tax-deductible receipts to donors. Many are branches or regional offices of much fewer central organizations.
There is also a similar number of non-profit organizations that are not CRA-licensed, but depend on contributions, and don’t provide deductible receipts.
Although tax deductibility is a new motivation, altruism still drives contributions in hard times.
Today, many of Canada’s charities and non-profits are facing a crisis — the donors who sustained them are retiring, their income is lower, and their donations no longer increase. As well, employed donors are now experiencing interrupted or smaller paycheques.
It is arguable that if these organizations continue to operate as in the past, they risk a cash flow crisis that might force some of them to close. Business as usual is no longer a viable strategy.
Moreover, our governments have budget constraints and are cutting back on funding social programs, in the expectation that charities will pick up the slack. To survive charities must revise their business model. They don’t own their donors, so their managements have to reorganize.
Imagine Canada, sponsored by the Rideau Hall Foundation, reported in 30 Years of Giving in Canada that individuals donated four times greater contributions than businesses. Should charities’ managements develop a wider corporate outreach? Charitable donations would constitute a deductible business expense.
That report also recognizes our boomers are aging and directs attention to immigrants and youth as potential new donors. How might charities develop online giving through digital fundraising methods that are more familiar to them?
Some religious and social service organizations in adjoining neighbourhoods compete for the same donor dollar. Should they consolidate or merge? Does one have a strategic advantage to distinguish it from another and offer a competitive edge?
Like any business organization, charities are obliged to manage their bottom line, or more accurately their cash flow. Do expenses outrun revenues? There may be an urgent need to cut spending, just to survive.
Most charities are run by volunteers. Would they consider the corporate way of doing things? Governance (describing how they’re organized) and Disclosure (reporting their finances) would improve communication with donors as to how they’re managed and where the money went.
Spreading technology destroys old methods, but drives new opportunities. In The Giving Report 2018 Canada Helps.org reports an explosive growth in online giving in recent years. Can charities improve their bottom line and survival by exploiting tech, selling costly premises, then downscaling to rented virtual offices, and introducing online funding?
As cash donations decline, should charities actively solicit late-in-life legacy donations (say, two per cent of life insurance and annuity proceeds, or two per cent of estate proceeds)? Such future portions could yield bigger dollars than present cash donations.
Canada’s legislation permits charities to advocate in a non-political way to inform the public and governments how to improve public policy. Canada Revenue Agency reports almost 9 million tax filers don’t pay tax and can’t benefit from the existing non refundable charitable tax credit. Shouldn’t charities recommend the tax credit be refundable for donors below the lowincome line, so they would have an incentive to donate?
By following the advice of 2017 Nobel laureate in economics, Richard H. Thaler, these small “nudges” might leverage big results that would help to save our vital charitable sector.