Funding for non-profit organizations in Canada
In the recent past, there has been an occurrence of the funding environment especially for the non-profit making organizations in Canada. The non-profit making organization has a great impact on Canadian society. The fact that these organizations do not operate for profit motives has resulted in a reflection of their funding. This has resulted in funders formulating new funding strategies that are aimed at ensuring accountability, sufficient supply of capital, and also enhance competition amongst these firms. This will ultimately lead to erosion of their roles within society,(Kathereine,13).
Traditional sources of funding for non-profit making organizations
The non –profit making organizations have various financial sources that they have utilized to sustain their operations. These include the following;
Donors
The non-profit-making organizations in Canada have been using donations as a major source of finance. There are organizations that have been in operation with their main role being to connect the non-profit making organizations with the major donors around the world who have well-organized strategies to conduct fundraising campaigns. One such organization is the Personal Giving Directory Canada Incorporation that assists with fundraising for Non-profit making organizations, PGD Canada, paragraph, 7).
Foundations
These are non-profit-making organizations that also conduct charitable activities. They also donate funds for other non-profit making organizations. According to Canadian law, foundations may either operate as public or private organizations and their number is high coupled with their large size of the asset base. According to Intute, one such organization is Imagine Canada which is aimed at encouraging collaborations from the corporate, government, and also organizations,(paragraph 11).] Corporations
Government
The Canadian government has been a source of finances for non-profit making organizations. This is mainly in the form of grants from various governmental departments. These government agencies meet fund different non-profit making organizations. The government was a major source of funding for the non-profit making organizations in Canada but due to the increased competition from the profit-making, raising concern over the sustainability of these organizations and their stability, a need has occurred for consideration of diversification of sources of finances.
Income earned
These organizations make some investments within various sectors of the economy. The excess amount that they obtain from these operations is a surplus that is reinvested to enhance the sustainability of the organizations.
Other sources of funding include individuals, corporations, tax assistance. The individual and corporate donors give for a specific reason and they expect a given degree of tangible results.
Recent changes in the funding environment for non-profit making organizations in Canada
In the recent past, there has been the occurrence of trends that pose a threat to the funding of non-profit making organizations. This has resulted in organizations resulting into diminishing financial options by finding other sources of financing. These sources cannot be able to sustain the operation of the organizations effectively in the long term. These sources include fees from services offered; applying for finances from multiple sources and fundraising which are challenging to the organization. This is due to a shift from the current funding sources resulting in grave competition due to the scarcity of the resources. The firms have resulted in short-term funding which compromises the organization’s goals and core activities,(Katherine ,9). These short-term funding techniques are complex and unpredictable for many organizations that thrived after the government cut back the funding to these organizations in the 1990s. These changes in trends include the following :
Funders are focusing on an increasingly targeted approach to funding
Funding for these organizations is currently being emphasized in certain areas of these organizations. This means that the funders have a more strategic approach to funding and also priorities on the areas to fund making them narrow down their scope of funding and opportunities. The narrowing by the funders is pegged to the degree of efficiency, which is whether the funds donated are utilized according to their purpose. The level of accountability and limits of the funds available is also being emphasized.
In this approach of target financing, there is the marginalization of some of the non-profit making organizations within some sectors of the economy. There is a tendency of biasness that is inclined towards the brick and mortar organizations. Some organizations have to restructure their operations to meet the requirements of the new funding regime.other funders including those foundations within the private and the public sector have adopted a funding method that is more strategic,(Katheriene,37)
Shift from the core funding model to project-based funding model
According to Canadian Council on Social Development by Katherine, there has also been a shift from a core funding model to a project-based funding model. The core funding refers to funding that is aimed at meeting costs such as the administrative cost of the organization in addition to the specific requirements. The project based cost refers to costs that are emphatic to the project costs. This strategy takes into account certain administrative costs such as phone calls costs but it is under strict terms on what to include as an expenditure. The control of the project in the new funding technique falls with the funder unlike in the previous funding where it was with the non-profit making organization, (p.38).
Funders are not ready to fund administrative costs that are not related to the projects or program
There has also been a shift in that the funders are not ready to fund administrative costs that are not tied to a project or a program. This is aimed at increasing the degree of accountability and reducing the risk of failure. The funders are concerned with the project attaining a specific set of objectives other than the completion of the whole project. Funders are also only providing accessibility for funds for shorter periods which have become very unpredictable. This has resulted in the formulation of strict guidelines that are meant to regulate how the project is being conducted and also ensure that the funds are used for the specified project.
The new funding regime has resulted in the complexity of the infrastructure that is paramount in the execution of the project. This has resulted in underfunding of activities that the funders consider as non-program.
More strings attached to funding
There has been the emergence of contract funding techniques within the non-profit-making organizations. This has resulted in increased requirements for funding upon the receipt of the funds. Services that were once being provided by non-profit making organizations are currently being standardized and also narrowly specified and also being brought under tight government control. The contracting funding technique is a new strategy within the nonprofit making organization that is aimed at introducing marketing principles. The contracting model of financing gives more control of the funders to the non-profit organizations. Funding has also been reduced to consider non-profit making organizations that the funders consider as worthwhile hence leaving out others. In Canada, this has become the dominant criterion that is used by funders. Katheriene, pp.38-39).
There has been an emergence of the need for increased accountability of the non-profit making organizations to various parties such as the funders, clients, and even the beneficiaries. This funding regime has also stipulated that there should not be any moving of funds between one expenditure item and another as the project moves from one phase to another. There is also an emphasis on the need of the non-profit making organizations to adopt different accounting systems for the different programs.
Funders are providing funds for only a short time
Funding of projects by the funders using the project-based model only caters for the specified period which has resulted in the instability of the projects due to a lack of guarantee from the funders for continued funding. This means that the firm has to look for other sources of funds in the event of the financier pooling out and if it is not possible to secure another source of finances then it means that the organization will be closed. This has resulted in the diversion of attention by the management of these organizations from project activities due to the increased uncertainties of the funders and hence the need to convince the funders to continue funding these projects. It occurs that the shorter the funding term the more the degree of diversion of the concentration from the accomplishment of the project tasks.
Increase in Report Requirement
With the shift of the funding into project-based, there funding environment of the non-profit making organizations has resulted in the need to report the progress of the activities of the projects to depict the effectiveness of the organization. The reporting requirement has become a challenge for some of these organizations which often struggle to meet their funding requirements. This is because they have limited resources in terms of professionals and finances. The increased need for reporting requirements has resulted from the increased accusation of the non-profit making organizations as not being accountable. The reporting requirement is not only a responsibility to the beneficiaries but the current trend is inclusive of the funders. The reporting is aimed at ensuring that there is a mechanism that can be put in place to formulate appropriate indicators that can be used to measure the outcomes and the inputs for a specified project appropriately. The reporting requirement also enables the non-profit making organizations in the identification and management of risks effectively while putting into consideration the results and the expected resources.
A reflection on the Implications of the changes in the funding environment to the non-profit making organizations
As these organizations struggle with the determination of where to get the funds from, there is a possibility of shifting the core objectives. This is because they struggle to meet the program-based requirements or win government contracts. This results in their losing the much-desired credibility within the society which is amongst their long-term goal.
There has also been an increase in the level of volatility amongst these firms in their effort to diversify their sources of funds. This means that the ability of these organizations to provide quality services and also to carry out effective forecasting of their financial needs. There has been an emergence of reporting overload for the small non-profit making organization in their effort to meet the challenge requirements of the changing funding requirements.
Strategies that an organization could use to develop long-term, sustainable funding
Several strategies were formulated to ensure that the non-profit making organizations in Canada develop long-term funding to ensure their sustainability. These include the following:
Incorporation of volunteers
These organizations are urged to develop strategies that will foresee the engagement of volunteers and develop programs that will ensure the proper training of the volunteers. This will help in that the funders recognize the value that volunteers bring to these organizations and they evaluate in the event of the non-profit organization presenting their funding proposals. The performance of the volunteers will also attract the government and foundations to fund these organizations,(Robert, p.29).
There was also a strategy that was aimed at encouraging the founders of the non-profit making organizations to examine the opportunities to improve the organizational effectiveness.
Collaborating with funders and other agencies
The emerging funding system has constrained the capacity of nonprofit making organizations to respond to the dynamic economic environment. To enhance a sustainable funding environment, these organizations should collaborate with the funders and other agencies in ensuring a mutual definition of the funding requirements such as the standards for the accountability required and the evaluation criteria to be done while putting into consideration the diversity that exists in the non-profit making organizations.
Definition of core funding
To ensure sustainability there was the need for a definition of core funding.this is due to the confusion that has resulted in the event of raising funds where the funder applies two models are the core funding and the project-based models which have confused, This should include the administration to ensure that there is an allocation to core operations of the non-profit making organizations. The terms defining which expenses should be funded should provide room for flexibility to address issues of agency.
Ensuring consistency in funding
There is a need for the management of these organizations to ensure that the funders are consistent in their funding cycles to these organizations. This will ensure that these organizations can be able to assess whether they are credible to be funded so that they can be in a position to plan for the project’s financial requirement. Consistency should be in terms of the application process, measures of accountability, and benchmarks to be used to measure the best practices. The funders should also establish a clear basis of projects by the non-profit making organizations which are fundable.
Ensuring multi-year project funding
According to Independent Sector, to ensure stability, these organizations should encourage multi-year funding for projects. This is a type of funding that is directed to the completion of the whole organization instead of particular projects. This means that the non-profit making organization should have the confidence of the funder to the latter and not one that assumes that the organization will become self-sustaining or that other funders will support the firm in the event of ceasing to support it In the event this, the non-profit-making organization should have a well defined alternative funding strategy to ensure sustainability following the exit of the funding organization. The funder should also reduce the degree of rigidity in terms of reporting and proposal requirements. (paragraph, 9)
Clear definition of the nature of projects
It is also paramount that the non-profit making organizations define the nature of the projects. This will ensure that the funder understands in advance the strategies that are to be incorporated to meet the organization’s future fund requirements. There should be clear criteria that define when a project becomes long-term.
The organizations should also be innovative in conducting their fundraising activities fundraising such as innovating on how to increase the level of donations. In the determination of the sources of funds, the organization should consider the effect of inflation on their funding requirements.
In conclusion, there has been a dramatic change in some organizations have the financing environment for the non-profit making organizations in Canada which has raised the need to consider how alternative financing avenues can be implemented so that the significance of these firms to the economy do not fade away due to financing difficulties.
References
Robert, D.H &Associates: The Jossey-Hand Book of Non-profit leadership an Management, 2nded.2004.Web.
Katherine, S.Impact of Canada’s’ New Funding Regime On Non-Profit and Voluntary Organizations.
Independent Sector: Guidelines for of non profit organizations. Web.
Intute Best of the Web: Imagine Canada. Web.