Canadian charity, Part 1: State of the sector

By Todd Cohen

[Note: This article was written for Blackbaud.]

Overall giving in Canada grew 2.7 percent in the three months ending February 2014, compared to the same period a year earlier, while online giving for the period grew 7.2 percent, according to The Blackbaud Index – Canada.

The new Index draws from actual data from about 250 organizations that raise a total of $600 million to $700 million a year – or roughly 6 percent to 7 percent of the Canadian market.

Canadian charities with effective fundraising programs benefited from growing investment in fundraising staff and capacity, greater attention to major donors and donor loyalty, and increasing sophistication in fundraising technology and best practices, experts said.

But they said many Canadian charities face big challenges in securing the investment they need in their fundraising capacity, particularly in developing board leadership and staff expertise.

Strong finish in 2013

After experiencing relatively flat growth during the first half of 2013, overall fundraising revenue among 276 Canadian nonprofits that together raise $692.5 million a year grew 6 percent during the second half of 2013, compared to the same period a year earlier, according to the new Blackbaud Index – Canada.

Online fundraising revenue for 219 Canadian nonprofits that together raise $154.3 million a year online grew 8.9 percent, 13.6 percent, and 10.1 percent, respectively, in each of the three-month periods ending in October, November, and December, compared to the same three-month periods a year earlier.

That surge in overall giving represented a strong finish for a year in which Canadian nonprofits generally posted lower overall results for much of the year, compared to the previous year, said Chuck Longfield, chief scientist at Blackbaud.

“It does look like things are looking up in the Canadian market,” he said.

Growth at year-end is especially good news, he said, because roughly a third of all charitable giving takes place in the final three months of the year, and roughly 25 percent of all giving takes place in December.

Overall giving for the three months ending in January and February grew 1 percent and 2.7 percent, respectively, compared to the same periods in 2013, while online giving grew 6.8 percent and 7.2 percent, compared to the same periods in 2013.

Sector snapshot

Canada’s charitable and nonprofit sector is the second largest in the world after the U.S. and consists of roughly 170,000 organizations, split almost evenly between registered charities and nonprofits, according to Imagine Canada, an umbrella organization for Canada’s charities and nonprofits.

The charitable sector employs two million Canadians and contributes an average of 7.8 percent to total gross domestic product.

Revenues from the “core” nonprofit sector – charities and nonprofits other than hospitals and universities – account for about 2.4 percent of Canada’s GDP, or more than triple that of the motor vehicle industry, Imagine Canada said.

Sales of goods and services account for 45.6 percent of total income for that core nonprofit sector. In comparison, the larger nonprofit sector – including hospitals, universities, and colleges – counts on government funds for nearly 75 percent of its funding, with 72 percent of its overall funding provided by provincial governments, Imagine Canada said.

Hospitals, universities, and colleges represent only 1 percent of organizations but account for 66 percent of total revenues for the entire sector.

Sector ‘mature,’ ‘conservative’

“Canada’s charitable sector is the second-most mature in its professionalism, use of investment in technology, and best practices” after the U.S. nonprofit sector, said Michael Johnston, founder and president of Hewitt and Johnston Consultants, a fundraising consulting firm in Toronto.

From small shelters to big national charities, he said, nonprofits are “becoming more professional and leveraging technology and best practices,” he said. “The sector is trying to do a more professional job, and I think it means charities are raising a bit more money.”

Fundraising stability

Unlike the economies and charitable sectors in the U.S. and U.K., which slumped after the capital markets collapsed in 2008 and only recently have begun to rebound, the economy and charitable sector in Canada have held relatively steady, Johnston said.

That’s because, unlike the economies in the U.S. and U.K., the economy in Canada is based on commodities such as oil, gas, and diamonds that limited the damage of the recession, and because its banks are highly conservative, he said.

“That translates to the charitable sector,” he said. “It’s a very kind of stand-pat, very conservative, cautious sector, so we don’t see the kind of growth or rebound because everything is ticking along at a slow, conservative rate.”

Government cuts

With government in Canada getting smaller, Johnston said, nonprofits are looking to private support for a growing share of their funding.

“Canadian charities, a lot of them historically, have received large proportions of revenue from state sources, and that’s shrinking,” he said. “It means a competitive fundraising environment will become more intense with less government support as individuals become more and more important.”

What donors want

A study released in February by the AFP Foundation for Canada and market research firm Ipsos entitled “What Canadian Donors Want” finds a “high degree of confidence in charities.”

But it also said charities would be “well served” to make it clear they are “well managed and have the resources, competence and capacity to carry out their mission and plans.”

The study said arts groups may have “the longest road to travel to improve presence of mind and share of wallet;” that people increasingly give to fewer charities, with a plurality – the biggest single group – giving to two to three charities; and that charities should ask for bigger gifts and take a hard look at how frequently they ask for donations.

Next: Sector faces challenges

The series:

Part 1: State of the sector.

Part 2: Sector faces challenges.

Part 3: Volunteer leadership key to fundraising.

Part 4: SickKids Foundation invests in fundraising capacity.

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