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Championing sustainable financing: Progress following the National Summit

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In his opening statement at the 2011 National Summit for the Charitable and Nonprofit Sector, Adam Spence – one of the co-leads of the priority stream focused on more sustainable and diversified financing – observed that while the two-day Summit was “remarkably important”, the sector and its achievements would ultimately be judged in the days and months to come.

Six months following the National Summit, in the wake of the Federal Government’s funding redistribution and on the precipice of a new phase of Imagine Canada’s National Engagement Strategy, many are curious about what has been accomplished, especially in relation to sector’s financial sustainability.

“Now is the time for us to collectively step up and take leadership for our own agenda,” says Michelle Gauthier, vice-president of public policy and community engagement at Imagine Canada. Though aware that changes to financial policy and practice may require a long-term approach, Gauthier has been encouraged by the overall progress and momentum the Summit continues to generate among sector leaders. In particular she saw the past six months as an opportunity to “put in place the building blocks to ensure the long-term sustainability of the [National Engagement] Strategy.”

Finance Committee hearings and the Stretch Tax Credit

On issues related to philanthropy, grants and contributions, and earned income and financial literacy, several milestones have been achieved since November’s event. Across Canada, Summit participants have demonstrated their commitment to engagement by hosting follow-up sessions in cities including Vancouver, Saskatoon, London and Charlottetown. Key funders have also expressed willingness to entertain proposals for the extension of the National Engagement Strategy.

More specifically, presentations on charitable giving made to the House of Commons Standing Committee on Finance have included input from a working group including more than 80 organizations from across the nonprofit sector. To date, seven of the 12 Committee hearings have taken place, providing opportunities for sector leaders to engage in dialogue with key decision-makers and put forth recommendations to incent philanthropic giving.

One of those recommendations was the adoption of the Stretch Tax Credit for Charitable Giving, a measure that would increase the federal charitable tax credit for individuals by 10% on all new giving that exceeds previous donations. The Stretch was widely supported by participants at the National Summit and remained a key focus of discussions at the Finance Committee’s hearings. Yet, while more than 70% of organizations that appeared before the Committee voiced their support for its acceptance, the Stretch was not included in the 2012 Federal Budget. Imagine Canada has expressed their disappointment over the Credit’s absence, but the organization remains optimistic. There is “clear interest from politicians of all parties to understand how philanthropy is changing, what the new needs are of the sector and how important measures like the Stretch Tax Credit are for moving forward,” says Gauthier.

Reductions in government spending were also a financial challenge raised by Summit participants. With the elimination of charitable and nonprofit programs such as Katimivik and the National Aboriginal Health Organization (NAHO), along with many other organizations impacted by the government’s financial redistribution, funding conditions in the six months following the Summit have largely not improved. Though the federal budget has promised to “explore social finance instruments” through its Economic 2012 Action Plan and modernize the grants and contributions process to “reduce red tape and make it easier to access funding,” it is unclear at this time how these commitments will translate into action.

Opportunities for earned income activities

Amidst the financial challenges there is also room for opportunity, particularly in the area of earned income. The need to reduce reliance on government capital may encourage some organizations to introduce or expand earned income or social enterprise activities. Adam Spence, manager of special projects at the MaRS Centre for Impact Investing suggests a measured approach for organizations wading into social enterprise activities.

“The first step towards embracing opportunities related to earned income, social enterprise or social finance is to build greater awareness of these subjects, and engage in a deep internal examination of the financial literacy and conditions of your organization. Once this important foundation of knowledge has been built among staff and board members, organizations can make educated decisions about the best options for moving forward with new financing mechanisms, which may include new or improved earned income activities or social finance tools.”

As another example of progress following the National Summit, Imagine Canada and a host of other partners are involved in the development of an earned income framework that will facilitate the engagement of charitable and nonprofit organization in earned income activities. The action-oriented framework, set for release later this year, will focus the conditions surrounding earned income activities, namely the effective availability of capital, work-related skills and competencies, an enabling regulatory environment and positive market demand.

Yet while earned income activities may indeed give nonprofits and charities greater control over when and where they direct funding, they should not be seen as a cure-all solution. “Cutbacks in government funding for charities will continue to put pressure on the nonprofit sector,” says Jeremy Douglas, Director of Advice for Good. Greater demand for charitable services combined with a shrinking pool of funding creates the conditions for a perfect storm, says Douglas, who is not surprised that the last few years have seen tremendous growth in the fields of social finance, impact investing, social entrepreneurship, philanthrocapitalism and social enterprise.

“It's a brand new field still, with a lot of uncertainty...Some are experimenting with social enterprises with certain degrees of success, but impact investing and other similar models are mostly being driven by individual entrepreneurs and the business sector, rather than charities,” cautions Douglas. “Charities should keep an eye on what is happening in these new fields, but for now they are going to have to continue to focus on sustainable funding from traditional donors.”

Local commitment towards a sustainable future

Recognizing that the movement towards more sustainable and diversified financing is a long and ongoing process, Spence believes that important progress over the past six months has been achieved. “There has been significant demand among nonprofit organizations for resources and pathways… towards more sustainable and diversified financing. This growth in self-awareness will drive substantive change in the sector.”

At the local level, nonprofits, charities and networks continue to uphold commitments made at the Summit:

  • The Ontario Nonprofit Network (ONN) followed through on contributions to the Ontario government’s Open for Business initiative and presented five recommendations during a roundtable in March, including the need to streamline and modernize the government funding processes.
  • The Calgary Chamber of Voluntary Organizations (CCVO) made good on promises to explore new areas of social finance in its annual survey of Alberta’s nonprofits and charities; the results of which are distributed provincially and inform government decision-making at various levels.
  • The Community Forward Fund (CFF) officially launched in April, providing loan financing to nonprofit organizations and charities across Canada alongside important financial fitness and coaching services.
  • The MaRS Centre for Impact Investing helped mobilize $6 million in financing for the nonprofit sector and is working with other partners to mobilize additional capital to support nonprofit organizations, impact ventures and impact funds within Canada.
  • And across the sector, organizations have kept promises to upload financial information to Charity Focus, an information portal for finding information about Canada’s 85,000 registered charities.

Though it appears too soon to make any predictions about the financial sustainability of the nonprofit sector, or to proclaim the National Summit as a catalyst for transformational change, there has been enough measureable impact since November to feel encouraged by the direction of Canada’s charitable economy and to suggest that, at least this time, actions have indeed spoken louder than words.

Editor's Note: For additional context read David's original article which was published shortly after the National Summit in 2011. 

David Venn is an Ottawa-based public relations professional focused on helping nonprofit organizations create positive and sustainable social change. He currently works as a Communications Advisor with the Canadian Centre on Substance Abuse. Follow David on Twitter @davidjvenn or on his nonprofit PR blog.

Please note: While we ensure that all links and email addresses are accurate at their publishing date, the quick-changing nature of the web means that some links to other websites and email addresses may no longer be accurate.

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