The second quarter of 2022 began much the same way as the first, with a new wave of COVID-19. Thus far, however, no governments have signaled an intention to re-introduce the kind of public health measures that were taken during past waves, which suggests we have entered a new era of pandemic management. The other major event affecting the world this quarter is, of course, the war in Ukraine. Aside from the obvious humanitarian concerns, the war is having an impact on already strained supply chains and global inflation.
In the second edition of this new quarterly blog series, we discuss some of the macro trends that are impacting Canada’s charities and nonprofits in the second quarter of 2022.
Financial challenges and uncertainty continue to impact sector
In the most recent Canadian Survey of Business Conditions (CSBC), more than half of nonprofits (53%) reported having lower revenues in 2021 than they had in 2019; almost a quarter (23%) said their revenues were down by 25% or more 1. In 2021, we reported that the sector was experiencing a K-shaped recovery with some organizations having recovered while others were still facing significant financial challenges. These latest numbers from Statistics Canada suggest that, overall, that trend held throughout 2021. We do not yet have data on how the fifth and sixth waves of the pandemic or the war in Ukraine have impacted the nonprofit sector financially, but we expect that it will continue to have an uneven impact.
Nonprofit organizations, like individuals and businesses, are also being affected by inflation. The on-the ground impact of inflation is illustrated by this story about Meals on Wheels Winnipeg. They deliver 350-500 meals daily, but rising fuel and food costs are threatening their ability to pursue their mission and forcing them to reduce serving sizes. You can see more in-depth economic analysis of inflation’s impact on the sector here.
Staffing concerns continue
Concerns about recruiting and retaining staff increased sharply in the final quarter of 2021 and these concerns persisted into 2022. The most recent CSBC found that 36% of nonprofits expected recruiting skilled employees to be an obstacle over the next three months while 32% expected retaining skilled employees to be an obstacle 2.
An important aspect of this trend is the impact that the shadow pandemics of mental health and Long COVID may have on the sector’s workforce. Long COVID impacts a significant portion of those who caught COVID, including those who didn’t experience a serious illness initially. We are not aware of any data on the effect of Long COVID on the nonprofit sector specifically, but a recent study of its impact on the health care sector suggests it may be profound. Additionally, Statistics Canada recently reported that mental health-related disabilities are on the rise in the Canadian workforce 3. Many roles in the nonprofit sector involve supporting individuals and communities in difficult situations, which is emotionally taxing and can be traumatic work. This can lead to compassion fatigue and mental health issues in the best of times, and the pandemic has only exacerbated this challenge. Rebekah Sears at the Mennonite Central Committee Canada’s Peace & Justice Office recently wrote an article arguing that many nonprofits should be considered trauma-exposed and provide support for staff.
These concurrent trends suggest that employers need to get ready to manage a workforce that has higher rates of disability and new accessibility needs.
Keeping an eye on mergers and closures
Since the pandemic began, many have speculated on whether we’ll see a wave of closures or mergers in the nonprofit sector due to financial and operational challenges. So far, we have not seen evidence of a large number of pandemic-related closures. However, last year many organizations were supported by the Canada Emergency Wage and Rent Subsidies as well as other emergency funding opportunities. As those supports dry up, we may start to see more nonprofits close their doors or merge with other organizations.
In the latest CSBC, organizations were asked if they planned to merge with or acquire another organization over the next 12 months. Only 0.6% of nonprofits had acquisition plans and 0.8% had merger plans 4. Unfortunately, we do not have a benchmark for these figures, so it is difficult to interpret the data but there does not appear to be a flood of mergers on the horizon. A recent report out of the UK, however, shows that the number of charity mergers in that country has risen to its highest number in five years, so this is a trend to keep an eye on.
Scrutiny on fundraising and crowdfunding
Budget 2022 included an announcement that the federal government intends to implement new anti-money laundering and anti-terrorist financing requirements for crowdfunding platforms and payment service providers. This announcement came on the heels of the major protests in Ottawa and other cities and the blockades of border crossings that dominated the headlines earlier this year. The organizers of these events raised money to support their efforts through crowdfunding platforms, and both the media and Parliamentarians have questioned where the money came from and how it was used.
Crowdfunding platforms are a digital tool that individuals, movements and organizations can use to raise funds. Campaigns are easy to set up, making crowdfunding platforms a convenient way to fundraise. Understandably, charities also use these platforms. But donating to a charity, by any method, is different from donating to an individual or an unregulated “cause.” If approached by someone concerned by recent media coverage of crowdfunding, we recommend responding that charities are subject to extensive transparency and accountability measures that individuals on crowdfunding platforms are not subject to.
Despite the challenges that the nonprofit sector continues to face, 83% of nonprofits indicated that they were somewhat or very optimistic about their organization’s outlook over the next 12 months 5. This is above the economy-wide average and demonstrates the high level of resiliency that exists in our sector. While we need continued support from our funders and partners in the corporate sector and government, this resiliency will help us weather the continuing uncertainty we face.
1 Statistics Canada. Table 33-10-0489-01, Revenues from 2021 compared with 2019.