More than a year since the onset of the COVID-19 pandemic, the effects of the crisis are still being deeply felt by many charities across the country. Our latest Sector Monitor survey shows how the pandemic continues to challenge the sector and suggests that recovery will be challenging for many organizations.
The uneven pandemic: many charities continue to be severely affected while others are doing alright
More than 4 in 10 charities are still facing declines in revenue
Among these charities, the average revenue decline is 44%, unchanged since our last survey in late 2020, and more than half are dealing with revenue declines of more than 40%
On the other hand, about a third of charities are now reporting that their revenues are about the same as before the pandemic and almost a quarter report increased revenues
These findings mirror what is going on in the economy as a whole, with some industries affected by the pandemic far more than others and some of those affected likely to take much longer to recover than others. Revenues in the travel industry, for example, plummeted in March 2020 and will likely take years to recover as many would-be travellers are deterred by financial concerns, complex and ever-changing entry requirements and continued fear of the virus. Revenues in other industries were less affected to start with and are already showing strong signs of recovery (e.g., manufacturing).
This is what economists describe as a K-shaped recovery. In this scenario, after a recession, some industries recover, while others stagnate or continue to decline.
56% of charities are struggling and their recovery is at risk
There are two groups that are still struggling and whose recovery is at risk:
- Charities that have seen a significant decline in demand, largely because they have been unable to operate and therefore deliver most or all of their programs and services due to public health restrictions (14% of all charities).
- Charities that are facing demands for their programs and services that exceed their capacity to deliver (42% of all charities).
44% of charities are coping better and already recovering
The charities in this group report that they are keeping up with demand.
Charities that are struggling because of a significant drop in demand due to the fact that they are largely unable to operate
Arts, culture and recreation organizations are more likely than other types to be in this category, as are smaller organizations and organizations that rely on earned income
82% of organizations in this category report decreased revenues and the average decline is almost 46%
Among Arts, culture and recreation organizations in this category, the average revenue decline is 59%
Organizations in this category have, in many ways, been hardest hit by the pandemic. They have been largely unable to operate for more than a year because of the measures put in place to combat the pandemic. Examples include performing arts centres, museums, music festivals, organizations that operate health and fitness facilities, and organizations that deliver in-person programming of various types for children, seniors and others.
More than 80% of these organizations are reporting decreased revenues. Although their expenses have also decreased, the reduction in expenses rarely matches the reduction in revenues. This is because most organizations continue to have significant, ongoing costs (e.g., mortgage, rent, insurance, bookkeeping, payroll, audit, IT infrastructure) that must be paid regardless of their ability to operate.
For these organizations, the situation hasn’t improved in the past year and is as critical now as it has ever been. Recovery for them will likely be long and slow and some will not survive.
Likely due to vaccination efforts ramping up and the gradual lifting of restrictions across the country, these organizations are slightly more optimistic about the future when it comes to demand: about two fifths say they think demand will increase in the next three to six months.
Charities that are struggling because demand for their programs and services exceeds their capacity to deliver
This category is more likely to include mid-sized and large organizations and less likely to include Arts, culture and recreation organizations; in other ways, it is very diverse
Half of organizations in this category report decreased revenues, with the average decline being just under 16%
More than two thirds expect demand to grow even further but less half expect their capacity to increase
During the pandemic, more Canadians turned to charities for assistance and support. As a result, the sector as a whole has been experiencing a steady increase in demand for the programs and services it provides. More than a year since the start of the pandemic, almost half of organizations are reporting an increase in demand, up from about a third a year ago. Moreover, 60% say they expect demand will continue to increase, with almost 20% saying they anticipate the increase will be significant.
Increased demand for programs and services is not necessarily problematic. It becomes a problem only when organizations are unable to expand their capacity to meet the greater demand. Unfortunately, this is what has happened to many organizations during the pandemic: demand increased and their capacity to meet it either did not increase at all or did not increase sufficiently. In our most recent survey, two fifths of charities were in this category, compared to one third a year ago.
Most charities in this category do not expect their situation to change in the near future. Fully 70% say they expect demand to continue to increase but only half anticipate any improvement in their capacity to meet this growing demand.
Staff and volunteers in these charities are likely overworked, tired and stressed. Even more troubling is that many people are not receiving all the services they need and/or may be waiting much longer than usual for support. New clients may not be able to receive services at all. Canada is likely to be dealing with the consequences of these unmet needs for many years to come.
What does the future hold?
Almost 1 in 4 charity leaders believe their organizations will not be able to operate for more than a year; this rises to 1 in 3 among charities that have experienced a collapse in demand due to public health measures
The majority of charity leaders expect the financial health of their organizations to remain about the same for the next few months but 1 in 7 now say they expect it to improve (up from 1 in 14 late last year)
Most leaders predict staffing levels will remain the same (59%) or increase (25%) over the next few months
Organizations’ experiences during pandemic strongly colour their predictions for the future. Those that have experienced a significant decline in demand are more likely than others to say they won’t be able to operate for more than 12 months; their financial health is likely to worsen; and the number of staff and volunteers in their organizations will decrease.
Those that have been dealing with demand/capacity imbalances are somewhat more optimistic. Most say they can continue operating for more than 12 months or for an indefinite period; their financial health is likely to remain the same, at least for the next few months; and their staff and volunteer numbers are also likely to remain unchanged.
Charities that have been able to keep up with demand for their programs and services are the most optimistic. Almost three quarters say they can continue to operate for more than 12 months or indefinitely and their financial health will likely remain the same for the next few months. They are also more likely to predict increases in staff, although not in volunteers.
These findings suggest that, just as charities have had diverse experiences during the pandemic, they are likely to have diverse experiences during the recovery. Some are already on the road to recovery. Others are likely to struggle for some time to come.
Ripple effects: impact on staff’s mental health
Half of organizations have increased the time and resources they dedicate to their employees’ or volunteers’ mental health and wellness
However, just over one third have an Employee Assistance Program or a similar resource to support employees or volunteers
The pandemic has had a significant impact on the mental health of many Canadians, and charity staff and volunteers have not been spared. The pressure of increased demands and stresses of layoff and lost revenue is undoubtedly taking a toll on the sector’s workforce.
The survey shows that organizations have stepped up to ensure the wellbeing of their staff. Almost half of organizations have increased the time and resources they dedicate to their employees or volunteers mental health and wellness since the beginning of the pandemic.
However, only 36% currently have an Employee Assistance Program or a similar resource to support employees or volunteers, which indicates that some workers and volunteers requiring assistance may not receive the support they need.
This is even more concerning as 77% of the nonprofit workforce are female workers, and studies have shown that women have been disproportionately affected by the pandemic, as they often have to juggle childcare, or caring for other family members, in addition to work.
What a struggling charitable sector means for communities
When charities are unable to deliver services and programs, and can’t keep up demand, it means that some individuals don’t receive the support they need. Demand is expected to continue to increase in the coming months, as people start to re-engage with their communities. Facilities such as community centres and libraries are reopening, and various programs will be available again soon.
Among the charities struggling the most are organizations that have not been able to continue their activities up until now. When these charities resume their programs and services, they will seek to increase their revenue sources. Other organizations that have been experiencing revenue declines will also need support, including charities that rely on earned income activities for funding. It will likely take a long time before people are comfortable participating in activities in group settings, and attending large events.
As a result, there is a strong possibility that we see increased competition for funding, notably for donations. At a time when donations are needed more than ever, our previous Sector Monitor report as well as CanadaHelps’ recently released Giving Report show troubling declines in overall giving.
While Canada is poised for reopening and recovery, their revenue models mean that many charities will take longer to recover than the rest of the economy. This is especially true of organizations that are already lagging behind. Government support measures, which many organizations have been relying on to continue to offer services and programs, are expected to end with the economy reopening. This may create a funding gap for charities, pushing many to a breaking point even after the pandemic is largely over. With demand likely to reach an unprecedented high post-pandemic, this poses a serious challenge for charities and the communities they serve.
About this report
Findings are based on a national survey of 1,219 charity leaders who answered our online survey between April 20th and May 7th, 2021. All responses are weighted by organization size, activity area, region, principal source of revenue, and the presence of paid staff to produce estimates more representative of charities as a whole. Historical comparisons are based on our first and second COVID-19 tracking surveys, fielded in the Spring and Fall of 2020 respectively. In addition to these topline findings, the research report contains detailed information by organization size, sub-sector and principal source of revenue. Because it uses data from T3010 information returns to weight responses so they are more representative, the study focuses on registered Canadian charities. Read the full report for additional insights.