Budget 2021: Behind The 16% Average Revenue Decline
As we move into the implementation phase of Budget 2021, it is important that programs designed to support the nonprofit and charitable sector are targeted effectively. Not all organizations in our sector have been affected equally by the pandemic or the measures taken to address the crisis. We believe strongly that new federal support measures should be designed to assist organizations most in need.
In this context, we were pleased to see the use of data from our Sector Monitor survey in the recent federal budget, but are concerned that the figure used does not adequately capture the challenges facing a significant part of the sector. The following statement appears just prior to the announcement of the Community Services Recovery Fund: “Recent research from Imagine Canada suggests that as of late 2020, the average charity has reported a revenue decline of 16 per cent.”
Averages can be helpful tools for communications and decision making. Most people understand averages and they are an easy way to summarize a lot of information. However, the use of averages can also be problematic as they do not always provide a full or nuanced picture. We believe this is the case with the 16% figure.
The K-shaped recovery applies to our sector
Concerns over what some economists call the K-shaped recovery have made the news recently. The “K” is meant to illustrate the vastly different experiences specific groups of people and sectors of the economy are having during the pandemic. Some groups and sectors are managing, while others are really struggling. Our data clearly show that this is the case in the charitable sector.
Many organizations, including foundations and organizations whose revenues come mostly from the government, have remained relatively stable. Some organizations (e.g., those providing services that are obviously urgently needed during the pandemic) have even seen their revenues increase, although this has usually been accompanied by a surge in demand for services. However, arts, culture & recreation organizations and those that rely on earned income or donations are facing major challenges.
The paragraph in our report that cited the 16% also discussed the complex nature of what is occurring on the ground, and we feel it is important to provide the full context:
- more than half of charities (55%) reported revenue declines;
- the mean revenue decline within this group was -43%; and
- the median revenue decline with this group was -40%, meaning that half the charities that report revenue declines are experiencing declines of more than 40%.
This means that more than half the sector is being strained much more severely than the 16% average suggests. Imagine Canada has long advocated for evidence-informed policy. In this case, there is clear evidence that a significant number of organizations are dealing with substantial revenue losses that threaten their ability to operate; many organizations are also facing increased costs as they struggle to adapt to changing circumstances; and many are doubling down on their missions at the expense of investments in their longer term sustainability. They have experienced greater than average revenue declines and/or have not been able to access previously announced support programs.
The new programs announced in Budget 2021, particularly the Community Services Recovery Fund, must address the great need experienced in the lower half of this “K”.