My article was reprinted in the Canadian Fundraising & Philanthropy eNEWS. Of course they cleaned up the grammar and logic!
OPINION - Mark Blumberg
Canwest nonprofit coverage sensationalist, inaccurate
In this article, I look at and criticize a sensationalist and inaccurate article in the Ottawa Citizen headlined “Downturn will sink 10,000 nonprofits: think-tank” The subhead adds “‘We’re just beginning to see blood in the pool,’ expert warns.” The article is dated February 2, 2009.
It continues by stating:
Between 10,000 and 12,000 of Canada’s nonprofits will fall victim to the current economic downturn, warns the head of a Toronto-based think tank. That’s one of every five or six of Canada’s approximately 60,000 nonprofits, Rick Blickstead told representatives of charities, government and academia at Carleton University last week.
Base numbers incorrect
First of all there are 160,000 nonprofits (not 60,000) and there are 82,000 Canadian registered charities. Accordingly, if you use those numbers one in 16 nonprofits will fail, not one in five.
There is no question that for many charities the next year or two will be very difficult. Some will have trouble getting donations, others will have to deal with far greater need and many have both greater need and fewer resources to deal with that need. That being said, Canadian nonprofits and charities make up about 10% of our economy and frankly (and ironically) they are probably in a better financial position than the business sector right now.
Every year about 2,000 charities stop being charities because they do not file their annual returns or they voluntarily ask for their status to be revoked. Every year thousands of new charities are registered and others close up because their organizations are no longer needed, their volunteers are no longer available, they grow tired of dealing with a particular issue, they lose their founder or executive director, etc. This happens in good times and bad times. Will it be worse in this recession? Perhaps and perhaps not. Certainly it is not going to be one in five.
Halloween-ready articles like this one in the Ottawa Citizen will not be of assistance to Canadians trying to understand the opportunities and challenges of the nonprofit and charitable sector.
1/10 of U.S. projections not Canadian analysis
“Mr. Blickstead’s estimate is based on projections made by the U.S. Rockefeller Foundation and adjusted for Canadian conditions,” the article notes. Remember – although we love Obama, Canada is not the U.S.! The U.S. has some very good literature on nonprofits and charities, but please don’t take generalizations related to the U.S. recession and then divide by ten to get a Canadian analysis.
Small does not mean vulnerable
While the top 5% of Canadian charities control about 85% of the dollars, the vast majority of Canada’s charities are ‘kitchen table’ operations that depend on volunteers. That makes them vulnerable, said Mr. Blickstead.
I don’t agree. There are many small Canadian charities. The average Canadian charity takes in under $50,000 per year. Many charities do a wonderful job with very few resources and largely rely on volunteers. A “kitchen table” charity is typically largely volunteer run, agile and efficient. It has deep roots within its community and a very small budget.
It is not these “kitchen table” charities that will suffer the most. The charities that will feel the greatest pain will be those that have high costs and overhead combined with a reliance on major gifts from narrow segments, such as the financial industry or certain foundations that may be cutting back.
Positive comments few, buried
Mixed with the blood and gore, there were some positive comments like “On the plus side, in tough times communities rally to support local causes. Nonprofits are already collaborating and sharing resources such as office space and expertise. Now, they will have to think about merging with similar organizations that have similar missions in order to survive, he said.”
I agree with that sentiment – but it is hidden in the body of the article. I feel sorry for any nonprofit that is going to a bank to get a line of credit if the banking officer has just read “Downturn will sink 10,000 nonprofits.”
“Many of those who attended the talk at Carleton agreed that perception counts for a lot. Nonprofits work in a new psychological environment, said fundraiser and consultant Lynn Eakin.” This I agree with – shouting that the sky is falling is not always a helpful thing – unless, of course, it is actually falling.
Loss of reputation a significant risk
Some may say, “What is the harm of exaggeration?” They may think that perhaps we will get more funding if the government thinks things are worse than they really are for nonprofits and charities.
I don’t share that view. The greatest asset that charities have, other than their people, is their reputation and goodwill. Exaggeration will undercut the credibility of the sector with the public and government. Across the sector, remember that charities get about 45% of their funding from government, 35% from earned income and only 15% from donations. If you are a government department and you think that one in five charities will fail over the next year or two, how eager are you going to be to provide funding to charities to deliver a program or service?
I think that many media outlets need to take the charitable sector more seriously. These sorts of mistakes would never be tolerated within the for-profit or public sectors. One can have a legitimate debate about the impact of the recession on nonprofits and charities, but the debate should at least be infused with accurate statistics and useful discussion.
Mark Blumberg is a lawyer at Blumberg Segal LLP in Toronto, Ontario. He can be contacted at or at 416-361-1982 x. 237. To find out more about legal services that Blumbergs provides to Canadian charities and nonprofits visit the Blumbergs’ Nonprofit and Charities page at http://www.blumbergs.ca/non_profit.php or http://www.globalphilanthropy.ca.
This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional.
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.