In this article, I look at and criticize a sensationalist and inaccurate article in the Ottawa Citizen entitled “Downturn will sink 10,000 non-profits: think-tank: ‘We’re just beginning to see blood in the pool,’ expert warns”.
I recently read an article in the Ottawa Citizen entitled “Downturn will sink 10,000 non-profits: think-tank: ‘We’re just beginning to see blood in the pool,’ expert warns”. The article is dated February 2, 2009 and I read it on February 20, 2009.
They then go on to state:
“Between 10,000 and 12,000 of Canada’s non-profits 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 non-profits, Rick Blickstead told representatives of charities, government and academia at Carleton University last week.”
First of all, there are 160,000 non-profits, (not 60,000) and there are 82,000 Canadian registered charities. Accordingly, if you use those numbers 1 in 16 non-profits will fail, not 1 in 5. 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 less resources to deal with that need. That being said Canadian non-profits 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 2000 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 non-profit and charitable sector.
“Mr. Blickstead’s estimate is based on projections made by the U.S. Rockefeller Foundation and adjusted for Canadian conditions.” Remember, although we love Obama - Canada is not the US! The US has some very good literature on non-profits and charities, but please don’t take generalizations related to the US recession and then divide by ten to get a Canadian analysis.
“While the top five per cent of Canadian charities control about 85 per cent 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. It is not the “kitchen table” small charities that are going to suffer the most. It is going to be the charities that relied on major gifts from narrow segments, such as the financial industry or certain foundations that may be cutting back on funding, and that have high costs and overheads that are going to feel the greatest pain. A “kitchen table” charity is typically largely volunteer run, agile, efficient and has deep roots within its community and has a very small budget to begin with.
Mixed in the blood and gore, there were some positive comments like “On the plus side, in tough times communities rally to support local causes. Non-profits 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 non-profit that is going to a bank to get a line of credit, if the banking officer has just read “Downturn will sink 10,000 non-profits”.
“Many of those who attended the talk at Carleton agreed that perception counts for a lot. Non-profits work in a new psychological environment, said fundraiser and consultant Lynn Eakin.” This I agree with - shouting the sky is falling is not always a helpful thing unless of course it is actually falling.
Some may say ‘what is the harm of exaggeration’. They may think that perhaps we will get some more funding if the government thinks things are worse than they really are for non-profits 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 1 in 5 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 sort of mistakes would never be tolerated with the for-profit sector or public sector. One can have a legitimate debate about the impact of the recession on non-profits and charities, but the debate should at least be infused with accurate statistics and useful discussion.
To read the complete Ottawa Citizen article see: http://www.ottawacitizen.com/Life/Downturn+will+sink+profits+think+tank/1242911/story.html
There also appears to be a letter to the editor from one charity that is a sharp rebuke of the article: http://www.ottawacitizen.com/Life/Charities+work+sharper+tough+times/1266433/story.html
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 non-profits please visit the Blumbergs’ Non-Profit and Charities page at http://www.blumbergs.ca/non_profit.php or http://www.globalphilanthropy.ca
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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.