Financial crisis creating 'perfect storm' for charity organizations

Non-profit organizations in Canada are caught in a squeeze from the current financial crisis, with a decline in charitable donations as demand rises for social services, says an investment analyst.

Paul Taylor, chief investment officer with BMO Harris, said many charitable foundations in Canada have seen their investments drop because of plunging global stock markets.

"Donations from the donor community are dramatically lower because individuals are feeling the wealth effect," Taylor said. "They're being laid off as well and … the need for service is going up, so it's the perfect storm for them."

It's placing a measurable burden on community groups, said Tommy Kulcyzk, director of emergency services at Sun Youth in Montreal.

Sun Youth provides help to low-income families, and over recent months the number of people seeking the organization's services has been on the rise, Kulcyzk said.

The centre usually provides more than 1,000 food baskets to community members each month, but over the last six months, there has been an increase of about 250 people a month seeking the centre's services, he said.

Many of the new faces are people who have fallen victim to the current financial crisis, he said.

"So that means we've had more requests on one side and less donations on the other," Kulcyzk said.

It is the busiest the centre has been in 50 years, Kulcyzk said, and there is concern about what will happen when individuals who have recently lost their jobs run out of employment insurance and are in need of more help.

Donors decline

It's not an isolated problem, said Faye Wightman, president of Vancouver Foundation, which sets up endowments for charities.

A recent report by Statistics Canada showed that in 2007, the number of donors in Canada dropped by 0.9 per cent to 5.7 million tax filers. However, the total donations in Canada rose 1.4 per cent, compared with 2006, to $8.6 billion.

Meanwhile in the United States, a Consumer Reports survey suggested that 76 per cent of U.S. shoppers intend to scale back holiday spending this year, including the amount of money they donate to charities.

"We rely on our investments, community foundations use their investments — the interest that's earned on their investments — to fund the charities," Wightman said. "Like any other institution, our investments are suffering as a result of this economic downturn, so that means we have less money that we can give to the charities."

Communities 'ground zero' for recession

The focus over the past month has been on the plight of businesses during the financial crisis, said Monica Patten, president of Community Foundations of Canada, which represents 164 foundations that provided about $176 million in 2007 to local charitable works.

"But our communities are ground zero in terms of the impact of this crisis," Patten said. "When times are tough Canadians are going to rely on community organizations more than ever."

With the holiday season approaching and the cold of winter beginning to set in, it's expected that some of the smaller community groups and charities are going to find it difficult to meet the growing demands, said Wightman.

It's a crisis and not just part of the business cycle, Taylor said, and "it's important for them, as not-for-profit funders, to be aware that they're going to have to be more creative."

The community foundations are tapping into reserve funds to try to continue to provide grants to charitable organizations, according to the Community Foundations of Canada website.

"It's extremely important that at a time like this, that communities find a way to come together to determine our shared priorities," said Rahul Bhardwaj, CEO of the Toronto Community Foundation. "We need to look beyond the present circumstances."

Long-term planning and tailoring strategies will help community organizations get through the tough times, said Richard Frost, head of the Winnipeg Foundation.

But the government should also be stepping in to help ensure community non-profit groups are able to continue to provide crucial social services, Wightman said.

"There is no doubt that there will be a need for additional funds to be able to continue the good work that's going on in the communities," she said.