Top 3 Charity Trends in 2012 Reviewed

This time last year I predicted the Top 3 Charity Trends in 2012, and it's time to see how I fared.

1. My first prediction was that many small and medium sized charities would disappear in 2012.

Well, sadly I was was right, but I also predicted that others would use this "crunch" to innovate and reinvent themselves, and it turns out that was true too. For example, Touchstone Youth Centre closed its doors in November due to financial challenges. After over 20 years and providing outreach and shelter for thousands of young people, they were gone.  However, the Learning Disabilities Association of Canada (LDAC) took a different tack, and became a national association and plans to fulfill its mandate via a web-based presence. A final example is that of the Ontario Mental Health Foundation. They're still around, but due to a decrease in provincial funding and their own reduced return on investments, they have temporarily suspended a number of research fellowships. Net result? Fewer charities, reduced impact, but less spending. Without any way of assessing impact and value and which charity closes and which survives beforehand, there's no way of knowing whether the "right" charities closed or not. Or whether the right programs / initiatives died on the vine or not either.

2. My second prediction was that big charities would get bigger in 2012.

Many larger organizations celebrated their best year ever in 2012 in terms of revenue. However, in this new Darwinian world of charitable survival it's NOT really about who is most fit (e.g. who has the most impact and who is best equipped to deliver on their Mission) but rather who has the deepest pockets, the best fundraising campaigns, and the best top-of-mind awareness. So in the case of big charities the obverse from the small charities that closed is true: of those that grew, who really had the best impact and delivered the best value per donated dollar?

3. My final prediction for 2012 was that charities would increasingly think and in some ways act more like for-profit businesses.

This is a tougher result to review. Certainly I heard a lot at AFP Congress and other events about Social Entrepreneurs and Social Enterprises, but maybe I missed the breakthroughs we all keep expecting.  MaRS and others talked about Social Impact Bonds, but again even with Governments starting to get involved my sense is only modest change has occurred.  I can vouch for charities becoming far more savvy about their back-of-house operations, looking to squeeze already lean budgets to find a few more dollars. For example, the number of calls I get about how charities can partner to save money on rent (hubs, co-locations, etc.) has gone up dramatically. And the number of organizations that are looking to buy their own office and program spaces and grown as well.

Stay tuned for the 2013 predictions shortly!

3 Ways Little Cuts Hurt Charities Most

My last post talked about charities closing their doors not due to a lack of need for their services or offering poor services, but simply due to a lack of funds.  It's also true that seemingly small changes, minor increases in costs, can have a disproportionate impact on charities.  Here are three key ways that "little cuts" can be painful in ways that are different from for profit organizations.

1. Increases in costs, say for example a new fee for garbage pick up, are hard for both charities and for- profit firms to absorb. However, while firms can "pass on" these increased costs to clients, charities have no such option. So for example when the City of Toronto imposes a new garbage collection fee on over 1,000 charities, there's no customer to pay more to offset this cost increase, just a decrease in services to those who can least afford it.
2. Charities have proportionately smaller voice for their size than their for-profit peers (#9 on my Top 10 list of differences). From Boards of Trade to business leaders that have worked within government (and vice-versa), businesses are simply better connected to government. Also, businesses are seen as providing jobs / tax revenue to all levels of government as opposed to perceived as begging from / costing money from all levels of government.  Not the case you say?  Well, in the example of the garbage fee the charities were denied the ability to protest: my bet is that business leaders wouldn't have been treated this way.
3. Another way cuts and increased costs hurt charities most is more philosophical in nature.  By definition charities help those most in need.  So when their revenue is reduced those who suffer from the reduction in services are those who are most at risk. And where charities are providing preventative and proactive supports, keeping people from "costing the system" even more down the road, these extra costs (touted at cost savings) can actually cost the rest of us a lot more in the future.

No doubt that new costs to any organization can be difficult to manage, but the charity and non-profit world is often hurt the most when this happens.

Penny Wise and Pound Foolish: Expensive Spaces for Charities

There has been some press coverage about the impending rate changes to rent space in Toronto District School Board (TDSB) schools and auditoriums, particularly with respect to the impact on religious groups. For example, rates for unsubsidized groups can be from 5 to over 10 times higher per hour than they are for subsidized groups. I believe the implications of this decision are bad today, and will only get worse over time.

While I appreciate TDSB's desire to address their $110 million budget shortfall, there are two significant issues that such massive increases (even if they don't come into effect for several months) present to all sorts of organizations, the TDSB, and ultimately the entire City of Toronto.

1. If organizations can't afford the increase, they won't rent the space, resulting not in a decrease to the budget shortfall, but actually an increase (having some rental income on a property with utility costs is better than no income at all)
2. Even if organizations in the Subsidized Level 2 tier (not to mention the unsubsidized groups) can find the extra funds required, they may be forced to cut back in other areas, reduce hours or staff levels, or cut back on locations (e.g. for some groups there is a maximum of 3 locations before the subsidy does not apply)

In brief, this means fewer services by organizations that in many cases are trying to serve those who need it most.  For example, you can imagine that some of these people being served in TDSB spaces may ultimately face choices around criminal activity, and due to a lack of supports make a bad choice that winds them up in jail, then this is indeed "penny wise and pound foolish".  It costs hundreds of thousands of dollars per year to incarcerate someone, while ensuring robust organizations are in place to help reduce criminality and incarceration only costs (from the point of view of TDSB rents) a few dollars per hour.

It's truly a shame that our way of calculating the "bottom line" only looks at one number - in this case the TDSB's budget shortfall.  This forces short-sighted choices that cost us more as a society in the future.  Surely the better budget is one that includes societal costs and allows groups that save money over time to flourish. Calculating the true value of organizational and program impacts today in years ahead is hard to do, but surely worth doing if we seek maximum value for our donations and tax dollars.