Beyond Survival: The Impact of Unrestricted Funding on Charities’ Sustainability
As the demand for charitable services increases, many charities face a relentless struggle to secure funding for their essential operations. A central challenge lies in the structure of their funding—often project-based, restricted, or insufficient to cover core costs. This funding landscape forces many charities to devote valuable time to fundraising, diverting focus away from delivering essential services.
At the Charity Insights Canada Project (CICP), we conducted a survey to better understand the funding challenges charities face and explore how stakeholders and policymakers can better support them. According to our findings, over half of Canadian charities report being in “constant” fundraising mode to meet basic operational needs. Organizations such as Imagine Canada have long advocated for more core or unrestricted funding to help charities become more resilient. This blog delves into our findings from the Funding Landscape and Long-term Sustainability surveys, highlighting the crucial role of unrestricted funding in empowering charities to focus more on their missions rather than mere survival.
The Funding Dilemma
One survey respondent encapsulated the challenge: “Most of our funding comes from provincial government ministries, which restrict how we use it. They also cap administration costs at 15%, which is insufficient to run an organization effectively.” This sentiment underscores a widespread issue in Canada—restricted funding often supports only specific projects or programs, leaving critical expenses like salaries, rent, and administration uncovered.
Charities depend on various types of funding, each with different levels of flexibility:
- Restricted Project Funding: Allocated for specific projects, with strict usage conditions.
- Unrestricted Project Funding: Allows flexibility within projects but may not cover all costs.
- Full-Cost Project Funding: Covers all project-related expenses.
- Restricted Program Funding: Restricted to specific programs with limited flexibility.
- Unrestricted Program Funding: Offers more leeway for use within programs.
- Unrestricted Organizational Funding: Provides the most freedom, allowing funds to support any part of the organization’s operations.
Our survey reveals that most charities rely on restricted project or program funding, or on unrestricted organizational funding, to support their activities.
| Type of Funding | % of Total Revenue | % of Charities Receiving |
|---|---|---|
| Restricted Project Funding | 19% | 66.5% |
| Unrestricted Project Funding | 7% | 34.5% |
| Full-Cost Project Funding | 4.5% | 19.5% |
| Restricted Program Funding | 20.5% | 57.5% |
| Unrestricted Program Funding | 9.5% | 37% |
| Unrestricted Organizational Funding | 29% | 67% |
While unrestricted organizational funding offers the most flexibility and can support core operations, much of this funding stems from individual donations, membership fees, and self-generated revenues, requiring constant efforts to maintain.
Unrestricted Funding and Long-Term Sustainability
Our data show that charities reliant on project-based funding, whether restricted or unrestricted, express greater concerns about their long-term sustainability. Charities with higher levels of restricted project funding are significantly more worried about the future compared to those with access to unrestricted funding.
| Concerned About Long-Term Sustainability? | Avg. % of Restricted Project Funding | Avg. % of Unrestricted Project Funding | Avg. % of Full-Cost Project Funding |
|---|---|---|---|
| Yes, highly concerned | 23.5% | 9.5% | 4.5% |
| Yes, moderately concerned | 21% | 7.5% | 4% |
| Yes, minimally concerned | 15.5% | 6% | 4% |
| No, not concerned | 16% | 5.5% | 3% |
Conversely, charities with unrestricted program or organizational funding are generally less worried about sustainability, thanks to the flexibility this type of funding provides.
| Concerned About Long-Term Sustainability? | Avg. % of Unrestricted Program Funding | Avg. % of Unrestricted Organizational Funding |
|---|---|---|
| Yes, highly concerned | 7% | 24.5% |
| Yes, moderately concerned | 11% | 28% |
| Yes, minimally concerned | 9.5% | 32.5% |
| No, not concerned | 12.5% | 35% |
Charities Speak Out
Survey participants emphasized the need for a shift away from project-based and restricted funding:
“We are a small nonprofit. We need funding for salaries. We partner with many other organizations in the community to receive donations in-kind for equipment, program space, etc. But someone needs to run the programs and foster those relationships. We need unrestricted funding for salaries to do those things.”
“We have found in recent years that program funding from all levels of government has become far more restrictive. There area lot of hoops to jump through to get permission to make adjustments in order to meet emerging and growing community needs. This “red tape” creates additional barriers when it comes to accessing services and makes it very difficult for our organization to respond quickly and efficiently to urgent and growing community needs.”
“Funding restrictions are difficult, and many require our charity to take on new projects or programs rather than help us maintain what we currently offer. Time is wasted review criteria and then we abort and do not pursue. How can we expand our services when our current programs are meeting needs and are undervalued.”
Breaking the Cycle
While unrestricted funding has increased since the pandemic, many charities remain dependent on restricted project or program funding, which rarely covers core operations or guarantees consistent support.
Our research suggests that more unrestricted funding is essential to break the cycle of financial insecurity that threatens the longevity of Canadian charities. Project-based and program-specific funding may meet immediate needs but often falls short of covering core operational costs, forcing charities to divert time and resources to relentless fundraising.
The message from our findings is clear: unrestricted funding enables charities to focus on lasting community impact rather than mere survival. By advocating for more flexible and reliable funding models, we can help charities build the resilience they need to support vulnerable communities for the long term. The charities that address society’s most pressing needs deserve stable, unrestricted funding so they can continue their vital work without compromise. Let’s champion funding structures that allow them to thrive, not just survive.
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