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Contending with the Difficulties of Securing Funding for Core Operational Costs

Imagine a rescue crew tasked with saving a group on a sinking boat. As they approach, they discover holes in their own boat, causing it to take on water rapidly. They must spend time and resources fixing the damage to stay afloat, while the people they need to rescue are still waiting as their boat sinks further. This impossible scenario involves high-stakes decisions, difficult trade-offs, and urgent needs—a scenario we hope to only see play out on the silver screen, if at all.

“The cost of Insurance and Power is what will shut us down. The amounts have us drowning.”

There are core elements in most work environments that enable people to keep the doors open and keep things running. These are the key resources that lay the foundation for a mission to be executed—like a well-maintained, hole-free rescue boat. Not frills, but basics without which the work will likely suffer. The charitable sector in Canada is no exception, as we learned through the CICP’s week 14 survey on core operational costs (a topic derived from participant suggestions).

Core operating costs may vary from charity to charity but often include budget items like insurance or rent for office space—key costs involved in running an organization. Our survey from April 2024 found that the top five most common sources of funding that charities rely on to cover their core operating costs (based on 927 responses) include individual donors (60%), provincial governments (54%), fundraising events (42%), earned income (39%), and foundations and trusts and municipal governments (both at 32%).

The prominence of individual donors and fundraising events in this list stand out in light of recent data from the 2024 Giving Report, which indicates that the number of Canadians making donations to charities has declined for 11 years straight (The Giving Report 2024, p. 6). Consider these findings alongside results from the CICP’s survey, which tell us that out of 926 responding charities, 55% are typically having to source new funds “constantly” to cover their core operating costs. This suggests that a majority of charities are perpetually in fundraising mode to cover their basic operating needs—constantly trying to keep the boat afloat while also pursuing their mission.

There is a significant, albeit much smaller, group of charities (19%) who have secured more medium- to long-term core funding as they report typically sourcing new funds on an annual basis. There is also a small minority of charities (2%) who source core operational funds every two years, but most respondents fall into either the “constant” or “annual” categories of frequency, and 68% of charities are having to source funds to cover their core costs twice per year or more. Consider what it might mean for this 68% of charities to secure core operational funding for a year or more at a time in terms of their strategic planning, recruitment and retention of staff, and provision of services/development of programs.

What we also learned from the CICP survey is that some of the most common challenges charities face in securing funding for core operational costs include competition for limited funding resources (67%), limited capacity for fundraising efforts (51%), lack of dedicated fundraising staff or expertise (51%), the complexity of grant application processes (42%), and uncertainty of future funding sources (40%). It’s not a stretch to imagine that these top challenges are likely compounding one another to some degree. Another challenge that came up again and again in the ‘Other’ comments from participants was that funders often don’t cover core operating costs:  

“Many grantmakers and donors frown on supporting ‘overhead/operating expenses.”

“There is little to no sustainable core funding for non-profits.”

“Many funders don’t want to cover core costs.”

“Funders often want to fund new and exciting projects and are less interested in funding operating costs.”

While funding insurance or work-computers for staff may seem less flashy or exciting compared to a new project, perhaps these comments from charities can encourage further reflection on the part of the public and funders about what we assign value to in charitable giving (and the balance between core funding and project-based costs we have contributed to through our donation/funding patterns). Financing organizational stability may not conventionally hold a lot of marketing cache, but as Imagine Canada has previously highlighted, when charities must rely on project-based funding and are going from one project to the next, core funding is often insufficiently covered in a patchwork manner. This has negative consequences for program development, mission creep, the overall sustainability of the work, and the employment conditions charity workers experience. It also impacts the extent to which charities can meet the needs that emerge out of crisis situations, like pandemics or economic hardship.

Concerns around core funding are a recurring issue in the sector and while project-based work is important, impactful and deserving of support, we can’t avoid contending with the real-world implications of not funding core operational costs, and the benefits of providing charities with flexible funding. Not convinced? Check out these impact stories from Imagine Canada and these findings from an evaluation of the outcomes of flexible grants by the Ontario Nonprofit Network (ONN). Or these CICP survey comments from charities:

“It is difficult changing perceptions that NGOs should not have any or have minimal core operating costs. Without the core costs, it would be impossible to maintain or continue to function as a non-profit, resulting in a decrease in services to the people that need it most.”

“More and more corporate funders and foundations are looking at funding programs and services and shying away from providing funding for core operating costs. It’s a challenge to cover salaries…”

“We spend too much time trying to justify why we need funds to cover the basic infrastructure costs. This is also unfairly viewed as ‘overhead’ without the understanding that non-profits have to run just like a business – with proper accounting, HR, IT, leadership and revenue development.”

Canadians and our representatives ask a lot of charities, especially in recent years, but it is not fair or reasonable to expect them to Houdini themselves out of the sinking rescue boat scenario over and over. Charities in this country are resilient and innovative, but they are not magic.

–The CICP team

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