Inflation & the sector: No signs of relief for charities just yet
The latest Monetary Policy Report, from the Bank of Canada (January 2024), indicates a worldwide trend of decreasing inflation due to better supply chain conditions and a shift in consumer spending from goods to services. In Canada, the inflation rate has fallen to 3.4% at the close of 2023, a significant drop from its 40-year high of 8.1% in June 2022. However, despite an improving economic outlook, with the persistently high costs of housing and food as well as the economy’s slow-moving growth, the charity sector are not breathing a sigh of relief just yet.
The Charity Insight Canada Project (CICP) has explored how inflation affected Canadian charities throughout 2023 and into 2024. The two CICP surveys conducted in March 2023 and January 2024, have highlighted the enduring complexities faced by organizations despite a general easing of inflationary pressures.
Unsurprisingly, inflation remains a significant challenge for charities, particularly in top operational areas like salaries, insurance, supply/inventory, and utilities. The data indicates a persistent pattern, with salaries consistently being the most affected domain – where 60% of organizations reported impacts in 2023, this number has increased to 69% in 2024.
But the fiscal strain does not end with operational expenses. Provision costs are also on the rise, paralleled by a growing demand for services. While 60% of charities reported higher service costs in 2023, this figure has edged up to 63% in 2024.
With around one in five charities noting an increased demand for services in both 2023 and 2024, the sector is facing a dual challenge of stretching their already strained resources to meet growing needs.
This dual challenge prompts us to consider: how can government, funding bodies, and the broader community adapt their support strategies to effectively assist charities in overcoming these pressures?
As we observe inflation beginning to ease, a notable trend emerges in the support strategies that charities find most beneficial. Survey results reveal a decreased focus on short-term, inflation-specific funding, with its importance falling from 39% in 2023 to 23% in 2024. Despite this shift, the core needs of charities continue to resonate strongly: securing core funding, enhancing public awareness and contributions, and increasing flexibility in foundation grants remain the top three sought-after forms of support for the second year running.
As noted by Malia Rogers from Imagine Canada’s Grant Connect Team, the charity sector experienced a transformative 2023 that is marked by increased advocacy for core funding and the forging of trust-based relationships between charities and funders. The sector’s aspirations for more sustainable and flexible funding mechanisms are moving in tandem with such an urgent plea for collective action. Funding and policies need to address the unique challenges charities face, including full funding for overheads, enhanced public awareness and donations, and stability of funding (see year 2 week 4 report).
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