Don McRaeBy Don McRae.

COVID led to charity closures

COVID has had a chilling effect on the activities and revenues of charities, as indicated by a steady stream of charities remarking on how the pandemic affected their fundraising, volunteering, social activities and how they serve their constituents. It’s now becoming clear which types of groups didn’t make it – which have closed and sought voluntary revocation of their charitable status or had their status revoked by Canada Revenue Agency (CRA) due to a failure to file the annual (T3010) tax return.

The best information on reasons for closure comes from voluntary revocations where the groups comment on their recent T3010s about the challenges they faced. Revocations for failure to file are not as forthcoming, because changes to activities or revenue generation create a crisis that lead to failure to file. The time lag in reporting means the critical years of 2020 and 2021 have few or no reports.

Over the past two and a half years, I have come across 93 charities where COVID has been a major factor in their demise. It’s a small sample (that likely under-reports the real extent of closures), but the patterns are clear: reductions in revenue in 2020 and 2021 and a lack of volunteers and restrictions on meetings and social interaction were key factors in closures.

Which charities were hit hardest?

To read all of Don McRae’s stories in our “Charity Revocations” series, click the above image.

To read all of Don McRae’s stories in our “Charity Revocations” series, click the above image.

The majority of the organizations that made comments about COVID restrictions have been groups with older people and those that use face-to-face methods of service and interaction.

Churches were hit hard, accounting for 20 of the 93 (21%). Many churches already had declining numbers of congregants which was exacerbated further by the pandemic restrictions. So, they were already vulnerable, and the cancelling of religious services affected their financial situation leading to premature revocations.

Having studied revocations, I can safely say that the number of groups talking about a lack of volunteers as one of the reasons for revocation has increased substantially. The lack of volunteers is usually coupled with decreasing revenue (something that shows up in cold hard numbers in their revenues).

Groups of seniors or those serving seniors were particularly impacted due to the lack of volunteers as older people stopped volunteering due to health concerns. This has affected everything from hospital auxiliaries to historical societies to older niche museums or “Friends of” societies. These groups usually have modest revenues or are barely keeping their financial heads above water at the best of times. The pandemic restrictions further limited their contact and ability to raise funds.

The effect on volunteering

More generally, COVID broke the cycle of volunteering, as it forced people to take time out and consider if they should continue to risk their health. It broke their volunteering habit. We know from surveys and anecdotal information that seniors want some assurance that their well-being is respected and protected before they go back. That said, in a number of cases of closure, the groups also cited a lack of succession planning or new blood. This is especially true for churches with aging congregations and for older social service organizational models. Overall, the groups chug along with their greying cadre of volunteers, and an older model of interaction, until it becomes too late to change and recruit new faces.

Volunteering was also impacted by the number of volunteer managers who were let go during the pandemic. With little or no face-to-face volunteering happening and revenue sources drying up, these managers were expendable. People with years of volunteer management experience left and found other work. Now groups are trying to hire for these positions and the field is sparse. Volunteer management is a learned trade and most of that learning comes from doing, so groups will be challenged to keep their programs going. And having inexperienced volunteer managers is not the best way to retool your volunteering needs in reaction to existing COVID concerns, especially from seniors.

The charities that were revoked involuntarily for failure to file had also been vulnerable before the pandemic. Most experienced a decrease in revenue long before 2020, showing that multiple organizational problems already existed. I suspect that the next two years of failure to file revocations may show a different trend; decent revenues and then sudden decreases followed by failure to file.

What seems clear in both scenarios of voluntary revocation and failure to file is that we are only seeing the tip of the proverbial iceberg.

Read Don McRae’s update from April 2024: “Four Trends in the Creation & Shutdown of Registered Charities in Canada.”

Don McRae is a former federal public servant and a longstanding volunteer, consultant, writer and researcher on the charitable sector. Since 2020, he’s been following how the pandemic has affected Canadian charities. His information on closures caused by COVID has come from news stories, the internet, YouTube videos, a few mentions in the Public Information returns from charities, and from reports of revocations of charitable status. McRae is on LinkedIn.

Tuesday, January 10, 2023 in , , , ,
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