Hard Hit: The Impact of the Economic Downturn on Nonprofit Community Social Services in Ontario

Posted on 21. Oct, 2009 by Christopher in Reports

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Hard Hit: Toronto

The Toronto Story: One hundred and thirty-five Toronto agencies took part in this survey of more than 400 Ontario nonprofit community social service organizations, representing one-third of the total. This bulletin provides a summary of the Toronto-specific results of the study. Find an analysis of Toronto results here.

Executive Summary

Context

The vital role of the nonprofit community social service sector is never more apparent than during harsh economic times. When communities are reeling from mounting job losses and growing insecurity, organizations on the front lines are called upon to respond. In turn, the capacity of the sector to respond is critical to individual and family well-being and the cohesion of communities.

In Ontario, decades of government underfunding and cutbacks have left agencies under-resourced and overextended at the best of economic times. While governments have increased their reliance on the nonprofit community service sector to deliver vital programs, they haven’t been willing to foot the full bill (Clutterbuck & Howarth, 2007). Based on an analysis of 155 discretely funded programs, researchers calculated that programs, on average, are underfunded by 14% (Lynn Eakin & Associates, 2004).

In response to these manufactured budget shortfalls, agencies have diverted scarce resources from community building and service provision work to chase additional dollars. In the scramble for survival funding, organizations have found themselves in stiff competition with like agencies, vying for dollars from limited non-governmental funding pots and donor pools. This competition has undermined the potential of the sector to work collaboratively in the interests of the community.

Core funding that supports the overall mission of organizations and provides the flexibility to cover administrative costs and organizational infrastructure, has increasingly given way to project and program funding with its limited and inadequate administrative dollars. Illustrative of this trend, the provincial government in 1995 eliminated its contribution to the Community and Neighbourhood Support Services Program which had provided stable core funding to nonprofit organizations, including many small emerging ethno-specific and cultural agencies (Clutterbuck & Howarth, 2007). The current government has made no move to reinstate this funding.

Compounding these challenges, funders have increased the administrative and reporting burdens on organizations without providing resources to meet these new requirements (Lynn Eakin & Associates, 2007). Again agencies have redirected critical resources from their mission-centred work to respond to grant-related administrative requirements.

Over the past fifteen years, Ontario’s nonprofit community service sector has increasingly found itself under stress, operating in a perpetual crisis environment, and stretching financial and human resources tight to meet community needs. During the best of economic times, governments failed to take action to put the sector on an even keel. Long-standing problems were left to fester and no actions were taken to prepare for the impact of future economic downturns – rainy days that were sure to come. And then the recession hit.

During the Fall of 2008, the worst global economic crisis since the Great Depression began to pick up steam. In Ontario, more than 160,000 people joined the ranks of the unemployed in only eight short months (Statistics Canada, 2008, 2009). Official unemployment rates approached double digits. At the same time, restrictive eligibility criteria limited access to Employment Insurance and provincial social assistance programs.

Within this context and against a backdrop of underfunding and diminished resources, Ontario’s nonprofit community service sector has been called upon to respond to the needs of struggling communities affected by this historic economic downturn.

Surveying the Impact

Hard Hit documents the impact of the recession on Ontario’s nonprofit community service sector, lays out the implications for Ontarians, and suggests a path forward to strengthen the capacity of the sector to meet the challenges ahead. During April and May of 2009, the Social Planning Network of Ontario (SPNO) conducted a survey with 413 community service agencies from across Ontario. This survey was conducted as the first in a series in order to track the changing impact of the recession on Ontario’s nonprofit community service sector. The questionnaire focused on changes in service demands and funding situations, and the strategies that agencies are adopting to cope with emerging conditions.

Recession Increasing Demand for Community Services

Survey results reveal increased demands on many participating agencies to respond to the needs of Ontarians hard hit by the global recession. Sixty percent of agencies reported that their service demands had mostly increased, with three quarters of these agencies attributing the increase, primarily or in part, to the recession.

A wide range of programs are being affected. Agencies provided examples including dramatic increases in food bank and meal program use, more demand on employment services and job training programs, increased use of bankruptcy and credit counselling services, and impacts on health services, mental health counselling, and suicide and crisis intervention programs.
Compounding the general effects of the recession on service demands, several agencies also commented on the increased demand for services among community members having problems accessing Employment Insurance (EI) or enduring long wait times for EI. Respondents described the emotional and financial crisis resulting from lack of access to EI.

Over half of survey respondents provided information on key programs that had experienced an increase in demand since September 2008. Among these agencies, 97% reported an increased number of people requesting services, 49% were engaging in more crisis management and had less time for preventative programming and 72% were finding increased complexity in the needs of the people they serve.

Rather than a new trend, the current economic situation is exacerbating a pre-existing problem faced by cash-strapped community service agencies trying to meet growing community needs with inadequate resources.

Funding Cuts Common with More Losses Anticipated in 2010

While service demands have been increasing for most agencies, respondents were more likely to experience funding cuts than increases in their most recent fiscal year. Half of all agencies experienced a funding cut from at least one revenue source compared to 35% of agencies reporting funding increases in at least one area. Similarly 65% of agencies anticipate cuts from at least one revenue source in 2010 compared to 44% that anticipate an increase from at least one area.

Agencies were most likely to experience funding cuts from private donors (52% of agencies), selfgenerated sources such as fees (39%) and United Way/foundation funding (31%) rather than government sources (13%) where cuts were less common. A similar pattern emerged in terms of sources of anticipated funding cuts in the upcoming fiscal year with donors (67% of agencies), self-generated sources (43%) and United Way/foundation funding (39%) topping the list. Still over one in five agencies anticipate government funding cuts in 2010.

Agencies Act to Address Increasing Demands and Funding Cuts, Still Community Needs Go Unmet and Coping Strategies Not Sustainable in the Long-Run

Agencies have employed a range of strategies to address service needs but 50% still report being unable to respond to increased demands in at least one key program area. Supporting more people with the same staff (69% of agencies) and increased volunteer hours (46%) were the most common strategies utilized. Many agencies also expanded program staff time and service hours (28%), fundraised more private dollars to expand programming (27%) and reallocated agency administrative dollars (24%) to expand programming as well.

Agencies have responded to funding reductions with a variety of actions. Most commonly, agencies reported supporting more people with the same staffing level (46% of agencies), increasing fundraising efforts (45%), applying for funding from another funding source (37%), increasing use of volunteer hours (36%), recruiting more volunteers (34%), using agency reserves to cover program hours (33%), cutting professional development resources (33%), engaging in new partnerships (31%), increasing unpaid management overtime (29%) and cutting agency administrative supports or systems (26%).

Agencies are pulling out all the stops to meet the increasing needs of community members and to limit the negative effects of funding cuts on the communities they serve. But it is simply not enough. Current coping strategies are not sustainable. Increased competition for diminished private donations and limited funding pots will not meet the need. Overloading staff, increasing the burden on volunteers and cutting essential supports is a recipe for organizational dysfunction and individual burnout. It will not serve communities in the long-run.

Shoring Up the Foundation: Meeting Community Needs Today and Preparing for Tomorrow

In July 2009, Bank of Canada Governor Mark Carney declared the end of the recession, technically defined as two consecutive quarters of negative economic growth (CBC News, 23, July 2009). While financial markets may be on the upswing, the employment situation is not expected to recover for years and even then, questions remain about the quality of jobs that will return with a shift away from higher-waged manufacturing to lower-waged service sector employment.

In a report released in September 2009, the Organization for Economic Cooperation and Development forecasted a grim future for Canada with growing unemployment over the next year (OECD, 2009). The OECD reminds us that it took almost eight years for Canada’s employment situation to return to pre-recession levels after the recession of the early 1990s – and our current situation may be worse. We have a long road ahead and need to begin the task of fortifying vital community services and public supports to meet community needs now and into the future.

To this end, we recommend the following course of action:

  1. All levels of government initiate discussions with key community service agency stakeholders immediately to identify reforms and investments that will effectively shore up the capacity of the sector to sustain and strengthen their communities. Because of their increased fiscal capacity, senior levels of government in particular should develop strategies of support to fortify the nonprofit community service sector to address the human tragedy resulting from high unemployment levels.
  2. The federal and Ontario governments introduce dedicated social infrastructure funds, similar to the built infrastructure fund, as a means to deliver community program dollars over the next few years that can help fuel social and economic development and much-needed recovery. These funds would be used to support a nonprofit job-creation strategy that creates jobs and at the same time expands social support programs for affected communities including youth, seniors, women, racialized communities, people with disabilities and new immigrants. Job creation would be concentrated in key areas including child care, affordable and supportive housing and food security initiatives. This investment would support economic recovery, promote greater equity and foster community prosperity.
  3. The federal government work to improve eligibility and increase timely access to Employment Insurance benefits and the Ontario government work to improve benefits and increase access to social assistance programs to reduce the financial crisis faced by unemployed workers during these tough economic times. These actions, in turn, will support the nonprofit community service sector by reducing the crisis management required to assist community members in these difficult situations.

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