Shedding Light On A Hidden Sector

Heather Ferguson, President, The Hearing Foundation of Canada and Director, The Empire Club of Canada; Christina Turner, Student, The Bishop Strachan School; Rabbi Perry Cohen, Facilitator, Teacher and Author; Jim Hilborn, President, Canadian Fundraiser/Key to the Sector; Bluma Appel, Entrepreneur; The Hon. Henry Jackman, OC, KStJ, OOnt, CD, LLD, Honorary Chairman, The Empire Life Insurance Company, Former Lieutenant-Governor of Ontario and Past President, The Empire Club of Canada; Lou Natale, Director of Sales, Nortel Networks and Director, The Empire Club of Canada; Jeannie Butler, President, St. George's Society of Toronto; Dr. Frederic Jackman, President, Invicta Investments Incorp. and Past President, The Empire Club of Canada; and Charles S. Coffey, Executive Vice-President, Government and Community Affairs, RBC Financial Group and Director, The Empire Club of Canada.

Introduction by Bart Mindszenthy

Ladies and gentlemen, the old adage, "It is better to give than to receive," tends to evoke mixed emotions in most of us.

The fact is that receiving feels pretty good to most of us most of the time. If we don't make enough money to make us secure, how can we give money or time or attention to those who may need some or all of those things?

Giving is about a lot more than money. Giving is also about time, about actually caring, about values, about being a civil society that sees us reaching into our hearts and heads and finding causes of worth to embrace and support.

Individuals and organizations need to think about how we can and should support not-for-profits. We need to define how we can offer that support in the best and most sustained way possible. And we need to feel like we are helping make a difference because we truly want to, not because we think we have to.

So enter the Canadian Centre for Philanthropy and the Coalition of National Voluntary Organizations. Both established, both bringing value and great service. And this past year the two organizations have decided to merge into one grand new organization that will have a new name in the months ahead.

Meanwhile, they have selected a new President and Chief Executive Officer to lead the drive of Canadian companies and not-for-profits and governments toward a common ground and goal for amplified success. And that's why today we have Georgina Steinsky-Schwartz here to outline the case and the roadmap for the future.

Ms. Steinsky-Schwartz brings three decades of impressive public and private-sector experience to her newest challenge. From Deputy Minister in the federal government to senior positions at Bata Shoes here and abroad and at Manulife and then on to become a senior executive with Bell Canada, Ms. Steinsky-Schwartz has proven time and again that she can lead the way.

Today, she is here to outline her vision for philanthropy in Canada, and the organizations that so very much depend on the caring generosity of us all.

Ladies and gentlemen, please welcome to the podium of the Empire Club of Canada, Georgina Steinsky-Schwartz.

Georgina Steinsky-Schwartz

Thank you for your kind introduction and for the opportunity to speak here today.

Just for a moment, try to imagine what your community would be like without its places of worship, sports clubs, hospitals and daycare centres. Consider what it would be like if there were no arts events, professional organizations, service clubs or minor hockey leagues.

Without these, Canada would be considerably less than what it is now. A less developed country. A less compassionate country. Without these, you would have to wonder if it was really Canada at all.

None of these activities could take place without our charitable and nonprofit organizations.

These organizations are the cornerstones of our communities. They are the places where we Canadians come together to express the things in which we believe. They are places where people feel they can "make a difference"--where we can express our fundamental Canadian values. They provide outlets for our creativity. They give us a very direct way to show compassion for others. They provide a forum for expressing and acting upon concerns about our society, the environment and our world at large.

In a period of increasing mistrust of many public and private institutions, Canadians continue to express confidence in the work of charities and nonprofit organizations. Indeed, recent surveys conducted by various research firms--IPSOS Reid, Environics and EKOS--consistently show that Canadians trust these institutions far more than they trust governments. A poll conducted earlier this year by IPSOS-Reid for Edmonton's Muttart Foundation found that leaders of charities are trusted by 80 per cent of Canadians, ranking behind only nurses and doctors--but well ahead of business leaders and government employees.

Yet, while we Canadians intuitively "feel good" about charities and nonprofit institutions, it is remarkable how little we understand about the structure and dynamics of this sector, its economic impact and its challenges. As someone who has come to the nonprofit world from the corporate sector, I was used to having information about the business context in which I was operating. I constantly heard the maxim "what gets measured gets done." In order to make good decisions, I needed to know about the structure of an industry, its size and scope, the key competitive trends, etc. Yet, when I moved to the nonprofit world I learned that we are only now beginning to gather this type of information.

So for today, I would like to do two things:

First, I would like to share some very interesting new information with you about the nonprofit and charitable sector in Canada. This information lets us, for the first time, begin to understand the sector more empirically.

Second, I would like to share with you my thoughts on what we as individuals working in business, government or the nonprofit world itself can do with this information.

Let us first shine a light on this often hidden "third sector" that operates in that societal space between the worlds of government and of business.

This fall, thanks to funding that came from a Government of Canada program called the Voluntary Sector Initiative, a consortium of nonprofit organizations led by the Canadian Centre for Philanthropy released the results of a landmark study that we conducted in partnership with Statistics Canada. The National Survey of Nonprofit and Voluntary Organizations allows us to see, for the first time, the size and scope of Canada's charitable and nonprofit sector.

A companion study by Statistics Canada looked at the charitable and nonprofit sector's economic impact.

Taken together, both studies are groundbreaking pieces of work that provide information about the work of charities and nonprofit organizations and point to issues that need to be addressed. Hitherto, we have lacked the most basic information that other sectors have taken for granted: the number of organizations, their size, their contributions, and the resources they need to fulfill their missions.

Let's start by looking at the sector's role in economic life. Statistics Canada can now measure the sector as part of the system of National Accounts--where StatsCan tracks the size of all of the distinct sectors of the economy.

When measured by gross domestic product (the value of the productive activity generated), including the value of volunteer time, we learned that charities and nonprofits represent 8.6 per cent of the Canadian economy. This is more than 11 times that of the motor vehicle manufacturing industry, over four times larger than agriculture, and over twice the value of the mining, oil and gas extraction industry. It is more than 50-per-cent larger than Canada's entire retail trade industry. This is a significant economic presence employing more than 13 per cent of the labour force. Even when hospitals, universities and colleges are excluded from that number, the sector represents 3.2 per cent of the economy.

The research tells us that, in absolute numbers, charities and nonprofits represent $112 billion in revenues and 161,000 organizations, of which approximately 80,000 are registered charities under the federal Income Tax Act. If you exclude the "big fish" from the total number of nonprofits--the hospitals, universities and colleges--the remaining organizations report annual revenues of $75 billion and they employ 9 per cent of the Canadian work force.

Most of these organizations do work that directly influences the communities in which we live. More than half of these organizations are rooted at the community level, reporting that they deliver services in their neighbourhood, town or city.

The research also lets us get beyond the stereotype that charities and nonprofits are involved mainly with providing food and shelter for the homeless or supporting disease research. The work these 161,000 organizations do touches virtually every aspect of Canadians' lives. For those of you in the audience today who may take your children to ballet, hockey practice or gymnastics this week, we know that the single-largest concentration of organizations--some 20 per cent of them--are in the sports and recreational fields. Following close behind are religious activities, social services, arts and culture, and housing. Imagine any part of our society where people come together to do things that make their communities better places to live and you will probably find charities or nonprofit organizations there. And this 161,000 represents only those organizations, which are federally or provincially registered; no reliable statistic exists about the multiplicity of informal citizen groupings. Some estimates put the number of these groups as high as 900,000 organizations.

This research has changed how we look at the operations of charities and nonprofits. Many Canadians traditionally think of these organizations as relying on a mix of paid staff and volunteers. The research found that more than half (54 per cent) of the 161,000 organizations are run totally by volunteers; they have no paid staff at all.

The scale of the contribution that Canadians make as volunteers and as donors also becomes clear when we quantify these two elements. Each year, Canadian men and women volunteer two billion hours of their time to these organizations. They fill 19 million volunteer positions; that's the equivalent of one million full-time jobs.

In terms of financial contributions, Canadians donated $6.5 billion to charity in 2003. They take out 139 million memberships in these organizations; that works out to an average of four memberships per person.

But although charitable and nonprofit organizations have a significant economic presence and command large numbers of volunteers and paid staff, they face daunting challenges. And these challenges are affecting their ability to fulfill their mission and serve their communities.

The top-five challenges identified in our research relate to their ability to plan ahead and in particular to recruit volunteers (either to do the work of the organization or serve on their board). They are also very concerned with how to get the funding they need in the form they need it.

The number of registered charities in Canada grows every year. This means more and more organizations are competing for government funding, corporate partnerships, foundation grants and individual donations every year.

Are these sources of funding expanding to meet the needs of charities and nonprofits?

Funding is an increasing concern. While the charitable sectors' need for funding grows and the absolute amount of donations has increased, we are seeing a persistent decline over the past few years in the number of taxfilers claiming donations relative to the total number of those who file income tax returns. This means that fewer people are giving more. Not a good trend.

We also have a clearer picture of where the money comes from. Governments currently provide 49 per cent of the funding that flows to charities and nonprofits, with the largest portion coming from provincial governments. Government only contributes 36 per cent when hospitals and universities and colleges are excluded. These are fees for services that the sector delivers. Provinces are funding the work the sector does on its behalf, particularly in the area of health care. And as health-care spending has taken up an increasing proportion of government spending there are indications that the amounts of funding for other purposes has been declining.

Most Canadians tend to think that individuals, corporations and government support charities equally.

Compared to the 49 per cent of nonprofit funding that comes from governments, organizations raise about 35 per cent of their revenues through sale of goods and services to other parties (43 per cent of money is from earned revenue if we take out hospitals, universities and colleges), while only 13 per cent of all revenue comes in the form of gifts and donations from individuals, corporations and other organizations (this is 17 per cent excluding hospitals, universities and colleges). Of this 13 per cent, just 3 per cent comes from corporate sponsorships, donations and grants (4 per cent excluding hospitals, universities and colleges). This compares with 8 per cent (11 per cent excluding hospitals, universities and colleges) that comes from donations made by individuals.

Many Canadian charities tell us that what they really need is stable long-term funding that will help them pay for their operating costs. Yet, increasingly, when funding from governments, corporations and foundations is available, it is too often earmarked for specific short-term projects. There is an unwillingness to fund long-term programs and take into account that projects require supervisory staff and some infrastructure to support them. Often this is motivated by a concern that the money not be "wasted" on administrative costs. Funders' motivation to encourage organizations to be more efficient is understandable and laudable. However, it is clear from what we hear from Canada's charities that this project focus has now gone to an extreme. My organization and the Canadian Council on Social Development--as well as others--have studied this issue in some depth and it is clear the focus on project funding is becoming dysfunctional. For those of you in the private sector, would you run your organization with no administrative backbone, no supervisory personnel? Would you tolerate high rates of personnel churn and process re-work? This is what project funding is doing to many organizations who have to "re-invent" themselves from project to project, often losing valuable expertise and experiencing organizational mission drift as they try to survive and continue to serve their clientele. It's time for a healthier dialogue about the real cost structure of these organizations, and a focus on the outcomes to be achieved, without micromanagement of how this is done.

Small and medium-sized organizations also face another threat. Large charities have the most resources and that means they have the infrastructure to become bigger. With greater scale and resources to make their case and fundraise, they are attracting disproportionate amounts of funder dollars.

Many of these large organizations are hospitals, universities and colleges. A smaller number work in the areas of social service, education and research, health and international affairs.

When we group charities by revenue, we see that those with over $10 million in revenue--the top 1 per cent--actually receive 60 per cent of all revenues flowing to the charitable sector. The large organizations also tend to receive substantial amounts of government funding. This means that smaller organizations are struggling to find the money to carry out their missions and are much more reliant on generating revenues through sales of goods and services and fundraising from individuals, businesses and foundations.

Finding sufficient funding is not the only challenge facing charities and nonprofit organizations. They are having substantial difficulty in finding staff and volunteers.

Many of these organizations say volunteers and paid staff are one of their greatest strengths. Yet, those who do have employees are finding it hard to recruit, reward and retain good employees. All report trouble attracting volunteers and board members.

Studies by the Canadian Centre for Philanthropy reveal troubling trends in the volunteer area. Since 1997, the number of volunteer hours contributed by Canadians has increased. But--as with declining numbers of donors--the total number of individual volunteers has declined. This has happened because older Canadians are contributing an increasing share of those volunteer hours.

If these giving and volunteering trends continue, the future for all our charities and nonprofit organizations is worrisome.

When we look at the differences between big and small organizations, some of you who are in business may see analogies with the private sector. Smaller business enterprises also experience difficulties accessing capital or expertise, often due to lack of scale. However, in the past decades governments and the private sector have made significant efforts to address the concerns of small and medium-sized enterprises because they have recognized that the SME sector--as they call it--is an important source of economic growth and entrepreneurial innovation.

Now that we have identified a similar issue in the nonprofit sector, are there some lessons that can be applied to small and medium-sized charities and nonprofits? They are often an important source of social innovation and are clearly an important source of citizen engagement.

While there are thousands of examples of the innovative things that charities do each day, I would like to draw your attention to just one socially entrepreneurial group that is operating here in Toronto today.

The Somali Women and Children's Support Network began as a pretty traditional charity but has evolved into an innovative enterprise that is doing incredible work in the community.

The network was launched in 1992 to address the profound challenges being faced by immigrant Somali women in Toronto. Coming from war-ravaged Somalia, the women were thrust into a country and culture entirely foreign to them. Traumatized by the war, they were socially isolated and economically disadvantaged.

The community came together and formed the Somali Women and Children's Support Network. First the organization offered classes in English as a second language. Very soon, the program expanded to offer workshops on everything from parenting to computer training.

Within a few years, however, it became apparent that these workshops could not solve the main problem--the lack of employment opportunities for the Somali women. And so the organization decided to start a business, a profit-making venture within a nonprofit framework that re-invests its proceeds in community work.

Named Haween, after the Somali word for women, the new business began providing sewing services to the garment industry, using 10 donated sewing machines. The women not only learned to operate the machines, they looked after Haween's administration, inventory control, packaging and invoicing. Today, Haween operates out of a 3,000-square-foot warehouse in Etobicoke and employs as many as 80 Somali women, backed by a core of 40 volunteers.

Organizations such as Haween are a good example of the types of innovation that are happening across the charitable and nonprofit sector. And this innovation could not exist without the volunteers and funders who offer their skills and experience to make life better for others. In other words, to paraphrase the famous word of the Pogo cartoon: "We is the solution."

On that note, I want to turn our attention now to the second part of my speech--namely how we can all play a part in helping make our communities stronger and more vibrant.

First, many of you in this room are business leaders.

Increasingly, enlightened Canadian businesses are recognizing that their involvement in community is an important part of their bottom line. They are looking for ways to demonstrate that they are ethical and are committed to playing a positive role in society.

They realize that Canada's economic competitiveness and that of their own firm is linked to the strength and vibrancy of the communities in which they operate. Businesses are also realizing that good community relationships play an important role in their ability to attract and retain employees.

Many of the leaders in this room already know this. You are already actively engaged in building better communities and a concrete demonstration of this is that many of you support the Canadian Centre for Philanthropy's Imagine initiative. Since 1988, Imagine has worked with businesses to encourage them to commit 1 per cent of their net profits to charity as well as undertake other activities related to good corporate citizenship, such as promoting employee volunteerism and involvement in community initiatives.

With the support of many of the companies represented in this room, we launched a new Imagine commitment last week with a supplement circulated that ran in the Globe and Mail. And if you didn't see the supplement, we have copies available for you here today. This new commitment builds upon our earlier efforts and is even more flexible in recognizing the good that businesses can do in the community.

We've received strong support for this commitment so far--11 of Canada's top CEOs are on board and are publicly supporting it. However, there is a lot more we can do. If you are a business leader I urge you to get concrete about your commitment.

If you are an entrepreneur or venture capitalist, there are ways that you, too, can get involved. We have also been working with a group of enthusiastic venture capitalists here in Toronto to structure another program called Emagine that encourages entrepreneurs to pledge a percentage of future profits to community purposes.

If you need a concrete example of how companies can partner with charities to impact their communities, their employees and their bottom line, just look at the example of a unique partnership operating here in Toronto called Frameworks.

Frameworks is a small new charity that approaches corporations and asks them to purchase artwork that will appeal to young people. The companies then donate that artwork back to Frameworks.

Frameworks then holds what it calls a "time-raiser" auction. It invites young people under the age of 35, many of whom are employees of the donor corporations, to a reception where they can bid on the donated artwork with volunteer hours that they can dedicate to the charity of their choice. Once the volunteer has contributed the hours to the charity, the charity informs Frameworks, which then passes the art on to its new owner who has "bought" it by donating volunteer time. A charity "trade fair" is also part of the process, so that volunteers are presented with real options for which they can sign up.

The partnership meets a huge community need--encouraging younger volunteers, introducing small charities to them and also helping companies motivate their employees at the same time.

In addition to the business representatives in the audience, there are many here from government as well. For the foreseeable future, governments will be challenged by community needs, but for the most part won't be able to respond on the scale they once did. They will be looking to the nonprofit and charitable sector to fill the vacuum.

For those of you in government I urge you to use the new information from our research--and the innovation that is happening in the organizations themselves--to examine your policies and programs. In doing so, ask how your department, its regulations and its resources can better support the work that we all know has to be done. How can government encourage innovation, support our efforts and partner to build better communities? Shouldn't we be concerned about what is happening to our small and medium-sized charities in particular? Compare what you do for small businesses and see whether there are comparable ideas we can pursue.

In this space--where business, nonprofits and governments intersect--the organization I am leading is going to be getting even more involved. In January 2005, the Canadian Centre for Philanthropy will rebrand itself and become even more dedicated to researching and reporting on the nonprofit sector and the factors that are influencing it, promoting public policy that encourages contribution to community and strong nonprofit and charitable institutions, and advocating with individuals, governments and business to get involved.

To those of you in the room from charities and nonprofits themselves, we look forward to working with you to advance our common cause.

I want to direct my closing remarks to those of you in this room who haven't been engaged with nonprofits or charities to date. I hope the information I've shared has been sufficiently inspiring to make you reflect on your personal role and how you might get involved. The incredible diversity of charities and nonprofits means that there is no shortage of places where you can begin to make a difference. Are there issues that matter deeply to you and your family? Is there a cause or a community issue about which you feel passionately? Then find the organization that promotes that cause and get involved.

Think about the skills and experience you can offer and find volunteer work where you can contribute.

Volunteer work does not have to take a lot of time. Take on a small project, offer to write letters of support to your business contacts, act as an advisor or offer some pro-bono financial or management help. If you don't know where to start, there are many resources in Toronto that will have ideas: the Toronto Community Foundation, Volunteer Centres, the United Way, to mention only a few. If you are interested in serving on a board, go to www.Altruvest.org where you will see an innovative Internet matching tool where charities can post their needs and potential board members can express their interest.

If you are in a position to influence public debate, help us get the message to our political leaders about the challenges that charities and nonprofits face.

Remember--one person can make a world of difference.

Two weeks ago I witnessed how two businessmen with a passion for community used their personal expertise and relationships to organize a unique event that benefited dozens of different organizations. Altruvest, the group I just mentioned, is a charity that promotes good board governance for small and medium-sized charities. Two weeks ago Altruvest held Charity Expo--a trade fair for small charities. This was the brainchild of two business people with experience in marketing and promotion. They gave their time to bring together charities, their business funders, and other supporters in a trade fair environment where volunteers could meet organizations, organizations could meet each other, and innovation could begin to happen.

For those of you who are attaining what is euphemistically called "the best years" (and many of us are in that demographic), a career transition to a nonprofit organization may also be something to consider. A number of us--Paul Alofs at Princess Margaret Foundation and Michael Howlett, at the Canadian Diabetes Association--have made this change.

And whether you give money, ideas or time, in the end those of you who are already engaged know you get more back in satisfaction. You know that contributing to community is a way of working for that higher purpose for which every human being aspires. My personal inspiration as I have thought about these issues is an author named Victor Frankl, a Holocaust survivor who wrote a book called "Man's Search for Meaning."

In conclusion, I'd like to share some of Frankl's words with you as he reflected on what he saw in Auschwitz: "The experiences of camp life show that man does have a choice of action. We who lived in concentration camps can remember the men who walked through the huts, comforting others, giving away their last piece of bread. They may have been few in number, but they offer sufficient proof that everything can be taken from a man but one thing: the last of the human freedoms--to choose one's attitude in any given set of circumstances, to choose one's own way."

Whenever I read that passage I say to myself that we are fortunate that we don't live in the conditions that Frankl describes, but we too have a choice of action. I hope that by shining a light on the hidden nonprofit and charitable sector, I've played some role in inspiring you to choose your way through engagement in the sector.

Thank you.

The appreciation of the meeting was expressed by Heather Ferguson, President, The Hearing Foundation of Canada and Director, The Empire Club of Canada.