Catalyst for Change: A Roadmap to a Stronger Charitable Sector

Why is it so hard to do great works of charity? This was the question the Special Senate

Committee on the Charitable Sector (the committee) set out to answer. Struck in January

2018, the committee was asked to examine and report on Canada’s charitable and nonprofit sector. The task was daunting, but urgent. While the sector is resilient and

innovative, its potential is limited by what are seen by many stakeholders as complex,

outdated rules and a lack of coordinated support within the federal government.

As these organizations seek sustainable funding models, they are expanding to new areas of revenue generation, sometimes pushing the limits permitted under existing legal and regulatory constraints. Finding new forms of operation and drawing on innovative and often young volunteers and staff, these social enterprises are breaking new ground and finding ways to do good while doing well financially.

Earned income, social enterprise and social finance, and procurement

As noted above, a number of reviews of funding relationships between government and voluntary-sector organizations have suggested that contribution agreements and contracts prevent organizations from innovating and responding to new circumstances. Some stakeholders have called for new funding arrangements to address these issues.

Earned income

As described above, charitable and non-profit organizations are relying and are expected to rely even more on earned revenue, i.e. the sale of goods and services.

As described by the Chief Economist for the sector (Imagine Canada),

“With constraints emerging and demand increasing, charities are going to need to be able to explore every funding opportunity available to them. Out of government funding, philanthropy and earned income, only the last one offers any prospect of long-term growth, and it’s a constrained alternative.

These constraints, and others, on charities and non-profit organizations have led many organizations and other individuals and groups interested in providing public benefit to explore new ways of attracting and using other revenue streams. Witnesses told the committee that such organizations, often referred to as social enterprises, provide opportunities that organizations relying on tax exemptions and receipts for donations cannot access capital.

Social enterprise and social finance

Government officials told the committee of several initiatives intended to support the innovative capacity of charitable and non-profit organizations. For example, an official from the Treasury Board of Canada Secretariat described a “a five-year pilot that commenced in 2017-18, called ‘generic terms and conditions’ … [which] … allows departments to use microfunding, prizes and challenges, and incentive-based funding to promote innovation in transfer payments in communities across Canada, including the charitable sector.”

Testimony and briefs received by the committee identified the desire by charitable and non-profit organizations across Canada of various sizes and areas of work to find and implement innovative approaches to the services they provide and to the larger issues that provide the context for their work.

The federal government has been engaging with civil society and the private sector for

several years, investigating whether and how the government could support social finance

initiatives. The Fall Economic Statement in 2018 announced funding for this initiative,

committing more than $750 million over 10 years, to:

  • support innovative solutions on a broad range of social challenges through a competitive, transparent and merit-based process;
  • attract new private sector investment to the social finance sector. It is expected that the Fund would achieve matching funding from other investors;
  • share both risks and rewards with private investors on any investments;
  • only support investments that are not yet viable in the commercial market; and
  • help create a self-sustaining social finance market over time that would not require ongoing government support.

The Investment Readiness Program

We all want communities where everyone can belong and thrive. The Investment Readiness Program (IRP) supports new and innovative ways of getting us there. It is designed to help social purpose organizations explore, grow and flourish across Canada, contributing to solving pressing social, cultural and environmental challenges. Starting January 8-February 10, 2020, organizations can apply for between $10,000-$100,000 in non-repayable capital to help launch, design, measure and scale their social enterprise and prepare to access investment in Canada’s growing social finance marketplace.

If you would like a hand in planning your social enterprise, let us know:

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