Over the past few years/months talking to various people in the charitable and non-profit sector a recurring theme has emerged: More and more of them are either eschewing government funding or trying to find ways to do so.
Given that governments are the largest source of funding… why would they do this?
The reason is simple. The overhead of administering, overseeing and reporting back on (particularly federal and provincial) government grants or awards has become so onerous that the costs of oversight are increasingly greater than the value of the grant itself. This is particularly true of smaller grants (in the 5 digit range) but still true of even 6 figure awards. In addition to oversight, many people in the sector inform me that governments are not only looking more closely at how recipients spend the money they receive but are increasingly assertive in specifying how they should spend it.
So, in sum, it’s not hard to see why organizations want to walk away. The costs of the money is increasingly too great. On the one hand, compliance means more and more money is diverted to administration – rather than the core mission of the group – and increasing oversight means a loss of autonomy. Consequently, less money can go towards innovative, but riskier, new approaches that might yield better outcomes, or greater efficiencies.
The outcome, I fear, is a non-profit and charitable sector that starts to cleave in two.
On the one side will be non-profits (like those of some colleagues I know) that see eschewing government money as the only way to stay nimble, innovative and independent. These groups will either find progressive granting organizations, wealthy individuals or alternative ways create revenues. Freed to spend their funds as they see best, the most effective will achieve escape velocity and be able to operate for long periods of time without needing to consider government funding.
On the other side, there risks being those locked into government dependency. Unable to fund new projects and innovative approaches that might attract new external funding, they will be trapped in a government deathgrip, forced to adopt traditional approaches and take on excessive overhead, all in order to meet their funding obligations. In short, they will need to mirror the very bureaucracy that not being independent from was what was supposed to give them a competitive advantage.
On the one hand, this is the kind of situation that makes me jealous of the United States with its large pool of private foundations and granting organizations that ensure innovation thrives in the non-profit/charitable sector. But that is a structural difference smaller countries like Canada will not be able to overcome. We need our government’s to be smarter since we can’t replicate the American model.
This is made all the more difficult since those who’ve achieved escape velocity want little to do with government, while those dependent on government funding are probably the least likely (or empowered) to speak up. Sadly, no one wants to upset the government… (why bite the hand that feeds, even if the fruit is poisoned?) so we live in a world of silence on this issue.
I’ll confess, I’m somewhat stumped by the issue but I am worried about it. This country depends on non-profits more than people realize… anything that hampers their effectiveness is a collective drain on productivity, efficiency and competitiveness, to say nothing of social justice.