2024 is drawing to a close, marking approximately five years since COVID-19 began to spread around the globe, causing significant social, economic and political shifts. While the virus itself has faded from the headlines, many of the economic issues that came to the fore during this time continue to impact the sector in its daily work serving communities. In this blog, we check in on where the sector is compared with one year ago when it comes to labour issues, finances and demand. This analysis is mainly focused on a comparison of the third quarter results from the Canadian Survey of Business Conditions in 2023 and 2024.
Happily, there are some positive signs; in the latest results of the Canadian Survey of Business Conditions, 28% of nonprofits reported that they are anticipating no challenges over the next three months, compared to 22% a year ago.1 The sector is also becoming more hopeful; 95% say that they are optimistic about the future this year, compared to 88% last year.2
Economic and financial indicators show some positive signals, but cause for concern remains
In the Canadian economy, there have recently been some positive signs. After hitting the Bank of Canada’s goal of 2% inflation in August, Statistics Canada reported that inflation had fallen to 1.6% in September.3 The Bank of Canada has started cutting its prime interest rate more quickly, and ripple effects should start to be felt across the economy. In September, the unemployment rate declined and the job creation outpaced many economists’ expectations.4 We seem to have technically escaped a recession for now. However, economists point out that this seems largely due to a recent increase in immigration, which is masking recession-like conditions. Households are still feeling the squeeze, as is the nonprofit sector. So where does the sector stand with regards to its financial health today?
Whether an organization has the financial resources required to pay the bills and remain operational is an important indicator of financial health. As of the third quarter of this year, 4% of nonprofits reported that they do not have the cash or liquid assets required for the next three months and are unsure if they’ll be able to acquire them or know that they won’t. This figure is down slightly from 5% in 2023.5 Overall, this suggests that a large majority of nonprofits are financially stable in the short-term.
Inflation’s impact on the sector seems to be easing slightly; while 11% of nonprofits still say they expect rising inflation will be their biggest challenge in the near future, we’re seeing positive movement on several indicators. Compared with last year, more nonprofits expect to see their operating income increase in the next three months (23% vs. 14% in 2023), while fewer nonprofits expect to see their operating expenses increase during that same period (32% vs. 39% in 2023). However, the proportion of nonprofits that expect to see their cash reserves decrease over the next few months is unchanged from a year ago at 17%.6
Overall, the nonprofit sector’s financial situation is mixed like much of the rest of the economy’s; there are some early signals that we may be past the worst of the current economic downturn’s impacts on our sector, but we’re not out of the woods yet and there are still many organizations facing financial challenges.
Recent data from the Charity Insights Canada Project provide more insight into the sector’s financial needs and challenges. 55% of registered charities report that they are constantly sourcing funding to cover core operating costs, which is a major ongoing pressure that takes attention away from other important tasks.7 A large majority (68%) report that unrestricted organizational funding is the type of funding that they would most benefit from, but unfortunately a majority (55%) also report that this type of funding is the most difficult to access.8 Additionally, two thirds of charities cite competition for limited funding resources as the main challenge they face in covering their operating costs.9
40% of the nonprofit sector anticipate labour challenges, down from a year ago
In the latest Canadian Survey of Business Conditions, nonprofits cited recruiting skilled employees as their most challenging obstacle more frequently than any other issue.10 However, there are some hopeful trends in the data. Overall, 40% of nonprofits anticipate that they will face labour-related obstacles over the next three months, down from 50% one year ago. These figures are very similar to the economy-wide numbers. This drop is echoed across two key labour-related indicators; 31% of nonprofits anticipate challenges with recruiting skilled employees (down from 38% in 2023) and 23% anticipate that retaining skilled employees will be an obstacle (down from 34% a year ago).11
Based on this data, it is clear that labour shortages are still a major concern for a large swath of the sector, but in some parts of the sector, we may have moved beyond the peak of labour force challenges. Unfortunately, there is little data available to help us understand which parts of the sector are most impacted by labour shortages.
The sector’s ongoing labourforce issues are having concrete impacts on communities. In Ontario, staff shortages are putting long-term care targets at risk. The SPCA in Nova Scotia is trying out a new partnership with a veterinary school to ease their staffing shortages. Earlier this year in Sudbury, a francophone daycare had to temporarily close multiple sites due to lack of qualified staff.
Demand
The proportion of nonprofits anticipating demand to increase over the next three months has remained virtually unchanged compared to a year ago at 30%.12 This means that the majority of the sector (70%) anticipate demand will be either flat or decrease.
Generally speaking, it is the norm for demand for nonprofit programs and services to oustrip the sector’s capacity to meet this demand. A historical perspective is therefore useful. Statistics Canada data shows that 46% of nonprofits reported that their demand had increased over the course of 2023, including 21% who reported a significant increase. We can compare this with data on charities collected by Imagine Canada in late 2013, at the tail end of the economic downturn that began with the 2008 financial crisis. At that time, 53% of charities reported that they were experiencing an increase in demand for products and services.13 In 2016, Imagine Canada published its analysis predicting a growing “social deficit” by 2026 when demand would substantially outstrip capacity and financial resources. This prediction was based on numerous causes, including our aging population, increasing substance abuse and growing immigration. Today, we would of course add the housing crisis and the fallout from the pandemic, among other things, to this list. Overall, today’s gap between demand and capacity in the sector is nothing new, but rather a continuation of existing trends.
The results of Statistics Canada’s national survey of the sector earlier this year can also help elucidate which parts of the sector are most over capacity. 24% of nonprofits reported that their capacity to meet that demand had increased in 2023, while 13% reported that their capacity had decreased. Certain sub-sectors were under more pressure than others; 70% of both health and social services organizations and 64% of both environment and law, advocacy and politics nonprofits have seen demand rise significantly but capacity in those sub-sectors isn’t keeping up. For instance, we see many stories in the news about the huge strain on food security organizations and emergency shelters. Additionally, certain types of organizations saw a bigger increase in demand: it has risen more for medium and large organizations than small nonprofits (in terms of employment size) and more charities than nonprofits without charitable status are seeing demand increase.14
1 Statistics Canada. Table 33-10-0860-01 Business or organization obstacles over the next three months, third quarter of 2024 & Table 33-10-0689-01 Business or organization obstacles over the next three months, third quarter of 2023
2 Statistics Canada. Table 33-10-0889-01 Future outlook over the next 12 months, third quarter of 2024 & Table 33-10-0716-01 Future outlook over the next 12 months, third quarter of 2023.
3 Statistics Canada. Consumer Price Index, September 2024.
4 Statistics Canada. Labour Force Survey, September 2024.
5 Statistics Canada. Table 33-10-0748-01 Liquidity and access to liquidity over the next three months, fourth quarter of 2023 & Table 33-10-0884-01 Liquidity and access to liquidity over the next three months, third quarter of 2024.
6 Statistics Canada. Table 33-10-0688-01 Business or organization expectations over the next three months, third quarter of 2023 & Table 33-10-0859-01 Business or organization expectations over the next three months, third quarter of 2024.
7 CICP-PCPOB. (2024). CICP-PCPOB Weekly Report - Rapport Hebdomadaire (No. 2.4.14) Philanthropy and Nonprofit Leadership, Carleton University. https://carleton.ca/cicp-pcpob/homepage/research-data/
8 CICP-PCPOB. (2024). CICP-PCPOB Weekly Report - Rapport Hebdomadaire (No. 2.9.33) Philanthropy and Nonprofit Leadership, Carleton University. https://carleton.ca/cicp-pcpob/homepage/research-data/
9 CICP-PCPOB. (2024). CICP-PCPOB Weekly Report - Rapport Hebdomadaire (No. 2.4.14) Philanthropy and Nonprofit Leadership, Carleton University. https://carleton.ca/cicp-pcpob/homepage/research-data/
10 Statistics Canada. Table 33-10-0690-01 Most challenging obstacle expected by the business or organization over the next three months, third quarter of 2023 & Table 33-10-0861-01 Most challenging obstacle expected by the business or organization over the next three months, third quarter of 2024.
11 Statistics Canada. Table 33-10-0860-01 Business or organization obstacles over the next three months, third quarter of 2024 & Table 33-10-0689-01 Business or organization obstacles over the next three months, third quarter of 2023.
12 Statistics Canada. Table 33-10-0688-01 Business or organization expectations over the next three months, third quarter of 2023 & Table 33-10-0859-01 Business or organization expectations over the next three months, third quarter of 2024.
13 Imagine Canada. Sector monitor Vol. 3, No. 2
14 Statistics Canada. Table 33-10-0803-01 Change in level of demand and overall capacity for non-profit organizations to meet demand for services and products, 2023.
