Charity Funding Flows across Jurisdictions: Why we’re obsessed with following the “money in the system”

Foundations to understanding financial flows 

I am often asked how HelpSeeker as a social tech company  “got into Social Impact Audits” –  or SIAs for short. First of all, I will be honest that we made up the term because we needed a simple way to describe a pretty hairy concept. (By all means, if someone has claims on SIA the trademark, have at it –  the point here is not the name and who coined it.) That big hairy concept was related to our effort at HelpSeeker to make sense of our labyrinth social safety net in a way that was easy to understand, and then convert this into apps to help people navigate for resources.

The quest to figure out how to “map the system” got us a long way – we are up to 275,000 services mapped and still going (thanks again to CMHC) – but it took us down some convoluted, dead-end, but ultimately fruitful paths as well. One of those paths led us into the diverse financial datasets relevant to Canada’s social safety net – a key one being the Canada Revenue Agency dataset on charities, a part of the legal requirements for charities to maintain this status. This dataset is merged with many others from different provinces, municipalities, and other entities to paint as good a picture of the “money in the system” as possible. 

The emergence of Social Impact Audits

The Social Impact Audit concept emerged as we dug deeper into the systems mapping data on what services operated in communities delivering social supports, layered this with the financial information on where the investments were coming from, to better understand requirements and eligibility criteria. Inevitably, we wanted to then answer the question of what the impact – outputs, outcomes, etc. – was from the various services and their funding streams. The full process – systems mapping, financial flow analysis, and impact assessment – that’s what we refer to as a Social Impact Audit. 

In practice, we seldom get the data to truly answer the impact or return on investment question – the social safety net is too fragmented, data is not available or accessible in a systematic way- though in Lethbridge for insurance we managed to get the closest to a true SIA when the City opened up the books to all of the funding streams they controlled. It was 100% worth the pain: when you have this transparency, the opportunity for true collective impact, evidence-based and data-driven decision making is like nothing I’ve seen before, and is especially gratifying to see Councillors understand the information, not just the technical experts. It’s the future of smart, integrated funding. Now, sadly, the $28M we reviewed is only 2% of the full budget of these social safety net entities. Imagine what Lethbridge could do if they had the buy-in of the other funders to recalibrate the full social safety net? It’s a long road, but that’s the road they are on.

Edmonton more recently underwent a similar process initiated by the Edmonton Police Service to address social safety challenges in the city and consider how police and social service funding could be leveraged to enhance impact. If you’re into podcasts, Chief Dale McFee is a worthwhile listen. More recently, we’ve been getting to know Ontario communities a lot better as municipalities, districts, and police services are working on safety and wellbeing plans that now need to be operationalized – hence the need to dive deeper into financials and operations. It’s hard to implement ambitious plans and strategies when we don’t have the basics on who funds what, and who does what at minimum. 

Common challenges in “following the money”

Over the past two years, we’ve had the chance to test and refine SIAs all over the country – Edmonton, Moncton, Kelowna, Ottawa, Abbotsford, Nanaimo to name a few. There is tremendous difference region to region, unsurprisingly – but certain themes are consistent: fragmentation, lack of coordination, lack of transparency to end-users are a given. 

The big picture has also become clearer – the truth is that the social safety net is massive, convoluted, and it’s worth a boatload of money – we mapped about $380B annually of it – and no, that’s not including the health and education systems – mainly social services, poverty supports, mental health and addictions. We are still missing huge chunks out of this figure – the data are not as transparent when we contract social services to nonprofits or for-profit entities versus charities – making it hard to get financial details. And we are definitely not good at discerning what’s social vs health vs justice in less than obvious funding sources and granting – like lotteries grants, or ministries of finance. All this to say, we are just beginning to ‘follow the money’ – and the more we dig, the more insightful the analysis and future questions. 

A closer look at charities 

For this paper, I wanted to showcase the value of this work using just one of the 10-15 datasets we use in an SIA project. It is one of the greatest assets we have in the SIA work and it comes courtesy of the Canada Revenue Agency – one of the few times I am excited about the CRA. Thanks to the legislation on registered charities to maintain their tax-free status, all financial information has to be disclosed – what comes in, and what goes out. This is just one of the 10-15 datasets we use in an SIA, but it’s a very good one to be familiar with, and often part of our starting point in a new community because it gives a very good idea about the charitable financial flows into the social safety net that we can build from. 

Interestingly, although charities are key vehicles in the delivery of Canada’s social safety net to those in need of support with a diverse range of needs – housing, food, counseling, addiction treatment to name a few – we understand relatively little about charities as a whole in this process. This is in part because we’ve assumed we know ‘how it works,’ or because we were too overwhelmed by complexity when we tried to dig into this in the past. 

This paper is not the place to deconstruct the topic – rest assured, many academic treatises on the history of charities in Canada exist – especially their entwinement with nation-building, and unsurprisingly, colonialism.  In fact, the pandemic and equity movement have spurred considerable self-reflection in the sector on this exact issue – and a few articles on this stand out as interesting takes in the Non-Profit Quarterly and the NY Times’ piece on the charitable-industrial complex. 

What I wanted to draw attention to here more specifically is the tremendous diversity we see in how charities manifest, even from province to province. We are often called upon to provide insights on the future of the social safety net, and how we might increase impact, reduce inefficiencies or inequities – but are often stumped at how we might even begin without some of this basic knowledge about funding flows. Without transparency, it’s next to impossible to talk about how we might ‘fix’, ‘optimize,’ etc. In many ways, this data is nothing new – it’s called taxation – we all have to do it, and so do organizations that have registered charity numbers. The data is not a secret – it’s out there as Open Data and Open Government. The trouble is understanding it in context. 

We know for instance that overall, Canadian charities see about $284 billion in revenues – 67% of it coming from taxpayers via government contracts or grants. And yes, most of it is the provincial/territorial government and the myriad of ministries and departments, funding streams, and initiatives entwined in service delivery. 

A note on mega-charities and foundations 

These are big numbers because they include some big spending: hospitals, postsecondary, schools – all the things that keep society healthy and productive. That’s right – while many of us don’t know it, from a legal CRA perspective, our health authorities, our universities, and even our school boards have charity status. In this way, they’re a different beast from, say – government running services in-house – these entities have relationships with the state to deliver services to the population. That’s also why you’ll still get a tax receipt if you make donations to these entities. We also have public and private foundations which flow funds through, rather than deliver direct services, who are also charities – and we have a growing number of them according to some researchers, which may be a good or bad thing in the long run. 

Now, some folks make an important point: are the mega philanthropic foundations and large charities that operate in the billions (and are mostly funded by the government) really the same as the local soup kitchens? Of course not – that’s obvious – but that doesn’t mean we stop digging. For instance, health authorities often contract services out further of those gargantuan budgets – where does that funding go to? It’s still taxpayer-funded, but it’s often unclear where it finally lands into service delivery. I still want to try to figure it out – that tells me a lot about how health supports – which include mental health, addictions, disabilities, housing, etc. – play out on the ground or where backlogs and gaps exist. 

When it comes to foundations, I am always fascinated when we follow how money comes in from donors and government into a foundation, and how much of it ends up in frontline service provider charities. Take a look at this interactive dashboard (last tab), courtesy of Edmonton, to see what I mean.

It goes without saying that we will all want to keep a very close eye on these figures as the pandemic so-called “ends” – of course, social safety net allocations will be impacted, and in turn the delivery of services. We know that about 35% of charity revenues came from donations, fundraising, etc. and the balance was from the government – will this shift at all in future years? I am suspecting yes. Budgets for charities have historically increased every year as well – will that shift as we reckon with the pandemic debt? In other words, this is not a one-and-done research project; it’s ongoing analysis and monitoring.

A tale of 2 provinces and 4 cities’ charities in Ontario & Alberta 

When we look at various provinces, the picture gets even more complex – as per usual, no one does it the same. For instance, Alberta’s per capita charity revenue sits at $8.8k, which is similar to Ontario at $8.7K, but vastly different from New Brunswick at $4.9K, or even more drastically, Nunavut at $2.3K. 

Even within a province, cities and regions vary widely. Let’s take a look at Alberta and Ontario again – picking on cities we have done work in more specifically: Belleville and Ottawa in Ontario, and Edmonton and Grande Prairie in Alberta. Look at how divergent the capitals and smaller centers are, but even comparing Ontario and Alberta, how drastically different these numbers are. More interestingly, what’s happening to the provincial averages when we drill into cities of varying sizes? What causes this difference? And how are these differences impacting service delivery in the charitable sector?  

Clearly, major differences within the same provincial jurisdictions matter – they entwine with the considerable approaches to defining government and charity roles – who does what, and how. This raises some questions as to the cause and impacts of the variance in geographies – what are our rationales for the decisions behind these numbers? Are we making these decisions intentionally, or even consciously? 

Charity Revenues Per Capita
Belleville$9,712Grande Prairie$7,071

Now let’s look at what the charity revenue is dedicated to – of course, we have the usual big-ticket items: health and education…But what I am always interested in is the social sector – those charities that are doing the heavy lifting on homelessness and affordable housing, mental health and addictions, poverty reduction, how does this play into the picture? So let’s take a look at the same information flow, but honing in on the social sector only. 

Not surprisingly, we see variance from province to province: for instance, Alberta’s per capita social charity revenue sits at $1.1k, which is notably lower than Ontario’s at $1.7K, and still higher (though less drastically than the total charity spend) from New Brunswick at $0.7K, and Nunavut at $0.4K. 

Let’s follow our two case study provinces again with the social lens in Alberta and Ontario – two very similar per capita overall provincial numbers, but a pretty big difference compared to what we track into the cities. Of course, this is meant to be illustrative of variance – and the need to understand the math and why the results are so divergent. 

Social Charity Revenues Per Capita
Belleville$2,698Grande Prairie$716

For Ontario, the two cities are at about a fifth (Ottawa) to a third (Belleville) of the total provincial per capita for charitable spend; Alberta’s capital Edmonton is similar to Belleville at about a third and notably higher than Grande Prairie, AB. Drilling deeper into social charities – both Belleville and Ottawa are both notably higher than the provincial average, compared to Alberta cities where we see them at about ⅓-⅕ less than the average. 

City Charity Revenues Per Capita as a percent of Provincial Revenues Per capita
OntarioTotal CharitiesSocial Charities
Grande Prairie8%80%

A running list of questions that emerge while ‘following the money’ 

This of course raised so many questions for me over the past two years in this work. At first, we could not answer any of these – now we can answer all either in part or in full, though there is significant analysis left to do at a provincial and local level. While there is exploration left to do, we are well on our way. Some questions left for us to think about:

  • Who are these charities, are they delivering similar services? How many are delivering frontline service vs administrative/ coordinating functions? 
  • If charities are different from nonprofits legally, and there’s about as many charities as there are nonprofits, does that mean these numbers are doubled?
  • Is there a right amount of funding? Is there an optimal service per capita or service mix?
  • Can we do it better, cheaper, kinder? Are we shortchanging some areas that need something more?
  • Are we being equitable and advancing reconciliation through how we fund and where we fund, who we fund? 
  • What are the outcomes we get? Is it better to fund more to get more outcomes? 
  • Is there a max/min funding change before effects are felt either way – positive and negative?  
  • What’s the right prevention -intervention mix ? How is that different between regions? 
  • What is the realm of policing and social services or public health? What’s the right ratio today? In five years? Ten?
  • If we knew the optimal service mix and funding allocations to get the desired population outcome (say Medicine Hat ending homelessness – but replicable and scalable), could we plan more proactively and strategically? 
  • Could we make this something anyone could understand and use in diverse decision making situations?  
  • What would this mean for how we made investment or policy decisions? What would be disrupted in a positive or negative way – and what would remain steadfast despite disruption, in a positive or negative way?

My outstanding worry still is: even if we could answer all of these questions, would decision-makers be open to changing how they approach funding and policy, or service decisions in practice, or is this a futile pipedream?  Obviously, I don’t think this is futile – it’s hard work for anyone who plays even the smallest role in key decisions that impact the allocation of funding in the social safety net. 

Our work at HelpSeeker is to obsess about these questions and package them up so they make sense to people that don’t have a doctorate or 30 years in the field. We think these are ‘in your back pocket kinds of questions we should have the answers to at our disposal when we have the opportunity to play a role in the funding pathway. We are developing a Social Impact Audit module for our Community Success Hub platform that basically automates all this heavy lifting so that it can actually live in decision makers’ back pocket as ready-to-go data visualizations and insights.  We won’t have all of the answers, but we will be much closer – in fact, we can already answer some parts of all of these questions – but what we need is the leaders who are at the frontline of the reconfigurations already fissuring in the social safety net. 

An intentional conclusion 

Intentionality has been our go-to word this month – and that’s exactly what the takeaway here is. Intentionality – being mindful of our roles in these decisions, balancing being critical yet creative thinkers, strategic and decisive – that will be the future of smart funding. 

The technology, data insights, and tools we use, the new questions we ask, and the ones we now have answers to – all this will enable us to be intentional. And while this segway into financials can be very insightful, it’s less important than the conscious pause we have to take. That pause is essential as an opportunity to think into the work we do as actors along these intricate funding pathways that coil into what we call the social safety net. Our actions and decisions stack into what ultimately results in someone getting the right help at the right time, or its oft-lamented alternative. That is what this is about: how can we do better?

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