McLeod Group blog by Lauchlan T. Munro, August 10, 2020
Long before the COVID-induced recession slashed Canadians’ contributions to charities and the WE scandal threatened to undermine Canadians’ confidence in NGOs, there were deep-seated problems in the way that Canadian registered charities got funded. Canadian international development NGOs do well if they do child sponsorship or work in humanitarian emergencies, but otherwise they struggle to raise money from individual Canadians for long-term development work. It is time for a rethink.
Canada’s international development NGOs tap into one or more of five major sources of funding: 1) from government; 2) from child sponsorship; 3) from donations for humanitarian emergencies; 4) from the faithful, in cases of NGOs based in a particular religion; and 5) from the wealthy and powerful. All five sources are problematic to some degree.
In the 1960s, the then Canadian International Development Agency (CIDA) began funding Canada’s growing international development NGO sector. Two decades later, scholars were wondering if development NGOs hadn’t become too dependent on CIDA. Another three decades later, the problem persists. In 2017, of the 56 members of the Canadian Council for International Co-operation (CCIC), 16 took no federal funding, but 25 relied on the government for a third or more of their funding, 16 for over half, and four for over 85%.
Government funding encourages NGOs to work in areas government chooses, in ways government chooses; it can thus turn NGOs from autonomous agents of civil society into non-profit subcontractors for government. There is evidence that Canadian development NGOs’ dependence on government funding can lead to self-censorship.
For their part, ministers and officials in CIDA/GAC (Global Affairs Canada) often resent what they see as NGOs’ sense of entitlement, leading to testy exchanges between the two sides. In extreme cases, the loss of CIDA/GAC funding can cause an NGO’s demise. RIP North-South Institute, FOCAL and CHF. NGOs suffering big cuts or delays in GAC funding often go through massive layoffs and downsizing to survive.
Such cautionary tales stick in the memories of NGO managers and encourage risk-averse behaviour. For instance, CUSO has relied on government for an average of 45% of its revenue since 1999 and has reported no spending on “political activities” (i.e., advocacy) during that period.
At the other end of the government-dependence spectrum, child sponsorship alone brings in around 40% of the total revenue for World Vision Canada and Plan Canada, providing more income than most other CCIC members raise from all sources combined. World Vision also relies very little on government support – less than 10% every year since 2001. Other NGOs working on children and development without child sponsorships (such as Save the Children Canada and UNICEF Canada) raise only a fraction of what World Vision and Plan Canada do.
But child sponsorship is controversial. The communications strategies often employ problematic stereotypes of people in the South as passive victims, incapable of helping themselves or their own children without outside help. The sponsorships themselves can provoke tensions within recipient communities and create relations of dependence.
At least Save the Children, UNICEF and others have work to do in humanitarian emergencies, the third main fundraising model. But that too comes with problems. Due to their emotional impact, some emergencies (such as the 2010 Haitian earthquake) get oversubscribed, while others (like Afghanistan under the Taliban) get neglected. Slow-onset emergencies like droughts attract less money than fast-onset ones like earthquakes. Crises in countries unpopular with many Canadians (which, since 9/11, often means Muslim-majority countries) tend to attract less money. Put those two together and ask, does anyone remember the Pakistan drought of 2009?
Funding from the faithful is the fourth strategy, used by NGOs affiliated with a particular religion or denomination. Here, demography is destiny. Declining memberships and ageing flocks mean stagnating revenues from the faithful for NGOs affiliated with the mainline Protestant churches like the Anglican PWRDF and the Catholic Development and Peace, while those affiliated with Canada’s burgeoning evangelical Christian communities, like World Vision Canada, do well and even grow. Islamic Relief Canada has seen its revenues rise fiftyfold between 2010 and 2018, to over twice the size of Development and Peace, driven by donations from the public. Should good work depend so heavily on demographic trends? Can NGOs faced with demographic declines in their core Canadian audience rebrand and reorient themselves, as SeedChange (formerly the Unitarian Service Committee) has done?
The fifth model is corporate sponsorship and its close cousins, donations from high net worth individuals and the new philanthrocapitalism. As with government funding, funding from corporations and rich individuals is a Faustian bargain: Can you talk frankly about social justice and structural inequalities to the rich, who likely think they got their money honestly and fairly? WE Charity has pioneered fundraising from the rich and the corporations. No surprise, then, that WE has also been accused of promoting a sanitized vision of international development that glosses over issues of power and privilege in favour of feel-good volunteering and tourism.
Corporate sponsors may also come with skeletons in the closet – or in the supply chain. One WE employee left the organization because of ethical concerns about the corporate company that WE chose to keep. Others have made similar allegations in the past, and the problem is not confined to WE. And, of course, corporate sponsors are at least as fickle as government funders; the slightest whiff of scandal can make them quickly close their pocketbooks.
Given these deep-seated problems, Canada needs new mechanisms for funding its development NGOs. For NGOs are an essential part of a vibrant and pluralist polity and a crucial check on government and corporate power. They can be valuable agents of social change and development. A new funding model for Canada’s development NGOs should depend less on emotion (child sponsorships) and saturation media coverage of emergencies, be more predictable (smaller roles for fickle corporations and governments) and allow NGOs to maintain their autonomy and their creative approach to partnerships.
Canada should explore using a competitive, arm’s-length mechanism based on expert review for public funding, modeled on the Canada Council for the Arts or the scientific research councils. Since most development NGOs are registered charities, part of the solution may be to provide better incentives under the Income Tax Act to encourage more or larger donations, especially from the non-rich. Could we use the Act to encourage certain types of donations (such as unconditional grants to core operations, contributions to an NGO’s endowment) over those targeted to a particular project or program? The quasi-endowment of the recently created Equality Fund, based on a public-private-philanthropic partnership, is another model worth exploring. Creativity is required, as current funding models are all problematic to a degree. More of the same will not do.
Lauchlan T. Munro worked for UNICEF from 1989 to 2003. He teaches at the University of Ottawa’s School of International Development and Global Studies. All data are from CRA, courtesy of John Cameron.