Financial and structural pressures

Budget cuts leave nonprofits in flux

Nonprofits often work with limited funds, tasked to do more with less. The sector has and continues to grapple with a range of funding challenges and trends.

In light of these challenges and the recent provincial budget, we wanted to find out whether nonprofits’ budgets had changed in the last year and what the impacts might be.

We found that nearly a third (30 per cent) of respondents indicated their budgets decreased as a result of the provincial budget and policy changes. And even as late as July 2019 (three or four months into the fiscal year), another 11 per cent of nonprofit organizations did not know whether they would be affected, because of a lack of information available to them to make this assessment.

budget impact 2019

Funding is needed to run programs, pay staff and related program expenses, and to ensure that communities are served. Fluctuating budgets limit the ability of nonprofits to plan for and deliver consistent services to communities. Uncertainty increases when changes happen in-year and after an organization’s board of directors has already approved the yearly budget.

This climate of uncertainty leaves nonprofits in a precarious situation to serve their communities and fulfill their financial responsibilities.

We asked nonprofits if they received funds from provincial agencies and commissions (e.g. Legal Aid Ontario, Ontario Arts Council or Ontario Trillium Foundation [OTF] or provincial funding through municipalities (e.g. childcare, public health, housing). Almost half of respondents (49 per cent) responded yes, which tells us that municipalities and government intermediaries (agencies, boards and commission) can have a significant impact on a nonprofit’s ability to fund programs and services.

We can assume that a significant proportion of funding flows from to Ontario’s nonprofit sector from the provincial government via intermediaries, such as municipalities or local health integration networks (LHINs), for example.

We asked nonprofits whether their organizations are in a subsector that is being reorganized.

More than a quarter (28 per cent) of nonprofits indicated that their sector is subject to a restructuring exercise. Currently, there are major changes being planned and implemented in the child care, employment and training, and health care sectors, with changes expected in the near future to the structures of the community housing, arts, and sports sectors.

These reorganizations create high levels of anxiety and uncertainty, but they also present new opportunities for nonprofits to collaborate, to enter new markets, and to grow. The key is for the provincial government to sit down with affected nonprofits in advance of the changes to plan together and avoid unintended consequences.

When asked if nonprofits had been affected indirectly by the provincial budget, the majority (57 per cent) of respondents said yes.

The cumulative impact of Ontario Budget 2019 is that not just one subsector is impacted by a cut here or there. Given the nature of nonprofits and the diversity of services they provide, a budget cut in one area could have an impact elsewhere.

This is true even with funding increases for some organizations in the sector. While they can be seen as good news in terms of higher budgets to deliver services, these increases are often outweighed by higher demand because of cuts elsewhere.

What survey respondents said:

  • “We work with women. Cuts to daycare, education, legal aid all affect them directly. Losing the children’s advocate affects them indirectly.”
  • “Ontario Autism Program changes result in a $2.5M decrease in our transfer payment agreement with MCCSS [Ministry of Community and Social Services] by March 31, 2020. Funding will be flowing directly to families instead and we are expected to compete in an open market going forward. Planning/transition runway approximately 6 months. Limited transitional funding provided.”
  • “Cancellation of 758 “green energy” initiatives has had both a chilling effect on the alternative energy sector, and it is a worry that more actions of a similar type may yet be taken by the Ontario government.”