In March 2020, Canada was caught up in the COVID-19 pandemic then spanning the globe.
As with all other elements of society, patient-focused charities that raise funds to support research, programs, and services aimed at helping patients and their families with specific diseases or conditions were hugely impacted, with the future of many such organizations being placed in doubt. This report provides a comprehensive overview of the status of these patient-focused charities in 2019, presenting a unique snapshot of a moment in time before things changed.
This is the first report to specifically analyze the financial, operational, and human resource capacity of 1004 patient-focused health charities in Canada. The report is based on data submitted to Canada Revenue Agency (CRA) in annual returns for the year prior to December 2019. It offers a baseline by which to compare the impact of COVID-19 on this sub-sector of charitable organizations as stakeholders emerge into a post-COVID-19 period and begin to reassess partner relationships in light of these organizations’ capacity to continue their work.
The charitable sector in Canada was already facing challenges prior to 2020.
The heterogeneous nature of patient-focused charities is one of the most noteworthy characteristics of this sector – comparable in many ways to the diversity of diseases and health conditions with which the charities are concerned. With each having more than $100 million in income annually and hundreds of full-time employees, the Canadian Cancer Society and The Heart and Stroke Foundation of Canada dominate the sector. However, between these two charities and the many charities with few if any full-time employees who rely on volunteers and focus their efforts in a specific region or program, there lies a spectrum of many other organizations with a wide range of annual income and expenditures.
While the COVID-19 pandemic is having a dramatic impact on patient-focused charities, the charitable sector in Canada was already facing challenges prior to 2020 with concerning trends in charitable donations and other organizational threats.
A report from the Senate noted that for charities “demand for services has increased, yet funding is constrained. In addition, technology has disrupted traditional models of service delivery and changed the way in which charities and non-profit organizations interact with volunteers and donors. A new roadmap is needed to enable the sector to continue to build on its strengths and adapt to new and emerging realities.”
Revenue
There are over 86,000 registered charities in Canada whose total revenue in 2017 amounted to $279 billion.[1] While making up 1.2% of the national total, patient-focused charities generated $1.366 billion in revenue, only 0.49% of total charity revenue.
The top 20 charities alone control 62% of all revenue with the remaining 38% of total revenue shared by the other 98% of the organizations.
The number of groups earning under $100,000 in revenue during the period evaluated totals 502, exactly 50% of those organizations under review. On the other end of the scale, there were 44 patient-focused charities with revenues over $5 million or 4.4% the total, equivalent to the figure of 4% nationally across all 86,000 charities.
The top 20 patient-focused charities alone control 62% of all revenue with the remaining 38% of total revenue shared by the other 98% of the organizations. This disparity acutely underscores the degree of competition for funding among these groups. With diminishing numbers of individual donors, there are a finite number of other sources — events, grants, sponsorships, etc. — available to this specific sector. Many of those funding sources also attract charities from outside the patient-focused sector which serves to inflame the competition. It also illustrates the intersectional nature of competition for funding.
The ability to issue official donation receipts is the most important benefit to Canadian registered charities and Canadian tax laws for charitable giving are arguably among the most generous among developed nations. The charities in the patient-focused sector issued tax receipts for 36.29% of total revenue. This contrasts starkly with the national percentage of 6.5% (2017) which would indicate a much higher dependency on this revenue source for the sustainability of the charities than the entire sector average.
Total government funding for the patient-focused groups was $337,918,293 or just 24.73% of their revenue. By comparison, government funding of the entire charitable sector from all levels (federal, provincial/territorial and municipal) was in excess of $183 billion in 2017, almost 66% of all funding.
For patient-focused charities, funding from the various levels of government was as follows:
- Federal funding accounts for only 1.46% of total revenue.
- Municipal funding was only 0.42% of total revenue.
- Provincial funding provided 30% of total revenue primarily in support of social service activity as agents of the government.
The term “earned income” is generally applied to activities that involve selling goods or services to customers. It is estimated that up to 75% of all charities have engaged in these activities. The range of goods and services is extremely broad, and includes products, expertise, processes, and intellectual property. The broad sector generated $23.127 billion from the sale of goods and services which represents 8.5% of all revenue. Patient-focused charities, on the other hand, reported $56,995,775 or 4.17% of revenue.
Fundraising
Charities must report fundraising revenue and expenditures on their annual return. The fundraising ratio is a key measure that CRA uses to assess the fundraising activities of a charity. This ratio is calculated by adding up tax receipted gifts and non-tax receipted fundraising and then dividing by the total of fundraising expenditures. It is commonly believed that a ratio under 35% is unlikely to raise questions by CRA but if over 35% the opposite is possible.
Patient-focused charities however are far more dependent on fundraising.
About 40% of patient-focused organizations (399) reported total fundraising expenditures of $301,555,342 or 22.61% of total expenditures. Their fundraising ratio is 41%, somewhat higher than the CRA test but dramatically higher than the broad sector which reported a ratio of 12.6%. This can be explained in part by the sums of government funding that government related charities receive, thus relieving them of a great deal of dependency on fundraising. The patient-focused charities however are far more dependent on fundraising.
There is a definite trend towards donating online in Canada. Online giving grew to $144.8 million in 2017, a 17% increase from the year before, compared to a 6% increase in total giving in Canada.
Although over 16% of our groups still use collection plates and boxes, the trend to online activity is discernible with almost 30% of groups reporting fundraising activity on the internet.
Only 7% of patient-focused charities employed professional fundraisers who raised over $64 million and were paid $12.8 million.
Expenses
The patient-focused group of charities spent $1.33 billion or 97.61% of total revenue. By comparison broad sector expenditures amounted to $261.7 billion or 93.5% of total revenue. The total sum of $813,466,505 reported by the patient-focused groups on charitable activities represents 61% of total expenditures while the broad sector comes in with 76% of expenditures.
Of all expenditures by charities, management and administration is probably the most publicized and scrutinized metric by the public, donors and media.
Of all expenditures by charities, management and administration is one of the most publicized and scrutinized metric by the public, donors and media. While there are many factors that influence this expenditure, such as size of organization, it is generally accepted that a ratio below 12.5% is considered excellent, and then ratios are further rated on a scale between 12.5% and 22.5%. Spending in this area accounted for 8.16% of expenditures for patient-focused charities.
Medical and scientific research is a key priority for many patient-focused charities and forms a foundational plank in their mission. The public is also very attentive to this fact as it is one of the major factors communicated to members as a reason to support the cause. The public is barraged by online and newspaper ads, billboard and transit advertising, direct mail campaigns, etc. all focusing on the theme of medical research to find a cure. A total of $131,601,788 was reported as research grants and scholarships by 132 or 13.14% of the patient groups.
Human resources
Patient-focused charities differ markedly in how many staff they employ, if any. While a few have many employees and are headed by an individual who is well-compensated, others have no full-time staff and are strictly run on a volunteer basis. Overall patient-focused charities employ 7435 full-time staff.
The review of human resources for these charities revealed the following:
- 56% have NO full-time employees
- 2 organizations employ 56% of all employees
- Full-time compensation is 32% of total revenue
- 27 organizations reported 39 employees earning between $200,000 and $350,000
- 5 organizations reported one employee earning over $350,000
Public policy activity
There is limited information available about the impact of Canadian patient organizations such as patient-focused charities on policy development. It has been demonstrated that patient involvement in policy areas such as Health Technology Assessment can have beneficial results and uncover insights into patient experience previously not widely known. But there is no significant evidence reporting the impact and influence of patient organizations across the policy landscape.
To address this important gap, we examined the public returns of the patient-focused organizations to identify how they describe their activities and what financial and human resources they devote to public policy activities. The data set represents the last complete reporting period under which charities were required to fully disclose political activities, including descriptions of the activities, resource deployment and amounts spent. The data clearly describes the degree of engagement and resource commitment charities gave to political activities. Under the rules by which charities operated during the period covered in this report, charities were prohibited from spending more than 10% of their revenue on political activities and were required to report on their activities and disclose their spending. Recent changes to the rules allow unlimited spending on what are termed Public Policy Dialogue and Development Activities (PPDDA) and no requirement to report expenditures or other details.
Total expenditures (on political activities) was $5,135,878, .38% of revenue… fully 50% of that is accounted for by only 2 of the charities.
Out of the total of 1004 charities, only 31, or 3%, reported PPDDA expenditures. Total expenditures by this small number of organizations was $5,135,878, representing 0.38% of total revenue of $1.366 billion for the entire patient-focused sector. Of this spending fully 50% of that is accounted for by only 2 of the charities – the Canadian Cancer Society and Canadian Diabetes Association (now Diabetes Canada).
Post-COVID era
The impact of the COVID-19 pandemic in the spring of 2020 on Canada’s charitable sector including patient-focused charities was almost immediate and devastating. Organizations suddenly found themselves severely constrained in their revenue-generating activities while at the same time trying to maintain daily activities while direct person-to-person contact was discouraged or forbidden. Patient-focused charities also found themselves struggling to inform their constituents in the face of a novel coronavirus whose signs and symptoms were soon found to impact several organ systems.
An assessment[2] of the impact of COVID-19 on the charitable sector conducted with more than 1400 charity leaders in late April, 2020 and published by Imagine Canada in May showed 30% of charities have already laid off staff and 55% say new or additional layoffs are a possibility. By the middle of July it was being reported that health charities expected “historic losses” and would only raise less than half of usual revenues in 2020 because of the COVID-19 pandemic. At the time of publication of this report, the course of the COVID-19 pandemic remains uncertain as does its impact on the charitable sector. The initiation of new programs or continuation of existing programs from the federal government to support charities will be somewhat dependent on the scope and speed of the economic recovery as we enter a “post-COVID” period.
As with for-profit and non-profit organizations it is probable some patient-focused charities will not be able to survive the economic challenges caused by the pandemic and will be forced to close their doors. Others will have to radically restructure in order to survive in whatever fund-raising environment they will have to function within under “new normal” conditions.
How patient-focused charities describe themselves
Patient-focused organizations are asked to choose up to three program areas that describe their charitable activities These program areas are pre-defined by CRA and the full list is in Appendix E. It affords a witness box perspective of how organizations view themselves, their work and their community.
These important data deliver insights to the interconnectivity of patient-focused charities with other charities in social services, community benefits such as human rights, culture, education, research, housing, transportation, or other support for the physically challenged.
It appears that patient-focused charities view themselves through a lens that spans a universe of needs including disease awareness, research, social determinants of health, advocacy, health literacy and psychosocial support among many others. With a preponderance of patient-focused charities describing themselves as involved in multiple program areas, the challenge and opportunity to potential stakeholders is to align themselves with the same multi-disciplinary, multi-dimensional perspective when it comes to establishing authentic partnerships.