Inequitable Distribution of Operational Funding Is Squeezing the Life Out of Canada’s Non-Profits

COVID-19 pandemic was the nail In the coffin, exacerbating the need for an accessibility overhaul

By: Aly Laube | Art by: Laura Stanley

“A lot of us are on the verge of homelessness if we miss a cheque and can’t pay our rent and don’t have a security network to fall back on,” says Josh Eastman, founder of new non-profit music space, Helm Studios.

Eastman has worked primarily as a multi-instrumentalist, songwriter, producer, and educator in Vancouver for five years. With the onset of the pandemic, he’s added founder of a non-profit to that list, after seeing firsthand how a lack of income only furthered the marginalization of artists already underrepresented in the industry.

Without access to usual resources and networks, artists are left without support or time to do what they love, perpetuating a cycle of burnout that has left scars on their mental, spiritual, and emotional health. He started Helm to help artists in his community survive the pandemic and thrive as professional musicians.

Without any income from shows, and already feeling the pressure of being marginalized and underrepresented in the mainstream Canadian music industry, they were suffering to pay their bills and make their art. Without support or time to do what they love, many creatives got sucked into a cycle of burnout that left scars on their mental, spiritual, and emotional health.

Helm provides subsidized studio time to artists, with preference given to uplifting BIPOC, LGBTQ2S+, and women in music, working from the understanding that low-income folks exist on an intersection of identities that influence their access to the music industry. The non-profit is a stepping stool to equitable access for people of all identities and backgrounds. 

Eastman’s goal was never to make money, but he is surprised by how huge of a burden financial insecurity has been since Helm incorporated earlier this year.

Months after receiving an initial wave of community donations, Helm is struggling to pay the bills without operational support. The organization relies on “a huge amount of volunteer hours” and constant client support to make its bottom line. That’s Helm’s secondary goal, the first being to meet its mission of providing low-income artists with studio time.

Eastman, who had no previous non-profit experience, had to take out a $5,000 loan and make a “considerable investment” of thousands more to launch Helm Studios. He estimates it would take about $80,000 to fund the studio’s operations for the whole year, but after being repeatedly rejected for operational support and lacking corporate investors, there’s no way of knowing if Helm will reach that goal.

The result is that people like Eastman don’t get paid, even when they pour themselves into working overtime for a cause they believe in.

“As someone who’s living paycheque to paycheque, it’s scary to be like, now my costs are doubled or tripled in order to set these things up,” he says.

Other arts non-profit leaders across the country are in the same position. With public guidelines against mass gatherings came a financial crisis for the arts sector, including the non-profits who relied on ticket sales and audience engagement to survive. Many of those groups have adapted or shut down since last spring, but the Canadian grant system remains unchanged. The barriers that were keeping people out years ago still stand today.

Rethinking the federal approach to funding

Bernadette Johnson is the director of advocacy and knowledge mobilization at Imagine Canada, an organization dedicated to supporting non-profits and charities across the country through research and advocacy. She says this resistance to change creates a weak relationship between the government and the non-profit arts sector.

“It’s not intentional. It’s become what we call benign neglect,” she says. “It’s not an enabling relationship. It’s a ‘you can do this or you can’t’ relationship.”

It should be a strategic relationship, Johnson says. In the mid-90s, there were major cuts to arts sector and advocacy funding, among other subsections, marking the end of a “trust-based” relationship and beginning a stricter, more project-based one.

Project-based funding is often a one-time payment for one-time expenses like venue booking, gear rental, and promotions, while operational funding covers expenses like rent and wages. Often, non-profits survive off of sporadic, unreliable project-based grants, unable to attain operational support they need to survive.

Money appears to go to the organizations that are already at the top of the class ladder the most, since they have a financial record and organizational support necessary to run a non-profit. That makes them a low-risk, high-reward investment for funders, who can enjoy these relationships while small grassroots organizations shutter in defeat.

“There’ve been a series of attempts to change that grants and contributions approach and make it better. But you can tweak that system as much as you want. It’s not going to replace the government caring about the sector and investing in the sector,” says Johnson.

She and her peers at Imagine Canada suggest that the arts non-profit sector be given a “home in government” and associated minister. They have been rallying the federal department of finance for this with no luck for years.

“There’s nowhere the sector can turn to to have conversations about what it needs. There’s no one to encourage [Statistics Canada] to conduct research on the sector. We don’t know how many non-profits we have in the country. We don’t know their skills. We don’t know who they’re staffed by,” says Johnson.

There are consultants that help organizations run effectively, but that requires money overworked and underpaid staff are already desperate to keep. They’re often busy managing accounting, human resources, and fundraising while juggling constant financial insecurity.

To people without ample money, time, and education, starting a non-profit can be intimidating. Founders have to federally or provincially incorporate, register as a society, get a business license, and potentially acquire and operate space. Then they need a board of directors and to follow Robert’s Rules and the Societies Act, which regulate how to hold meetings and conduct business, respectively. 

Finally, when the organization is all set up, the executive director has to ensure the non-profit can carry out its mission. Non-profits are regulated through the CRA’s Income Tax Act, with legislation managed through Revenue Canada. Getting corporate taxes handled by a professional costs at least $2,500. 

All of that takes resources many grassroots organizers don’t have. Running a non-profit can easily become an unpaid, full-time job, but it’s not just financial issues that are the problem. The amount of paperwork and understanding of legal and business jargon necessary to start a non-profit is already unreasonable for the average person.

Eastman says there needs to be better access to information about where funding is available for non-profits. Instead of filling out a form, he suggests that funders have conversations with potential recipients so they can express their intentions and skill sets face to face.

“Filling out forms is such an impersonal experience, and it does in a way limit access. You have to know legalese. You have to know what jurors want and sometimes have connections. They want an established financial history, which caters to people with amassed wealth. It’s not really designed for people just starting out or people facing systemic oppression. They have to have roles that are actually meaningful.”

Making the process personal makes it more accessible, he says.

“The arts are always on the chopping block. It’s such a weirdly commodified industry that is also seen as having no benefit to capitalism. We’re in a weird position where funding is making jobs and supporting non profits, but […] helping marginalized people make music doesn’t stimulate the economy in the way that they want. It’s a big risk and fight to keep it going,” says Eastman.

“I can’t do this forever, and it’s very new, so I understand that, but there’s no middle ground between me volunteering and giving more of myself than I can or going into for-profit and only serving people who have the funds. Bridging that gap is really important.”

Johnson says organizations were able to build their capacity over the previous summer, largely due to provincial and federal emergency support. It’s important to keep that support going if those groups are to stay alive, and it’s past time to loosen up eligibility requirements for operational funding applications, as far as she’s concerned.

“That relates to the operational funding issue because the response in the sector has been program top-ups, but those are just more program-related expenses. There might be 10 to 15 per cent administrative coverage, which is not enough, and it’s not core operational support, which is what they’re really needing.”

Non-profits are being strangled by what Johnson refers to as “the overhead myth.”

“There’s a myth that organizations, in order to be impactful, should have the smallest amount of overhead expenses possible, and that the more overhead they have the more wasteful they are, which is not true,” she says.

“That leads to organizations feeling they need to trim their overhead as much as possible, which leads to things like the starvation cycle […]. Staff are covering more operational areas than they usually would, which is leading to staff burnout, and most volunteers haven’t returned.”

When leaders are constantly occupied keeping the ship afloat, they can’t stop to talk about long-term sustainability, development, or fundraising. It’s an environment that sets people up to fail if they don’t have savings to fall back on.

Photo by: Amilee Rypkema

Providing operational support from the bottom up

Mike Grogan is the president and CEO of IntegralOrg, a charity that helps non-profits increase their organizational capacity. IntegralOrg offers resources and workshops on foundational areas like governance, financial management, and strategic planning.

He agrees that the current system for giving out operational support in Canada “is not working already.” The pandemic took attention away from the sector as funders rushed to meet more immediate concerns—a loss big companies with deep pockets could take. Smaller, less established organizations got lost in the fray, without brand recognition or major partnerships to keep them afloat.

Small organizations need to develop a solid business model, he suggests. That will encourage funders to give them critical operational support.

“Passion doesn’t make it a viable business model,” he says.

“Small organizations tend to lack a) the funding to do it and b) the access to people to be able to do that. If you’re an institution or government funder, remove some of those barriers. Bring tools [… and] perhaps do it collaboratively.”

Relying on private donations isn’t working now, since people are being careful with their money during the pandemic. Grogan can’t see a short-term solution, but in the long term, he hopes the government will invest in “changing the people and the public’s perception of the arts.”

“Do that and the funding will follow,” he says.

“Ten years ago mental health was not talked about. Now it’s probably the top two or three funded areas in the non-profit sector. It’s changed in enormous ways. 30 years ago environmentalism was fringe, but it’s gotten up too.”

His vision of the immediate future seems stark and bleak, but perhaps realistic. Non-profits shouldn’t be waiting for things to “return to normal” because they might run out of money before that happens, he advises. Through his work, he has seen arts non-profits drop like flies over recent months.

“We are winding down more non-profits than we ever have. We’re also starting up probably twice as many.”

“For arts organizations this is a multiyear downturn, not a sudden downturn, and there are going to be casualties. The loss of those things you probably don’t feel overnight. You feel them over time, but it’s not like they go away forever. As you go through this period of destruction, opportunities arise. People see a need and start something up.”

When the time comes to start anew in the arts non-profit sector, he hopes the government will give groups the operational support they need to continue to do important work across the country.

“If you’re just stressed keeping the doors open one more day, it’s hard to step back and say let’s do some work on some of the foundations,” says Grogan.

Creating new opportunities to uplift the next generation

Matthew White is the CEO at Victoria Symphony, a registered non-profit, but he started his career as a professional opera and concert singer. He did that successfully for 20 years before moving into arts administration in Seattle, Vancouver, and Victoria. He came to “very much understand the idea of not having operational funding” after personally financing and producing an opera in Montreal that was “his dream.” 

“When you’re a company that doesn’t have all that funding, then the buck has to stop somewhere, and it’s often at the person at the heart of the creative vision,” he says. 

Now, in his role with Victoria Symphony, he is enjoying the benefits of receiving consistent operational funding for the first time. Victoria Symphony gets roughly a third of its money from the government, a third from donors, and a third from direct revenue. Without operational funding, he says the operas and ballets they produce wouldn’t be possible.

“I think the thing to remember about operational funding is that it’s meant to provide stability,” White points out. 

“When you’ve got a company that’s perhaps younger or just starting out, it doesn’t have operational funding, which means it doesn’t have some of those funds that any organization needs so it can start planning for the future and not just focus on the needs of today.”

He says the solution isn’t to “take the current pie and cut it up into more and smaller pieces.” Instead, the federal and provincial governments need to invest in creating a “much bigger pie” for the arts and culture sector. By adopting a similar approach to what has been done in Europe, Canada could broaden and diversify its pool of operational funding recipients.

“It is absolutely vital that there are larger-scale organizations in every given community so we can still have access to things like contemporary opera and ballet dance and some legacy music-making. The government should continue to fund them, but I think it’s also really important to recognize that there’s a whole new generation of artistic voices there that need support.” 

He has been arguing for years that the arts are an economic engine. Investing in the arts creates economic activity and pays for itself, according to various studies, articles, and reports. Still, White says that should be the government’s secondary concern, after the value that art-making brings to people’s lives. 

“When you look at how much money is invested in arts and culture as a proportion of the entire budget, it’s absolutely negligible,” he says. “If you stop investing in arts and culture, it’s going to result in a cultural desert that’s going to make everybody feel less good about being alive.”

Without the special funding that the government provided them, such as the wage subsidy program, he estimates Victoria Symphony would have downsized to a third of its normal operations. The organization provides living wages for 35 musicians plus staff who rely on that support, and he’s grateful to have it. 

“This shouldn’t be a situation of pitting larger organizations against smaller ones, because we’re all really part of the same community. It should be about providing more support all around because I think an ecosystem needs people at every single level to find ways of funding creative and smart and capable artists at the beginning of their careers, and you need to find ways of supporting established organizations,” he says. 

“The solution is more money to arts and culture.”