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«The Capacity Challenges of Nonprofit & Voluntary Organizations in Rural Ontario Susan Stowe Cathy Barr Working in Partnership © 2005, Imagine Canada ...»

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Capacity challenges of nonprofit and voluntary organizations The results of the qualitative phase of the National Survey of Nonprofit and Voluntary Organizations (NSNVO) indicate that these organizations face significant challenges that affect their ability to fulfill their missions (see Hall et al., 2003). Financial issues appear to pose the greatest challenge. Government cutbacks and downloading have had a major impact on many organizations, as has tendency for funders to support short-term projects rather than long-term activities and core costs. Other financial problems include increasing competition among organizations for diminished funding, onerous financial accountability requirements, and difficulty obtaining corporate support. Many organizations also find themselves tailoring their programs to meet the requirements of funders, which puts them at risk of “mission drift.” Although most nonprofit and voluntary organizations identify human capital as their greatest strength, they also face significant human resources challenges. In recent years, there has been a decline in the number of volunteers. Many organizations are finding it particularly difficult to recruit and retain volunteers who are willing to make a long-term commitment and taken on leadership or administrative roles. The biggest problems with regard to paid staff are that the funding environment makes it difficult for organizations to hire enough staff, to hire staff with skills they need, and to pay staff well enough that they stay with the organization for more than a year or two.

Nonprofit and voluntary organizations face a variety of structural capacity issues. Engaging in strategic planning and development is difficult for many organizations because of the uncertainty of their funding, frequent changes in funding priorities, and constraints on the use of funds.

Participating in policy development is also a challenge because of a lack of time and other resources. Many organizations regard policy development as a luxury that they cannot afford.

Most structural capacity issues are ultimately related to dependence on short-term project funding that does not support organizational infrastructure. This lack of support can also affect the ability of organizations to collaborate and access technology.

The quantitative phase of the NSNVO provides additional evidence regarding the capacity challenges of Canada’s nonprofit and voluntary organizations (see Hall et al., 2004). Conducted in 2003, this national survey of 13,000 charities and incorporated nonprofit organizations found that the majority of organizations (56% to 58%) report difficulties recruiting the types of volunteers they need, obtaining board members, and planning for the future. Close to half (48% to 49%) report difficulties retaining volunteers; obtaining funding from other organizations such as government, foundations, or corporations; and obtaining funding from individual donors.

The Capacity Challenges of Nonprofit and Voluntary Organizations in Rural Ontario 3 Approximately 40% of survey respondents also report the following problems: competition with other organizations for funding (43%), increasing demands for services or products (43%), difficulty earning revenues (42%), difficulty adapting to change (41%), lack of internal capacity (e.g., administrative systems and technology, 39%), difficulty participating in development of public policy (39%), and difficulty providing training for volunteers (38%). In comparison, less than 30% of organizations report difficulties retaining paid staff, obtaining the type of paid staff they need, providing staff training and development, and collaborating with other organizations.

Organizations that received external funding (from governments, foundations, corporations) and had been active for at least three years (48% of the sample) were asked about this type of funding. Between 61% and 65% of these organizations report that reductions in government funding, the unwillingness of funders to fund core operations, and an over-reliance on project funding are problems for them. Forty-seven percent report that the need to modify programs to receive funding creates problems, and 43% report problems with the reporting requirements of funders.

The Capacity Challenges of Nonprofit and Voluntary Organizations in Rural Ontario 4 The Research Strategy To improve understanding of the capacity challenges of nonprofit and voluntary organizations in rural Ontario, 15 in-depth interviews were conducted with ten leaders (e.g., executive directors, senior volunteers) of rural nonprofit and voluntary organizations and five leaders of key sector organizations (e.g., United Way, Community Foundations of Canada) in urban centres that serve or work with rural nonprofit organizations. Interviewees represented a variety of organizations including volunteer centres, foundations, social services providers, and agricultural societies.

The interviewees were selected randomly from a list of 36 people provided by the Foundation for Rural Living.1 Interviews were conducted between February 1, 2005 and April 16, 2005; each lasted between 45 and 60 minutes. Interviews were recorded with the permission of the respondents and transcribed for analysis. Interviewees were assured that published quotations would not be linked to them or their organization.

The interview questions were informed by the results of the first phase of the Rural Charitable Sector Research Initiative and by the conceptual model developed by Hall et al. (2003). Two sets of questions were used. The questions for the leaders of nonprofit and voluntary organizations (see Appendix A) focused on their organization’s capacity challenges. The questions for the leaders of key sector organizations (see Appendix B) focused on issues facing rural nonprofit organizations in general.





Both sets of questions were divided into four groups: the first group of questions focused on the challenges of rural communities and the effects that these challenges have on nonprofit and voluntary organizations; the second group delved into the financial capacities and challenges of rural organizations; the third focused on human resources issues; and the last focused on structural capacities such as relationships and networks, strategic planning, use of technology, and influence on government policy.

Throughout this report we use the term “nonprofit and voluntary organizations” to describe the organizations on which we are focusing. Nonprofit and voluntary organizations undertake activities in a wide variety of areas, including health, social services, arts and culture, sports and recreation, education and research, environment, and housing. Organizations are considered to be part of the nonprofit and voluntary sector if they have a degree of institutional structure; are institutionally separate from government; do not distribute profits to owners, directors, or shareholders; are self-governing; and benefit to some degree from voluntary contributions of time or money (Salamon and Anheier, 1997).

The list of nonprofit organization leaders was compiled from a variety of databases to provide good representation of different types of organizations and all regions of the province. Key sector leaders were selected based on their perceived understanding of rural organizations and issues.

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These challenges mean that rural organizations have both higher operating costs than urban organizations, and fewer human and financial resources to draw on. Interviewees recognized that urban and rural organizations face many of the same challenges. Their perception, however, is

that rural organizations have a harder time overcoming these challenges because:

1. they have less access to certain types of funding (e.g., corporate sponsorships, individual donations);

2. the networks that they can build are smaller and more costly to maintain due to greater distances between organizations;

3. they have less access to technology and other resources; and

4. they can devote fewer dollars to education and training because of the cost of having volunteers and employees travel to and from training locations.

In this section, we summarize the key findings from the interviews relating to financial capacity, human resources capacity, and structural capacity. Given the qualitative nature of this research, we have chosen not to indicate the precise number of interviewees who expressed certain opinions. Where possible, however, we have tried to indicate in a general way the extent and magnitude of certain problems and whether they vary by organization size, focus, location, etc.

Financial capacity The organizations that participated in this research receive revenue from various sources, including government, corporate and individual donations, and membership or association fees.

Most organizations are funded through more than one method.

The largest source of revenue for many rural nonprofit and voluntary organizations is government. Government revenue can come in the form of payments to organizations to deliver services or grants to undertake specific projects. All levels of government provide funding to nonprofit and voluntary organizations, although the results of the NSNVO indicate that, in the sector as a whole, provincial governments are by far the largest funder.

We’re funded primarily by provincial ministries. Our largest funder is the Ministry of Community and Social Services. The second largest is the Ministry of Housing. We also have a small amount of money from the Ministry of Health, and The Capacity Challenges of Nonprofit and Voluntary Organizations in Rural Ontario 6 then because of budget shortfalls, we are compelled to fundraise in excess of $100,000 in a rural community.

Many interviewees told us that their biggest financial challenge is a lack of stable funding for core operations. Most of their funding is for specific programs, with very little available to cover the day-to-day expenses that any organization encounters (e.g., rent, utilities, communications, accounting, technology, travel).

[Our biggest challenge is that] we don't have core funding. I think there is a real place for Volunteer Centres to have a model that’s like in Quebec, where they have core funding for their Volunteer Centres. We don't have a source of income that we can count on annually. It is the constant battle to stay in existence.

Although many interviewees told us that they preferred government funding over other sources because it was comparatively stable, they still expressed concern about the work needed to have government contracts renewed each year. They also reported that government funding had not kept pace with either inflation or the demand for services. According to the people we spoke to, both costs and the number of people seeking services have increased. The payments they receive from government, however, have remained essentially the same. This situation has forced many rural organizations to seek other sources of funding or cut services. Some organizations have had to do both.

Our dependence on government funding has eroded our capacity because government funding has eroded in absolute amounts in some programs and in relative amounts against inflation. Because basically, once you get a grant, you have program. And say that it hypothetically receives $100,000; the amount never increases. If government wants to give you additional money, it’s for new programs so that they can get political recognition. Escalating costs – for salary, health costs, rent – are causing the layoff of staff and decline of services.

These problems are not necessarily unique to rural organizations. However, rural organizations may have more difficulty coping with them because they have fewer alternative sources of funding, higher costs, fewer employees, and a smaller population base to draw on for assistance.

Corporate funding, for example, is perceived to be less available to rural organizations than it is to urban organizations. And many rural organizations lack both the money and personnel to search for suitable grants, approach foundations, or engage in additional fundraising. The root of at least some of these problems is migration out of rural areas, which has left many rural organizations with a smaller population base to draw on for all types of assistance (e.g., board members, volunteers, staff, donations).

We do not have the potential to tap corporate sponsors that those in urban centres would have, which is another problem that’s particularly related to rural.

We don’t have the human resources to go after funds. I think it’s appropriate that we do it, but we don’t have that infrastructure. Citizens and local elected officials – like the municipal or county elected officials – don’t understand health. They The Capacity Challenges of Nonprofit and Voluntary Organizations in Rural Ontario 7 understand roads, sewers, farms, all kinds of stuff like that, but not health very well. They’re going to have to in the future and support it.

Grants Grants present specific challenges to rural nonprofit organizations. One of the greatest challenges relating to grants is the lack of resources available in small communities to help organizations prepare strong grant applications. Funders and others often provide training or workshops to assist grant applicants, but the training location is usually in an urban area and many rural organizations cannot afford to send a staff member or volunteer to attend these sessions.

I don’t think that there’s the same amount of accessibility in [rural areas]. We have an HRDC office here, but if you drive an hour and a half into some of the other areas where nonprofits are operating I don’t think that they will have the same capacity, because they don’t build the contacts, they don’t have the same accessibility to the knowledge, they don’t have the same accessibility to the mentorship that these grantors can give you.

The people we spoke to believe that the accessibility of grants varies greatly depending on the community in which an organization is located. Often, nonprofit organizations in small and/or remote rural communities must compete for the same grants as organizations in large urban centres, which they find quite challenging.



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