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The following online document from 2003 describes a reality faced by all not-for-profit groups across Canada. Understanding these major shifts by government programs and their agents is important for any new or existing organization along with First Nation communities.

Funding Matters: The Impact of Canada's New Funding Regime on Nonprofit and Voluntary Organizations

http://www.vsi-isbc.ca/eng/funding/fundingmatters

From the Executive Summary: A Warning and an Opportunity

The capacity of the nonprofit and voluntary sector to fulfill its important role in Canadian society is being undermined and eroded by new funding strategies that are intended to increase accountability, self-sufficiency and competition.

This study describes the emergence of a new funding regime for the nonprofit and voluntary sector and warns of serious challenges for the sustainability of a cross-section of organizations. Instability of this sector threatens the future of a diverse range of social, health, cultural, recreational, environmental, and other not-for-profit community services for millions of Canadians. ...

The study found that on the funding side:

• Funders are adopting an increasingly targeted approach to funding.
   
• There has been a marked shift away from a core funding model, which funds organizations to pursue their mission. The new model is project-based and is characterized by contracts that give funders increased control over what the organization does and how it does it.
   
• Funders are reluctant to fund administrative costs that cannot be directly tied to a project or program.
   
• Funding is being provided for shorter periods of time, and is increasingly unpredictable.
   
• Reporting requirements have increased.

Funders are increasingly requiring organizations to make joint submissions with other project partners and to demonstrate that they have secured funding from other sources – either financial or in-kind contributions – before extending their support.
No one disputes the right of private donors to allocate their money as they see fit, whether it involves individual or corporate giving. This study describes concerns in some quarters about the trend among private corporations to replace donations with sponsorships. But the major, overriding concern is about the new funding strategies of governments, which are the largest funders of the nonprofit and voluntary sector in Canada.

To be clear, the participants in this study were generally supportive of the stated motives of funders to increase accountability, support partnerships, promote diversification of funding sources, and foster efficiency and innovation within the sector. However, the study found a major disconnect between the stated intent of funding reforms and the consequences of these changes for nonprofit and voluntary sector organizations across the country.

Recognizing that organizations are coping with current realities in a variety of ways and with differing levels of success, the study has identified some worrisome trends:

• Volatility – As organizations struggle to diversify their funding sources, they can experience huge swings in revenue. This volatility undermines an organization’s stability and its capacity to provide consistent, quality programs or services, to plan ahead, and to retain experienced staff.
    
• A tendency to “mission drift” – As organizations scramble to qualify for narrowly prescribed program funding or to win government contracts, some are being pulled away from their primary mission, which is their long-term purpose and the source of their credibility within the community.
    
• Loss of infrastructure – With the move to project-based funding and the tightening of restrictions on administrative costs that will be covered by funders, some organizations are losing their basic infrastructure. They are becoming a series of projects connected to a hollow foundation.
   
• Reporting overload – Many smaller organizations are losing heart as they face yet another round of short-term contracts, short-term hiring and letting-go of program staff, all the while pursued for multiple reports from multiple funders with multiple forms and requirements.
   
• House of cards – Because funders often now require financial or in-kind contributions from other sources, the loss of one contract or the end of one partnership agreement can bring down the whole interlocking structure. A service that is thriving one year can collapse the next. Organizations despair of arrangements in which funders will not commit until other funding partners are on-side, the last one standing being the preferred position.
   
• Advocacy chill – When organizations must cobble together different projects and partners in order to survive, being seen as an outspoken advocate on behalf of one’s client group can be regarded as too risky, despite the justice of the cause. Some organizations may not want to have their name in the media when their next funding submission comes up for approval. In effect, advocacy organizations have been effectively marginalized over the past 10 years.
   
• Human resource fatigue – People, both paid and volunteer, are stretching themselves to the limit to meet the new challenges and yet remain faithful to their mission and to the citizens and communities to whom they feel responsible. But how long can this go on?