A Provincial Analysis of the Charitable Sector

by Jason Clemens and Johanna Francis

In a time of government cutbacks and re-prioritization of spending, more people are expressing interest in the role of the charitable sector in Canada. In particular, the current debate is focusing on the sector’s ability to take on an increased role in the provision of community goods and services that have in the recent past been provided largely by government. In order to assess the ability of charities to fulfil this role, the first step is to consider which charitable organizations exist in Canada and how they are distributed across the provinces. It is also instructive to detail the structure of revenues among the different categories of charities in each province so as to understand the sector’s source of funding.¹

Charity distribution

Figure 1 shows the number of charities and the population of each province. As one would expect, there is a strong correlation between the population and the number of charities in each province. In fact, only Saskatchewan does not follow the pattern. That is, people in Saskatchewan support more charities than do Manitobans, although the former province has fewer people than the latter.

Click Here to View Figure 1 - Number of Charities

Analyzing the number of charities without accounting for population provides very little insight into the density of charitable organizations in Canada. To ameliorate this, figure 2 presents the number of people per charity in each province, and therefore depicts the relative size of the charitable sector within each province. The fewer people per charity, the larger the comparative size of the charitable sector in each province. For example, a single charitable agency in the province of Prince Edward Island serves a population base of 237 (fewest people per charity), while the same agency in Quebec would be required to serve a population of 580 (most people per charity). This discrepancy implies a 245 percent variation between the lowest and highest ranked provinces, when they are ranked by people per charity.

Figure 2 enables a valid cross-province comparison to be made. Prince Edward Island has the most charities per capita, even though it has the fewest in absolute terms (574). Conversely, Ontario and Quebec rank first and second, respectively, in the total number of charities per province (figure 1), but when population is factored into the analysis, they drop to eighth and tenth positions respectively. Also, the extent of charities in the Maritime provinces is seen to vary considerably from a low of 237 people per charity in Prince Edward Island to a high of 544 people per charity in Newfoundland.

Click Here to View Figure 2 - Number of People per Charity

Click Here to View Figure 3 - Composition of the Charitable Sector

It is interesting to note from the data in figure 2 that geography appears to have very little influence. There is no strong regional influence, whether central, western or eastern, in terms of the number of people per charitable organization. The provincial differences that do exist, therefore, are likely due to some combination of differences in historical government funding for charities, the different roles and influence of religion, the varying composition of the charitable sector, and differences in the average size of the organization, among other possibilities. Thus, the charitable sector’s capacity to provide services in lieu of government provision would vary across provinces.²

Structure of the charitable sectors

Figure 3 presents the structural composition of the charitable sector for each of the 10 provinces (by percentage). In each province, “religion” was the largest category (the percentage of total charities that comprised the religion category ranged from 34 to 61 percent). Religion was consistently the largest category because of the uniformly large numbers of churches, synagogues, and places of worship (81 to 96 percent of this category)—in each province.

The second largest category for 7 of the provinces (the Maritimes and the Prairie provinces) was “benefits to community,” ranging from 11 to 26 percent. Unlike the religion category, benefits to community exhibits a varying provincial profile. For example, in 4 provinces the category was dominated by community organizations (e.g., Community Living Associations, juvenile houses, etc.). In the remaining 3 provinces, it was dominated by recreation, playgrounds, and camps.

The second largest category for the remaining three provinces was welfare organizations in Quebec (28 percent), and educational organizations in British Columbia and Ontario.

The “education” category, which comprised between 10 and 36 percent of the charitable sector in each province, includes teaching institutions, organizations supporting schools, cultural activities, and promotion of the arts. It was dominated in most cases by organizations supporting schools, promoting cultural activities and the arts. Only in Manitoba was the education category dominated by teaching institutions.

In all 10 provinces, the “health” category comprised less than 10 percent of the number of charitable organizations. Contrary to what one might expect, hospitals (which are predominantly government funded) account for only 10 to 33 percent of this category. The health category is overwhelmingly dominated by “services other than hospitals” (47 to 52 percent); for example, associations for the handicapped, community health centres, and Alzeheimers societies (largely privately funded organizations).

Click Here to View Figure 4 - Allocation of Revenues

The smallest category of the charitable sector was “other,” which ranged from less than 1 percent to 4 percent. This category includes service clubs, employees’ charity trusts, registered national arts service organizations, amateur athletic organizations, and miscellaneous charities.

The only generalizations which can be made about every province are: first, religion comprises the largest part of the charitable sector; second, health accounts for less than 10 percent; and third, education consistently accounts for between 10 and 36 percent. More detailed analysis, however, reveals that each province has its own profile in terms of both the specific mix of organizations dominating those categories and the division of charities between the welfare and benefits to community categories.³

Revenue structure

The distribution of revenues relative to the structure of the various provincial charitable sectors reveals a paradoxical relationship (figure 3). Figure 4 illustrates the composition, or percentage of revenues allocated to each of the six categories of charities.

While religion was the largest category in each of the 10 provinces in terms of the total number of organizations, when ranked by total revenues, it ranked third for 6 of the provinces and fourth for the remaining 4 provinces. The fact that religion represents the most numerous type of charity but accounts for a much smaller proportion of revenues illustrates the tremendous variance within the charitable sector. Contrary to popular opinion, the charitable sector has a large number of charities with distinctive characteristics. For instance, there are a large number of charities that are relatively small in size (such as churches) while at the same time there are a small number of large charities (such as hospitals and universities).

Interestingly, for 8 provinces, the health category (which includes government funded hospitals and other health organizations) received the largest percentage of revenues, even though in those provinces health comprised less than 10 percent of the charitable sector. For example, in Saskatchewan, health comprised 5 percent of the charitable sector, but received 47 percent of all revenues. Further, the religion category—51 percent of the charitable sector in Saskatchewan—received only 8 percent of revenues, again illustrating the tremendous variability in the charitable sector.

For the remaining two provinces, Alberta and Quebec, the education category, a largely government funded sector, received the most revenue, even though it was the third largest category in terms of the numbers of charities in each of these provinces (15 and 17 percent of all charities in these provinces respectively).

Education received the second highest proportion of revenues in eight provinces (ranging from 19 to 35 percent of revenues), as indicated in figure 4. In the remaining two provinces, the health category received the second highest level of revenues. Taken together, therefore, education and health received the majority of all revenues—from 65 to 80 percent—for the charitable sector in each province. This contrasts with the benefits to community and religion categories which, when taken together, received 6 to 20 percent of revenues, but comprised 47 to 70 percent of the charitable sector in each province.

Ontario: a case study

A look at Ontario reinforces the issues discussed above. Figure 5 shows both the structural composition of Ontario’s charitable sector as well as the composition of revenues allocated to each of the six categories. The same paradoxical relationship discussed previously is again evident. Religion represents 48 percent of the charities in Ontario but accounts for only 10.9 percent of revenues. In contrast, health and education represent 6.4 and 16.8 percent, respectively, of Ontario’s total number of charities, yet dominate all other categories in terms of revenues. Health and education account for 31.0 and 40.9 percent, respectively, of the total revenues. In fact, the closest match between the percentage composition of charities and the receipt of revenues occurs in the welfare category which has 14.3 percent of the total number of charities and 11.6 percent of total revenues.

The most plausible explanation for the divergence between the composition of the charitable sector and the allocation of revenues lies in the nature of each category of charity. That is, health and education facilities, in the traditional sense, are normally very large institutions that provide a variety of services. Religious agencies, on the other hand, are much smaller in both size and scope of services. This material difference in the method of delivery of services for each category likely accounts for some of the discrepancy between the relative size of the category and the percentage of funding.

Click Here to View Figure 5 - The Ontario Case Study

Click Here to View Figure 6 - Funding Structure

Structure of funding in Ontario

Another way of looking at the charitable sector (which also illustrates its variety) pertains to the nature of the revenues of the charitable organizations. Four different types of revenues have been identified: internal funding, government funding, individual donations and other.⁴ Figure 6 indicates the variation in the sources of revenue for the various charitable organizations.

A closer analysis of the distribution of revenues among charitable organizations in Ontario reveals that while the health category received the most revenue from all sources, 63 percent of that revenue was government funding (municipal, provincial, and federal). Hospitals received 65 percent of the government funding in the health category. This is commensurate with the fact that in Canada hospitals are public institutions.

Education received the second most revenue; again, 63 percent of that revenue was from government sources. This is in distinct contrast to religion, which received only 10 percent of the total revenues for the charitable sector and only 7 percent of the total amount of funding was from government sources. The overwhelming majority of funding for religion came from individual donations (61 percent).

Charities falling under the benefits to community category, comprising 13 percent of charities, received the most government funding as a percentage of total funds, even though they received only the fifth most funding in total receipts.

This brief glimpse into the revenue structure of charities in Ontario reveals that while the largest group of charities as a percentage of total charitable organizations in Ontario was religion, it received the fourth highest percentage of revenues and the least government funding. Conversely, health, the second smallest category, had the highest percentage of revenue. These observations suggest that broadly-based government funding cutbacks would affect some categories relatively more than others. The argument can be made that where the majority of a charity’s funding comes from the government, those charities are relatively less able to endure cutbacks without substantial restructuring of their funding reliance.

Conclusion

It is abundantly clear that the charitable sector is composed of a variety of different types of organizations, separate and distinct from one another. There needs to be more detailed research on the charitable sector. As the larger non-profit or voluntary sector gains in prominence and importance, the need for accurate and broad-based statistics on the sector will become more apparent. In order to devise sound public policy, policy makers require accurate information. The lack of consistent and broad-based statistics on the sector diminish the efficacy of any policies developed to further the sector.

Endnotes

1The data used in the analysis was taken from Revenue Canada Charity returns for 1995. The two territories—Yukon and Northwest Territories—were excluded from our analysis due to the incompleteness of the charity returns for those regions. Any comparisons made, therefore, include only the 10 provinces. Provincial population figures were used to determine the number of charitable organizations per capita in each province.
The charities were grouped into six categories: Welfare, Health, Education, Religion, Benefits to Community, and Other. A narrower set of definitions is also used by Revenue Canada which further delineates the six categories into 50 classifications.
The “welfare” category includes disaster funds, relief organizations, respite care, and other welfare organizations. “Health” includes hospitals, nursing homes, extended care facilities and medical charities such as the Canadian Cancer Society. “Education” includes schools, support organizations for schools, and institutions of learning. Organizations classed as “benefits to community” include: protection of animals, libraries, museums, recreation, playgrounds, and sports organizations. The “other” category includes organizations such as service clubs, fraternal societies, employees’ charity trusts, national arts service organizations, amateur athletic associations, and miscellaneous charities not sufficiently numerous to have their own category.

2The analysis of the number of people per agency was restricted to charitable organizations. It does not include non-profit organizations that are not registered charities. It is entirely possible that provinces with a high or low number of charities could have an offsetting number of non-profit organizations that equalize the total number of agencies across provinces.

3It was noted, in selective sampling of the Revenue Canada database, that there were many overlaps across categories. For example, a charity such as a day care may be classified under Welfare, Education, or Benefits to Community. Therefore the grouping of charities into six separate categories and the analysis based upon it should be viewed as an approximate characterization of the charitable sector.

4For purposes of discussion, individual fields from the revenue portion of the Revenue Canada charity returns were grouped into four types of funding sources. Internal funding refers to income gained from the sale of products or services or generated from capital gains, rents and investments. Individual donations included membership fees. Other was a residual category.

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Last Modified: Wednesday, October 20, 1999.