The nonprofit sector needs to seriously consider the question: what if what鈥檚 happening in the housing sector was happening with all essential services? Necessities made unaffordable, unattainable, and a fantasy from a bygone era. We have a responsibility to share with our communities, and the people we serve, information about the breadth of nonprofit services they use, and that those services are clandestinely being privatized. We must also communicate the severity of privatization, and the need to embrace nonprofits as service providers who are best suited to deliver these services because they are community, and not profit, centered. 

Privatization of services can be lethal for communities

Privatization is promoted as a policy solution when underfunded public and nonprofit services fail to meet the needs of communities. Private services are promoted as fast and more efficient while the (e.g. a colonoscopy priced at $739 in the private sector versus $290 in the public sector). We鈥檝e already seen in , Quebec, and that privatizing health services ends up costing taxpayers more money in the long-run. Increasingly however, privatization happens as an intended consequence of until they become untenable and introducing private services seems the only option. A vicious cycle emerges as governments move more towards the for-profit sector: they flatline funding to nonprofits/public sector organizations instead of raising it alongside inflation, resulting in public/nonprofit sectors being unable to provide services effectively and efficiently,  thus opening the door for the for-profits to take over.

While privatization isn鈥檛 a new approach to handling service provision in 91视频, the pace at which it鈥檚 happening is accelerating. It’s becoming harder for nonprofits and the communities who use these services to have a say in how and by whom these services are delivered. This policy choice does not just span one government鈥檚 mandate. So it’s not enough for us to develop short-term advocacy plans to combat privatization; it’s necessary for us to develop long-term solutions embedded in our daily work that we can take to any government of the day that attempts to privatize services.

Developing public advocacy campaigns and socializing the nonprofit business model amongst our networks is one way to let the public know they have other options. We can socialize the idea in our election advocacy work, in our comms and newsletters, during our fundraising drives, and even at community events. If communities don鈥檛 learn directly from us that they have other options, ones that are tried and true community options that keep profit out of care, privatization becomes inevitable. It begins with us. Nonprofits need to be at the forefront of socializing and embedding the nonprofit business model in the public鈥檚 consciousness. If no one knows our value, no one is going to fight for us.

Nonprofits are uniquely positioned to deliver publicly-funded services

We have drafted a one-pager on the nonprofit business model to help nonprofits integrate this language when talking about the work that they do. This resource provides the sector with an accessible piece detailing why the nonprofit sector is uniquely positioned to deliver publicly-funded services. 

ONN has been convening interested folks in the sector on the topic of privatization, and what we can or should do as a sector. As a result, an emerging and iterative strategy has been developed with some short and long term solutions:

• If organizations receive public funding to obtain real estate for essential services, government should either maintain direct ownership in the real estate or organizations should be prohibited from selling it to be used for other purposes.
• Enforce legally mandated quality standards with meaningful financial penalties, so organizations are not incentivized to cut corners.
• Grow essential services through nonprofit organizations by focusing scarce funds on loan guarantees, and strategic capital grants for nonprofits.
• Prioritize investments in nonprofit care by increasing funding for operations.

We need the sector to understand how big and insidious privatization is, and the significant impact it will have on not just us but also our communities across the province. 

We need to pay attention, come together, and engage in collective advocacy. 

The time for nonprofit-led services is now

Ontarians must know there is a better way forward that keeps their health and well-being top of mind. It is up to our sector to socialize and embed the nonprofit business model into the public consciousness; no one can or will do it but us, and it’s time to seize the moment. We must champion our values. We can settle for an 91视频 where unaffordable and low-quality services are the norm, or we can demand an 91视频 where nonprofits lead the way for high-quality and affordable services for our communities. I think the choice is clear.     

In the preparation of this report, ONN was pleased to provide our perspective through consultations and we thought it was important to share the insights with our network. Whether you are new to this area or an experienced practitioner, the report provides a good introduction to community finance, lays out the main tension in nonprofits accessing finance and offers a number of regulatory improvements to attract the kind of local investors more likely to support nonprofits.

Nonprofits and finance: Introducing the fundamental tension

This report highlights the inherent tension in impact investing, whether it is investor driven 鈥渟ocial finance鈥� or locally-owned 鈥渃ommunity investment鈥�. While ONN highly encourages nonprofits to consider community investment opportunities 鈥� which may be great untapped sources of finance in many cases 鈥� this tension reminds us why it is not an appropriate model for nonprofits in every case.
Nonprofits are restricted in what type of capital they can raise and this may increase the cost of borrowing. Furthermore, because many projects face issues like irregular cash flows, this adds additional risk and therefore makes borrowing more expensive in an ordinary market.
Many social ventures, by their very nature, yield below-market returns. Above-average risks combined with below-average returns means that in many cases capital can only come from sources willing to subsidize the work to some extent. The report points out that it may be simpler and more effective to just engage in traditional fundraising.

Included in the report is a glossary that introduces key regulators, and discusses foundational investment concepts. It also contains a helpful appendix explaining the advantages and disadvantages of the nonprofit versus other corporate forms in pursuing social enterprise.

Enabling investors willing to support nonprofits

Governments have the power to encourage and discourage different types of economic activities through the laws they pass, which come together to form an overall 鈥渞egulatory environment鈥�. A regulatory environment conducive to CIOs and other investment bodies ready and willing to share in the risks taken on by nonprofits without expecting higher returns is good for nonprofits. There are two reasons to think CIOs might make more capital available to nonprofits at a lower cost than other investors. First, they may be nonprofits themselves and make their investments based on a range of factors that don鈥檛 disadvantage nonprofit borrowers. Secondly, CIOs focus on local communities thereby limiting the competition nonprofits will face in securing financing and therefore should drive down the cost of capital that nonprofits have access to.

So what regulatory changes would be more conducive to CIOs and other similar investors?

Based on the changes suggested in the report, here are two that are relevant for our network:

1. The authors give the example of the Green Energy Act, which kickstarted an industry and enabled organizations to access debt and equity by guaranteeing a stable price for energy with a bonus for co-operative producers. Presumably, legislation that offers a predictable price in other areas and offers a bonus for nonprofit producers could have a similar effect. However, we caution nonprofits in using this example with the current Government as they repealed this Act.
2. In Nova Scotia, CIO equivalents called Community Economic Development Investment Funds (CEDIFs) were enabled by streamlining the forms and processes to start them. Less bureaucracy means less reliance on counsel and other experts, lower transaction fees, and the ability to engage in smaller capital raises ($50,000). Although CEDIFs can鈥檛 be nonprofits, the importance of simplicity and streamlining for creating such funds is vital across the board.

While the above changes would all be significantly helpful, the report is careful about applauding recent efforts by the 91视频 Financial Services Regulatory Authority to clarify existing requirements for co-ops to raise capital in certain situations they consider 鈥渉igh risk鈥�. The authors note that this clarity helps co-ops craft offering statements, and signals the regulator is taking the sector seriously. While this guidance doesn鈥檛 apply directly to nonprofits, this is a good reminder for nonprofit advocates in this space that clearer regulation is better regulation and often does not require legislative change but instead requires changing the attitude of the regulator.

What can nonprofits (and networks) do to use community finance to build community wealth?

While we wait for better regulation for organizations whose purpose it is to invest in communities, funders, particularly those with a focus on a particular community, can draw lessons from CIOs in other provinces to understand how to structure their own portfolios in a way that builds community wealth. Looking at Community Investment Co-ops in BC or CEDIFS in Nova Scotia is a great place to start to draw inspiration.

Nonprofits should continue to expand their understanding of options available to finance their work by building their investment knowledge and acumen. Towards this end, the report also contains helpful tips such as 鈥溾�aving a strong, diversified portfolio of revenue-generating services is imperative for non-profits issuing community bonds.鈥� and 鈥淎 major key success factor is that a CIO must be demand-driven, meaning that in order to work, it must solve an actual problem in the community.鈥� Ultimately, figuring out the business model of your work is an exercise in figuring out how it can be financially sustainable. This is a vital skill whether you call it social enterprise or not. In some cases, it will simply not be viable for certain public goods to be funded through private investment. In those cases, it becomes vital to advocate collectively for adequate public funding. Stay tuned for ONN鈥檚 new election advocacy toolkit to better understand how your nonprofit can get involved in the democratic process.

The nonprofit sector secures about a third of its revenues from earned income and these revenue-generating activities have the potential to take up a bigger slice of 91视频鈥檚 economic pie. Securing the financial backing to ensure growth in nonprofit goods and services 鈥� whether a small newcomer women鈥檚 catering service or a multi-site child care operation 鈥� means keeping more community wealth in community hands. Community investment organizations can play an important role in this context.

Related Resources:

• A transcript of this webinar is available in the ONN Publications library
• Loan Readiness Assessment
• Community Lifelines of Credit Information Kit聽