The charitable sector, both nationally and internationally, is tackling the most critical issues facing humanity today. Yet, despite the importance of the work they do, we still consider charitable donations as a favour to the organization. To complicate matters, most funding is dictated top-down from the funding organization’s board.  Funding is highly competitive, and restrictive eligibility criteria mean charities may need to modify programming to receive funding – often at the cost of program impact.  In the last post exploring alternative granting models, we looked at participatory grant-making, in which funding parameters, application processes and awards are set by the community the funding is intended to serve. You can read it here: Participatory Grant Making. In this article, I am examining how increased access to core or unrestricted funding could transform the charitable sector and Canadian society.  

Core funding and unrestricted funding are sometimes used interchangeably, but they are materially different. Core funding is more common; it allows the funder to restrict the funding from being used on capital purchases, fundraising activities, debt repayment or any area the funder does not want to support. Unrestricted funding can be used at the organization’s discretion. In other words,  all unrestricted funding can function as core funding, but not all core funding is unrestricted.  

In Canada, the vast majority of foundation and government funding streams are project-based. For a funder, this means finite one-off projects. A specific start and end date, project costs – sometimes excluding any staff costs, and commonly limiting operations/administrative support to 15%.   

The shift towards project-based funding began during the 1990s. By 2003, project-based funding had become the dominant funding model in Canada. Recognizing concerns around the impact of this shift, the Canadian Council on Social Development, in partnership with the voluntary sector and the federal government, undertook a landmark study to examine the changing funding landscape and recommend policies to strengthen the long-term sustainability of nonprofit organizations. More than twenty years later, many of the challenges identified in that report remain unresolved. 

“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.” – Katherine Scott, Canadian Council on Social Development 

Two decades later, the concerns raised in 2003 have been made clear. Most, if not every, Executive Director in Canada feels the strain the project-based funding has placed on the nonprofit sector.  The short-term nature of project funding makes it difficult to retain staff, hire a core team for project management, and day-to-day operations, maintain sufficient office-space, keep programs in line with their mission, and effectively advocate for their clients. Evangel Hall Mission has been offering meals, support and day-shelter to Toronto residents struggling with poverty since 1913. 

“As operations and core funding sources have declined, we’ve become increasingly reliant on project grants that rarely cover the infrastructure needed to run a responsible charity. Meanwhile, expectations around compliance, accountability, technology, and reporting continue to grow. These are entirely reasonable expectations—but they require sustained investment. Without core funding, charities can spend more time chasing grants than delivering the services our communities rely on.” – Ainsley Chapman, Executive Director, Evangel Hall Mission 

The most common argument against core and unrestricted funding is the perceived lack of accountability. The idea that project-based funding equals measurable data, and operations funding is hard to quantify, is pervasive but misguided. It is common for charities to approach reporting as unnecessary bureaucracy, but it can be a valuable tool for development as well as providing much-needed insight into an organization’s impact. One option might be for funders to accept an organization’s annual or impact report. This way, an organization’s resources are invested in one multi-purpose document. 

In 2022, Imagine Canada published Core Funding: Supporting Nonprofit Missions, Resilience and Impact, calling on the federal government to reallocate 30% of its project-based funding for charities and nonprofits to longer-term core funding. Though 30% would not solve the sector’s chronic underfunding, it could provide a meaningful test of what becomes possible when organizations have sufficient funding to sustain themselves—not merely to deliver a succession of short-term projects—and could encourage private foundations to adopt similar models. 

A growing number of foundations have begun experimenting with unrestricted, multi-year, and general operating grants, signalling a gradual return toward funding models that prioritize organizational resilience alongside program outcomes. Though these initiatives are promising, much more is needed.  

More funding for operations will help stabilize the Canadian charitable sector is obvious. The critical result, though, is not simply stronger organizations; it is that a stronger organization can better serve its mission. The challenge now is not proving that core funding matters, but convincing funders that a stronger charitable sector creates a stronger Canada. 

Daniella Sorrentino Headshot

With a background that spans film and advertising production, arts leadership, and communications, Daniella Sorrentino’s cross-disciplinary approach to grant writing — combines strategy, storytelling, and strong design thinking. She has helped clients secure millions in funding, from core operating support to complex project grants. Website | LinkedIn

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