Campbellford/Seymour Community Foundation suspends 2023 granting to ‘protect’ endowment amidst market downturn
Why It Matters
The financial markets have bruised many foundation’s endowments this year. So too, however, have many charities and non-profits been feeling the pinch with increased inflation and service demands. The rate at which foundations keep giving will impact how community organizations are able to support their communities.
Heather Hill, board member with Bike Action in July at a festival in Campbellford, Ontario. Hill says the Campbellford/ Seymour Community Foundation’s decision to suspend granting came as a “shock and a disappointment.” (Courtesy: Heather Hill)
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In late October, community organizations in Campbellford, Ontario, got some bad news.
In an email, the town’s local community foundation, the Campbellford/ Seymour Community Foundation, which operates on the traditional territory of the Mississauga people, let past grant recipients know they’d be suspending granting in 2023, owing to poor performance of the foundation’s investment in the market.
“Due to the global investment markets continuing to perform poorly in 2022, the CSCF investment has been substantially negatively affected,” says the email. “In an effort to be prudent and to protect our investment, the Board of Directors…passed a resolution to [suspend] the CSCF’s 2023 grant program, until such times as our investment recovers.”
The decision caught Heather Hill, a past grant recipient, off guard.
“It was a shock and a disappointment,” says Hill, a member of the board of directors for Bike Action, a local non-profit that has received about $5,000 from the foundation for each of the past two years. “Definitely, it’s affected our immediate and short-term plans.”
Hill says the foundation’s decision means her organization, which hosts group rides and bike maintenance events, and advocates for improved bike infrastructure locally, will need to look further afield for financial support in 2023.
The decision also came as a disappointment for Sheila Olan-MacLean, CEO of Compass Early Learning and Care, whose organization has also received support from the community foundation for several years. In their case, funds have been used to hire an early childhood education assistant to offer childcare in the summers at the Beehive Daycare in Campbellford.
Olan-MacLean says they had already submitted an application for funding from the foundation for 2023 when they learned of their decision to suspend granting.
She says the board’s decision may affect her organization’s plans for next summer: “If we don’t find alternative funding, then our ability to offer summer programming will be diminished.”
The community foundation’s decision also comes as many charities and non-profits across the province are facing acute challenges in the fall-out from the pandemic, including high inflation, increased client demands and troubles attracting and retaining staff.
This spring, the Ontario Nonprofit Network, a non-profit advocacy organization, surveyed about 1,500 non-profits across the province, finding that this past year, 83 per cent of surveyed organizations have faced higher costs and 74 per cent have experienced an increased demand for services, when compared to 2021. The report also found that 65 per cent of respondents are experiencing recruitment and retention challenges.
Olan-MacLean’s organization is one of many facing this particular hurdle. “The children have returned after COVID…[but] our biggest issue is finding staff for our programs,” she says.
Despite the challenges many community organizations are facing, Russ Christianson, a co-op developer and a volunteer on the foundation’s investment committee, says the board’s decision to suspend granting in 2023 was prudent.
Last year, the foundation’s assets dropped 19 per cent — from $7.1 million at year’s end in 2021 to $5.76 million at year’s end in 2022, Christianson says.
Due to the poor investment performance, he adds, the foundation’s assets have now fallen below the original $6.2 million donation that was given to the foundation when it was first established in the early 2000s.
“The people in our community really have a strong expectation that we will protect the endowment of the community foundation,” he says. “Because if we don’t, we won’t be here in the long term.”
Investment blues: Why the tough go in 2022?
The bulk of Campbellford/Seymour Community Foundation’s investments are pooled with and managed by the Toronto Foundation, an arrangement which helps the rural foundation access lower investment fees and more investment expertise than they might be able to otherwise.
For this same reason, Toronto Foundation manages the funds of some 40-odd other charities, according to Sharon Avery, Toronto Foundation’s CEO, including the funds of United Way Greater Toronto, Niagara Community Foundation and Durham Community Foundation.
Avery acknowledges it was a tough year for the foundation’s investments. At the lowest point this year, the foundation’s investments were down ten per cent, but have since rebounded somewhat, she says.
Avery adds, however, that this tough year was not unique to the foundation’s portfolio — that many foundations have similarly struggled amidst topsy-turvy markets.
“Our returns are the same as everybody else’s’,” Avery says. “We didn’t do a bad job. In fact our returns are probably better than many [others].”
Interviews with the Hamilton Community Foundation and Genus Capital Management, an investment firm that manages the portfolios of several Canadian foundations, suggest this to be the case.
Yulena Wan, Hamilton Community Foundation’s director of finance and operations, says her foundation’s investments are down seven per cent over the past 12 months. Stephanie Tsui, foundation portfolio manager with Genus Capital Management says many of her client’s portfolios, despite beating the market overall, are indeed down between three and seven per cent in the past year.
Tsui says markets have been very volatile this year, prompted first by Russia’s invasion of Ukraine. Markets have also stalled in recent months as a result of multiple interest rate hikes.
Tsui adds that foundations who have their investments screened for environmental, social and governance (ESG) factors have tended to do somewhat worse in 2022 than those without the screen, as oil investments have performed well.
Avery stresses, however, despite her foundation’s lackluster 2022 investment returns, she’s not aware of any of the other 40-odd organizations who pool their funds with Toronto Foundation having made the same decision as the Campbellford/Seymour Community Foundation to suspend granting in 2023.
Given markets rise and fall each year, Avery says, most community foundations have a plan for bad markets. This prevents them from needing to suspend granting when markets are down.
Across the wider Canadian foundation landscape, the Campbellford/Seymour Community Foundation’s decision to suspend granting in 2023 due to poor investment performance in 2022 seems rare.
Jacqueline Reid, communications director for Community Foundations of Canada, says she is not aware of any other community foundation amongst the organization’s 200-odd other members, who have made the decision to suspend granting this year.
Sara Krynitzki, director of policy and communications for Philanthropic Foundations Canada, the member network of private and public foundations, says she, too, hasn’t heard of any other foundations deciding to curb granting in 2023 due to the economy.
“Our recommendations for our members and other foundations will be to consider the toll of inflation and volatility of the markets on the sector and to step up rather than shy away,” she says, by email.
Sources who spoke with Future of Good say that occasionally foundations will curb grantmaking when the market drops, but that it’s not a common occurrence.
Avery recalls that in 2008, during the financial crisis, some community foundations pulled their grants. “They really paid for it though,” she says. “No one should be pulling granting right now. The sector needs us more than ever before.”
Asked about this unique decision, Christianson says that while community foundations all have some similarities, there are many differences. “Each community foundation is unique…there all in different situations in different communities,” he says.
He stresses that in the case of Campbellford/Seymour, the community foundation’s origin was in the sale of a prized public utility, which the towns were forced to sell during the privatization wave that occurred under Premier Mike Harris. He says residents could have decided to invest in building a swimming pool, or in building roads and sewers, but instead they chose a community foundation.
He recalls a packed community meeting, with hundreds of residents, where the vast majority of people voted to use the money to seed a community foundation. “That was an act of local grassroots democracy,” he says. “That’s what people wanted and we’re trying to maintain it over the long-term.
“That’s why we’re not panicking; we’re just being prudent,” he says.
Wan adds that smaller community foundations may struggle more amidst volatile markets than their larger peers. She notes that Hamilton Community Foundation, which was established in 1954 and now holds more than $250 million in assets, has had many years to build up a sizeable reserve fund, which they are able to use in bad markets.
“When you’re smaller, and you have modest returns each year, you’ve got to grant them out,” Wan says. “And you have less that is being held back into that ‘rainy day fund’ for when the returns are lower.”
The prognosis for local groups in Campbellford in 2023
As for the impact of the foundation’s decision on local groups, Christianson says that while many non-profits are struggling, he doesn’t think any of the foundation’s grant recipients are dependent on the local community foundation’s capital for survival: “It’s usually a bonus for them to get [a foundation grant] and it really helps move their organizations forward sometimes.”
Christianson adds that though the foundation will not be granting based on its endowment assets, they will still serve as a grantmaker in their community through offering the federal Community Services Recovery Fund.
For Bike Action, the foundation’s grants have indeed provided a platform to support organizational sustainability. Hill says in 2021, the foundation’s grant helped them to start a new program, offering bicycle pumps and other tools for rent at the library. In 2022, the foundation’s grant helped them access the support necessary to incorporate as a non-profit and set up a website.
This solid platform, she says, will allow her organization to look further afield for grants from government or other community foundations.
Still, Hill worries for other community organizations who might be in a more precarious position than her own. “There’s not a lot of money elsewhere to be had,” she says.
“I’m optimistic that for Bike Action, we’ve managed to get ourselves firmly footed enough that we’ll be okay to see it through,” Hill says. “And hopefully, next year Campbellford/Seymour Community Foundation will be back to granting again and we can apply for that funding.”
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