Some of Canada’s largest food banks built up record reserves during the pandemic that are only now beginning to draw down, giving them tens of millions of dollars of financial cushion to feed people during an affordability crisis.
Twelve large food banks across the country collectively held about $168 million in cash and investments last year, roughly quadrupling their reserve balances from 2019. During that time, expenses roughly doubled.
National and provincial food bank associations had an additional $70 million in reserves.
The money came from multimillion-dollar surpluses fueled by pandemic largesse and extraordinary government grants. For some food banks, those surpluses are still adding to their balance sheets.
“Am I struggling right now? No, I’m not. I’m very fortunate,” said David Long, CEO of the Greater Vancouver Food Bank.
“But my concern is… what’s going to happen in the next five years.”
He said food bank CEOs across the country are nervous about rising food costs and the housing crisis. Some are already seeing their surpluses turn into deficits as donations dry up and demand for food increases.
“It’s a perfect storm of more people needing food and a huge number of people not having more discretionary income to donate to charities,” Long said.
Here is a breakdown of some of these reservations. All data comes from the Canada Revenue Agency or charity financial statements.
Ottawa Food Bank CEO Rachael Wilson said the budget crisis is exactly what she was saving for.
“We knew it was going to continue to be a struggle in our community, that there would be economic impacts after COVID,” he said.
“There would come a day when donations would start to decline but our numbers would continue to rise, and that’s exactly what we’re doing with those funds now.”
SEE | Why the Ottawa Food Bank says it has built up reserves:
Rachael Wilson, executive director of the Ottawa Food Bank, said she expects donations to decrease and demand to increase as food costs continue to rise.
The Ottawa Food Bank’s reserves have dropped from $22.3 million last year to about $14 million today, Wilson said. That has gone partly to fund equipment in a new building, but also to provide grants to a network of community food banks that she says are “struggling.”
It has a deficit in 2023 and plans to be about $2.6 million in the red next year.
“We know that the next two years will continue to be very challenging,” he said.
Tomorrow in Ottawa6:22Ottawa Food Bank has $14 million in reserves, but its CEO worries the money is running out
Huge surpluses allowed food banks to accumulate record balances, but now deficits are starting to take hold. Rachael Wilson, CEO of the Ottawa Food Bank, explains what the food bank is facing as demand (and food prices) continue to rise.
‘A tsunami of new people’
Toronto’s Daily Bread Food Bank saw its reserves increase 12-fold between 2019 and 2022, but CEO Neil Hetherington said that supports an organization that is now triple its size, serving four times as many customers and paying about 10 times as much. more for food.
This is because demand is outstripping food donations and each new meal must be paid for in cash, causing “exponential growth” in food purchasing costs.
He doesn’t hesitate when asked if food banks are struggling: “That’s an absolutely accurate narrative.”
“We have unsustainable growth in the number of people who need food banks,” he said. “Our fundraising growth has not kept pace. We are depleting reserve funds.”
Daily Bread’s 2023 financial statements, which were approved last week, showed a smaller operating loss than Hetherington expected thanks to strong fundraising. It expects a loss of $7 million by 2024.
The new figures also showed that food procurement and distribution costs rose from $11.6 million to $22.4 million in just one year. Hetherington noted that August was another record month for food bank visits.
He said reserves are now enough to cover about 16 months of food purchasing costs.
Feed Nova Scotia’s reserves remain at record levels in dollar terms, although CEO Nick Jennery said its surplus has shrunk sharply this year. He doesn’t see the pressure letting up.
“We have this tsunami of new people,” he said. “There are more new people than ever entering the foodbank support system, and I don’t see that slowing down.
“We live in anxious times, whether you have reservations or not.”
Are food bank reserves reasonable?
Kate Bahen, CEO of Charity Intelligence Canada, has taken a close look at food banks’ finances and sees a need for nuance.
The organization investigates charities with the goal of providing transparency about their finances.
Demand has definitely increased, he said, but headlines about struggling food banks overlook the other half of the equation.
“For the most part, food banks are in a stronger position than ever to meet that demand thanks to the generosity of Canadians,” he said.
“One of the silver linings of COVID was that in the minds of donors, they could see where the food banks were on the front lines… people started writing checks, big checks.”
Bahen said that created a “trust fund” for food banks and there is always a risk of trust funds becoming inflated. Donors may want to compare the immediate results they would get from a charity spending their money now with the delayed impact of saving for the future.
“Your donation will stay in the bank,” he said. “He’s not going to be on the front line.”
Do you think food bank finances have reached that level? Definitely not.
“I have great confidence that donations made to food banks benefit more than many other charities in Canada,” Bahen said.
Sometimes you see charities that have built up financial reserves that could last eight years or more. That’s not the case with Canada’s food banks.
“Before they had a year’s cushion; with COVID now they have two or three years’ cushion,” he said.
Where are food banks putting their money?
Before the pandemic, in 2019, food banks kept most of their reserves in cash or ultra-secure guaranteed income certificates.
As balances increased, they diversified their financial holdings into riskier but potentially more rewarding assets. The 12 largest food banks had at least $30 million in capital investments last year.
Higher-yielding investments have allowed food banks to increase their profits through interest payments and dividends, but that comes with risks. Price fluctuations shaved about $3.2 million off the market value of those investments in 2022.
Daily Bread Food Bank reported an unrealized investment loss of $2.2 million that year. Hetherington said better performance this year has already improved it and the organization is now ahead on its investments by about 1.5 per cent over two years.
He said a careful balance must be struck.
“Charities have to be incredibly careful with administration,” he said. “You can’t just put it under a mattress and at the same time you can’t expose those donations to potential capital loss.”
Hetherington said keeping about a quarter of Daily Bread’s portfolio in stocks is “minimal” and “very conservative.”
“Yes, we probably could have taken on additional risk for potential additional gain, but we decided not to,” he said.
Other CEOs pointed to investment policies and advisors that help them limit risk. Jennery said the goal is to find “prudent” investments, not to maximize dividends.
Bahen said charities need to ensure their savings keep up with inflation without wasting money on high-risk assets.
The most important point is to make it clear to donors where their money is going. In that sense, he said, most food banks get top marks for transparency.
Long said that’s one of the strengths of his organization, along with the good they did during the pandemic.
“I think the attention to food security in this country has never been greater and I think food banks have become the focus of the public’s attention when considering donations,” he said.
“Our donors like transparency, they like what they see with what we’re actually doing and how we’re using their money.”
