Some of Canada’s largest food banks built up record reserves during the pandemic that are only now beginning to shrink, giving them tens of millions of dollars of financial cushion to feed people through 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 since 2019. During that time, expenses roughly doubled.
National and provincial food bank associations had an additional $70 million in reserves.
The money came from multi-million dollar surpluses fuelled by pandemic generosity 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 mounting food costs and the housing crisis. Some are already watching their surpluses vanish into deficits as donations dry up and demand for food surges.
“It’s a perfect storm of more people needing food and a huge amount of people that have no more discretionary income to give to charities,” said Long.
Here’s a breakdown of some of these reserves. All data is either from the Canada Revenue Agency or charity financial statements.
Ottawa Food Bank CEO Rachael Wilson said that budget crunch is exactly what she was saving up for.
“We knew that it was going to continue to be a struggle in our community, that there would be economic impacts following COVID,” she said.
“There would be a day where the donations would start to drop but our numbers would continue to rise, and that’s exactly what we’re doing with those funds now.”
WATCH | Why the Ottawa Food Bank says it’s built up its reserves:
The Ottawa Food Bank’s reserves have shrunk from $22.3 million last year to about $14 million today, Wilson said. That’s gone in part to fund equipment at a new building, but also to provide grants to a network of community food banks she said are “absolutely struggling.”
She’s running a deficit in 2023 and plans to go about $2.6 million into the red next year.
“We know that the next couple years are going to continue to be very challenging,” she said.
‘A tsunami of new people’
Toronto’s Daily Bread Food Bank saw its reserves swell about 12-fold from 2019 to 2022, but CEO Neil Hetherington said that’s supporting an organization that’s now triple the size, serving quadruple the clients and paying about 10 times as much for food.
That’s because demand is outpacing food donations and each new meal has to 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’ve got unsustainable growth in the number of people that need food banks,” he said. “Our growth of fundraising has not kept pace with that. We are depleting reserve funds.”
Daily Bread’s 2023 financials, which were approved last week, showed a narrower operating loss than Hetherington was expecting thanks to strong fundraising. He’s expecting a $7 million loss for 2024.
The new numbers also showed food acquisition and distribution costs ballooning 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, though CEO Nick Jennery said his surplus has narrowed sharply this year. He doesn’t see the pressure relenting.
“You’ve got this tsunami of new people,” he said. “There are more new people entering the food banking support system than ever before, and I don’t see that curtailing.
“It is anxious times, whether you’ve got reserves or not.”
Are food bank reserves reasonable?
Kate Bahen, managing director of Charity Intelligence Canada, has taken a close look at food bank finances and sees a need for nuance.
The organization researches charities with the aim of providing transparency about their financials.
Demand is definitely up, she said, but headlines about struggling food banks miss the other half of the equation.
“For the most part, food banks are in a stronger position than they’ve ever been to meet that demand because of the generosity of Canadians,” she said.
“One of the silver linings of COVID was, in donors’ minds, they could see where food banks were on the front lines … people began writing cheques, big cheques.”
Bahen said that created a “trust fund” for food banks and there’s always a risk that trust funds get bloated. Donors might want to compare the immediate results they’d get from a charity that will spend their money now to the delayed impact of saving for the future.
“Your donation is going to sit in the bank,” she said. “It’s not going to be on the front lines.”
Does she think food bank finances have reached that level? Definitely not.
“I have great confidence that donations given to food banks do more good than many other charities in Canada,” said Bahen.
She sometimes sees charities that have built up financial cushions that could last eight years or more. That’s not the case for Canada’s food banks.
“Before they had one year of a cushion; with COVID they now have two to three years of cushion,” she said.
Where are food banks parking their money?
Before the pandemic, in 2019, food banks kept most of their reserves in cash or ultra-safe guaranteed income certificates.
As balances swelled, they diversified their financial holdings to riskier but potentially more remunerative assets. The 12 largest food banks had at least $30 million in equity investments last year.
Higher-yield investments have allowed food banks to increase their earnings through interest payments and dividends, but that’s come with risk. 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 made that good and the organization is now ahead on its investments by about 1.5 per cent over two years.
He said there’s a careful balance to be struck.
“Charities have to be incredibly careful around stewardship,” he said. “You can’t just put it underneath a mattress, and at the same time you can’t just expose those donations to a potential capital loss.”
Hetherington said holding about a quarter of Daily Bread’s portfolio in equity is “minimal” and “very conservative.”
“Yes, we probably could have taken additional risk for potential additional gain, but we chose not to do that,” he said.
Other CEOs pointed to investment policies and advisers that help them limit risk. Jennery said the aim is finding “prudent” investments, not maxing out dividends.
Bahen said charities need to ensure their nest egg keeps pace with inflation without throwing money away on hyper-risky assets.
The most important point is being clear with donors about where their money is going. On that point, she said, most food banks get top marks for transparency.
Long said that’s one of the selling points for his organization, along with the good they did during the pandemic.
“I think the attention on food security across this country has never been greater and I think food banks have become front and centre for the public when they’re considering donations,” he said.
“Our donors, they like the transparency, they like what they see with what we’re actually doing and how we’re using their money.”