In Charity We Trust? How allegations of misspending against the Canadian Cancer Society serve as a wake-up call for the North American non-profit sector.

In Charity We Trust?

How allegations of misspending against the Canadian Cancer Society

serve as a wake-up call for the North American non-profit sector

Part I

The Three and a Half Minutes That Tripped the Alarm

The Preamble

• The Canadian Cancer Society (CCS) changes its funding formula for cancer research precluding scientists like Dr. Brian Lichty from applying for a renewal of core funding.

• Lichty believes CCS spends too much on the cost of fundraising, and misleads people into thinking that more of their donations go toward research.

• He pitches the story to media to upset donors in the hopes of urging CCS to cancel the changes.

The Marketplace Episode

• http://www.cbc.ca/news/canada/story/2011/07/04/cancer-society-funding.html

The Marketplace Episode

• July 6, 2011: Show suggests that research funds have dropped from 40% to 22% of overall budget while fundraising costs up from 26% to 42%.

• CCS declines on camera interview, but show airs statement from CCS.

• Charity Lawyer Mark Blumberg defends CCS on camera but charity watchdog spokesperson Greg Thomson suggests CCS’ costs are high.

• Final impression: What doesn’t go to fundraising or research is wasted or mismanaged.

CCS’ Response: Step 1

• July 6, 2011: CCS issues news release saying research funds are up 55% over last 10 years.

• CCS suggests money needs to be spent on patient support as the number of new diagnoses is rising.

• CCS admits fundraising costs have risen – partly due to lotteries that give it an extra $36M/year.

• No senior official is quoted or comments publicly.• CCS sends several tweets to repeat key

messages.

CCS’ Response: Step 2

• July 7, 2011 – CCS sends a letter to volunteers, staff and board only, acknowledging the media scrutiny but emphasizing that the changes to its research funding formula were made after an extensive consultative process.

• The letter is silent about the fundraising ratio and the other claims made by the show.

• No one from CCS comments publicly.

External Expert: Mark Blumberg

• July 7, 2011: Independent charity lawyer Mark Blumberg shows that CCS increased funds for research and spent great amounts on other legitimate areas, to provide evidence that donations are not wasted.

• He suggests CCS is transparent (as it provides consolidated & individual tax filings), includes lotteries in its ratios & makes its financial statements public (something not required by law).

• Blumberg is the first to recognize that Marketplace crunched the ratios incorrectly & states CCS’ cost of fundraising is 37% (not 42% as claimed by the show).

CCS’ Response: Step 3

• July 8, 2011 – CCS news release & tweets: Notes that research receives more than any other area; says fundraising ratio is actually 39% with lotteries or 32% without; claims costs are up due to expansion/diversification of fundraisers

• Directs people to Blumberg’s site for his analysis

• No senior staff quoted or comments publicly

CCS’ Response: Step 4

• September 1, 2011- Letter to researchers from Board Chair & President: 2 months after the show, CCS corrects the Marketplace ratio (says 38% went to research not 22% as reported on air)

• It notes that 40,000 new cases since 2000 have driven up costs for other mission areas.

• It acknowledges researchers’ “concern” about changes to funding, noting they are not “trivial”.

• No communication to donors or public.

Factors & Dimensions At Play

• Transparency & Trust• Relationships, Image & Reputation• Reporting & Rankings• Leadership and Visibility• The Halo Effect

Failed Opportunities• CCS makes no attempt to speak with Dr. Lichty.• CCS attempts to block media at the event Lichty entered as

part of a publicity stunt.• CCS chooses not to appear on Marketplace.• CCS takes days or months to correct the show’s errors.• CCS does not assign a senior spokesperson to the issue.• It directs people to Blumberg’s blog rather than owning the

issue.• It sends letters to its institutional family but none for

donors/the public.• There is no engagement on Twitter, only generic tweets.

Reaction: Swift, Mixed, Short-Lived

• MoneySense Ranking for CCS: C+ in 2012, B- in 2011, B in 2010

• Charity Intelligence- CCS does not make Top 33 in 2011, but makes the list in 2012.

• CCS’ Ethical Program Trustmark remains in tact• Overall donations up $2M in 2012 over 2011• Story falls out of the news quickly and has a short

and narrow run on social media... (see next slide).

Sysomos:News Mentions (N=60)

Sysomos: Blogs (N=19)

Topsy Pro: Original Tweets N=149

Part II

How Should Charities Demonstrate Transparency and Trust?

What Underpins Trust?

• Muttart Fnd. (2008) 3,900 Canadians surveyed: 77% trust charities. Those who don’t say it’s because they’re not sure how money is spent, they’ve been influenced by a charity scam or scandal, or feel that too much goes to administration.

• Hope Consulting (2011) 5,000 surveyed in U.S.A: Donors want to learn about mission, legitimacy, financials and impact. They prefer comprehensive analysis to seals of approval.

• Ipsos MORI for the Charity Commission in England and Wales (2012): The most important factor relating to trust = the way charities spend people’s money.

Current Measures Used• Donor Bill of Rights (widely adopted): 10 principles to build respect

& trust: being informed about capacity to use donations effectively for their intended purpose, access to financial statements, the ability to ask questions and expect prompt and truthful answers

• Standards Program (Imagine Canada): Peer-reviewed accreditation/ ‘trustmark’ to signal compliance on 72 standards re: board governance, financial accountability and transparency, fundraising, staff management and volunteer involvement

• Fundraising Ratio (CRA): 35% or less fundraising revenue to cost• Admin Ratio: total management/admin expenditures by revenues• Overhead Cost Ratio: admin, fundraising & event costs by revenues

The Problem With the Measures

• Different metrics compare apples to oranges.• Ratio is only as good as the information used

(it often has errors).• They don’t account for the reputation of the

organization/popularity of the cause.• Prospect affluence differs among charities,

forcing some to use costlier fundraisers.• They fail to indicate effectiveness and impact.

Ideas for New Metrics

• Cite the cost of each fundraising program not one bottom line total;

• Present the cost of fundraising as a 3-5 year rolling average instead of one year at a time;

• Create a metric for ROFE or Return on Funds Employed (how many people are helped for every $1 invested);

• Find a way to measure and put a value on the amount of volunteer hours contributed; and

• Invent a method to measure donor equity (the value of donors over the lifetime of their giving to the organization)

Lessons From Public Relations

• Transparency & trust underpin philanthropy. They can’t be simplified to a magic number, just like analysts don’t recommend purchasing stock based on one financial ratio.

• Metrics are important but are not enough. They don’t capture the number of people helped, effect on quality of life, and whether donations are used according to donors’ wishes.

• Benchmarking takes judgement. The public needs information that is accurate, timely, reliable and complete.

• Charities should research, interact and communicate in a way that is authentic, visible, transparent, and ongoing because relationships are what build trust and underpin success.