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 07/04/cancer-society-funding.html 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 doesnt 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 Blumbergs site for his analysis No senior staff quoted or comments publicly

CCS Response: Step 4 September 1, 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 shows errors. CCS does not assign a senior spokesperson to the issue. It directs people to Blumbergs 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 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 dont say its because theyre not sure how money is spent, theyve 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 peoples 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 dont 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 cant be simplified to a magic number, just like analysts dont recommend purchasing stock based on one financial ratio. Metrics are important but are not enough. They dont 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.