Category: uncategorized

text-align: right; Kate Bahen
David Common asked today why I rant on about financial transparency and audited statements. It is food for thought. My colleagues tease me about this obsession. Who takes the time to read audited financial statements? And does it really matter? With gaps between headlines and facts, audited financial statements matter.
Audited financial statements are the fine print. Financial statements show a charity’s “ingredients”. Like the current fuss over “ginger” “ale”, while the label says one thing, the list of ingredients shows how much ginger is in the can.
Here’s a good example. Donors were likely reassured by: “89.5 per cent of the $325 million Canadians and governments donated has been spent, says Red Cross.” 

Canadian Red Cross’s audited financial statement report that $254 million was spent – 78% of total funds received. The difference is in the fine print. Canadian Red Cross reported it had spent and committed $291 million. Charity Intelligence highlighted the.
$291 million vs. $254 million. Is 12% material? Does $37 million matter? That’s a decision a donor needs to personally assess. It matters to me. It likely matters to the people and charities in Fort McMurray. This was why Canadians gave in the first place. And $37 million is a lot of money, especially in the charity sector.
Maybe it also matters to Canadian Red Cross and that is why it headlined with the bigger number. Donors want fast disaster responses. Those affected by disasters also want fast support. Speed matters in disaster responses.
“Another $50 million went to community groups such as shelters and food banks”, CBC reports.  Wrong. In June 2016 Canadian Red Cross promised to share $50 million with Fort McMurray’s local charities and organizations. The audited statements show that in Year 1 Canadian Red Cross shared $8.2 million and, in Year 2, $12.2 million. So far, $20.4 million in support for community groups – only 40% of the promised $50 million.
As to shelters and food banks getting support? Wood Buffalo Food Bank has received three significant grants of more than $1.4 million. In contrast, Fort McMurray’s shelters have received chump change. , not the dollar amounts as United Ways report. 
This is sad. Many of Fort Mac’s local charities are still hurting and struggling after the fire. These over the last two years, not three years from now. 
CBC goes on to report “Our team is still very busy in Fort McMurray,” McManus said. “We are meeting one on one with families and individuals in the community. And what we are seeing is that people’s needs are emerging over time.
Total spending on helping individuals and families was $12.2 million over the entire year ending March 2018. From the donor report released earlier, Charity Intelligence reported $30 million was spent and committed to help individuals and families. Again, it turns out that most of this $30 million is commitments for future periods rather than actual cash spent in the last year.
Only spending $12.2 million over Year 2 is unsettling. At the start of Year 2, Dana Woodworth, team leader of Wood Buffalo Recovery Committee said, “We are in for the toughest period of the recovery so far.” Year 2 should have been a year of larger spending.
Canadian Red Cross is seeing and monitoring needs. It has a hard decision. Does it spend now in Year 3 to meet needs, or hold back to meet future emerging needs? Evidence-based research funded by the Gates Foundation shows that meeting needs within the first two years is more effective in getting people back on their feet after a disaster. Left neglected, needs compound into other issues like mental health, domestic abuse, and foreclosure. Does a dollar spent in the first two years have greater impact than a dollar spent in Year 5? Most likely.
Canadian Red Cross has $71.4 million in funds remaining. It has signed contracts and commitments to spend $37.9 million over Year 3 through Year 5. It holds $33.5 million in “uncommitted” funds.
Canadian Red Cross’ audited financial statements show it plans to spend $53.7 million in Year 3. For comparison, it budgeted to spend $55.0 million in Year 2. It missed this estimate by a wide mark, only actually spending $31.3 million. Let’s hope Year 3 gets back on track. 
Journalists are not at fault. Journalists can only go by what the charity reports. The audited financial statements are not posted until months after the disaster anniversary, and without fanfare. It takes time and expertise to crunch the numbers. Charity Intelligence’s analysts focus on financials and charity results. We troll websites. It’s all we do.
If donor reports and the audited financial statements both showed the same numbers, one wouldn’t need to read audited financial statements. Yet when donor reports lack full disclosure or only highlight stories and snippets, the audited financial statements are essential to see the full picture.
Until we get to that glorious age of “reconciliation” with full and frank disclosure, I’ll keep campaigning for financial transparency and audited financial statements. Sorry, David.
 
Sources:
David Thurton, “, CBC Edmonton, May 2, 2018 
Canadian Red Cross – March 2018 
Canadian Red Cross, 2016 Alberta Fires
Food bank again, not shelters –
Dana Woodworth’s comments reported by Cullen Bird, , Fort McMurray Today, April 5, 2017 
Canadian Red Cross http://www.redcross.ca/crc/documents/About%20us/About-the-Canadian-Red-Cross/CRC-audited-statement-signed-2018-03-31-EN.pdf 2018 audited financial statements, Financial Note 8: Deferred contributions for Alberta fires fund. In accounting, “current” is distinct from “long-term”. Current refers to the next 12 months from the balance sheet date. CRC’s balance sheet date is March 31.
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text-align: right; Updated October 23, 2018
Advice from the Coach’s Corner – Keep your stick on the ice and your wallet in your pocket when it comes to giving to professional sports foundations.
Be a fan, cheer your favourite team. Yet be careful not to confuse supporting your team with donating to your team. The way professional sports foundations raise money, giving to them should be thought of primarily as entertainment, not intelligent giving.





 
Since the Calgary Flames launched a charity foundation to complement its hockey team in 1983, other professional sports teams have jumped on the philanthropy bandwagon – the Vancouver Canucks in 1986, the Blue Jays in 1992, the Winnipeg Jets in 1996, the Ottawa Senators in 1998, Montreal Canadiens in 2000, and the Edmonton Oilers in 2001. Newly amalgamated in 2009, MLSE Foundation represents the Maple Leafs, Raptors, and Toronto Football Club (soccer).
Having a charity attached to a professional sports team offers a way to build the team’s brand in the community. Athletes give their time to do community service, and sometimes allocate a portion of their signing bonus to the team’s charity. With the donations, corporate sponsorships and money raised from 50/50 draws, the pro team charities fund a variety of charities. Grants go mostly towards other kid and sport-focused charities.
In 2017, Canadians gave $49.7 million to the eight charity foundations associated with professional sports teams. Having three teams under one charity foundation makes Toronto’s Maple Leaf Sports Foundation the league leader by size, with revenues in 2017 at $10.3 million.
Baseball tops all the hockey team charity foundations with Jays Care Foundation raising $9.4 million in 2017. Being a national team with 81 home games in a large stadium with division-leading average attendance of 39,555 (twice the average attendance of hockey, twice the number of home games) has material fundraising advantages.
The hockey teams’ charities raise between $4 million and $7 million, making them among the largest 3% of donor-supported charities in Canada.
 
 
 
Popular 50/50 draws held during games bring in 32% of revenue across all teams.  With the introduction of mobile apps betting, revenues from 50/50 draws have increased 32% to $15.9 million since 2015.
For Calgary Flames and Edmonton Oilers charity foundations, net profits from 50/50 draws are the largest source of funding. At these charities, 50/50 draw profits account for 65% and 49% of revenues, respectively. The rest of the revenues coming into these team foundations are public donations and sponsorships. Maple Leaf Sports Foundation and Montreal Canadiens Children’s Foundation get a higher proportion from public donations and corporate sponsorships, 82% and 79% of revenues, respectively. 

 
This lack of financial transparency may not be entirely the foundations’ fault. Inside sources whisper that NHL or MLB policy may restrict these Canadian registered charities from publicly disclosing audited statements.
If so, how ironic. The National Hockey League itself is an American tax-exempt not-for-profit 501 (c)(6) organization. #_edn1″ name=”_ednref1 ^[i] It files its reports with the IRS. The NHL is the last professional sports association to cling to its not-for-profit status, surely one of the most baffling corporate tax breaks in the not-for-profit sector. In 2015, the NFL dropped its tax-exempt status that it had enjoyed since 1942 #_edn2″ name=”_ednref2 ^[ii]. Major League Baseball opted to forgo its non-profit status in 2007. The NBA and NASCAR both file as for-profit companies.
 
Why does financial transparency matter? There is no public expectation for private corporations to disclose financial statements. Team owners do not have an obligation to report. However, registered charities that receive millions in donations and significant tax concessions in exchange for providing a public benefit, arguably have a different obligation to be transparent. Also, how charities spend money is the number one question asked by donors; 98% of Canadians expect charities to be financially transparent. #_edn3″ name=”_ednref3 ^[iii]
Poor financial transparency is particularly curious at Edmonton Oilers Foundation and Calgary Flames Foundation. Financial transparency is a best practice, widespread among many other Western Canadian charities, particularly in Alberta.
Financial transparency is a core value in Charity Intelligence’s objective rating. If these team foundations simply posted audited financial statements for the two most recent years, overall star ratings would likely increase one star.



Charity Intelligence researches Canadian charities for donors to be informed and give intelligently. Charity Intelligence’s website posts free reports on 760 Canadian charities, as well as in-depth primers on philanthropic sectors like Canada’s environment, cancer, and homelessness. Today over 350,000 Canadians use Charity Intelligence’s website as a go-to source for information on Canadian charities reading over 1.6 million charity reports. Through rigorous and independent research, Charity Intelligence aims to assist Canada’s dynamic charitable sector in being more transparent, accountable and focused on results.
Be Have
Sources:
Robert Cribb, ” https://www.thestar.com/news/investigations/2010/04/24/star_investigation_the_high_cost_of_sports_charities.html Toronto Star investigation: The high cost of sports charities”, Toronto Star, April 24, 2010 
#_ednref1″ name=”_edn1 ^[i] Courtney Cherico, “ https://trust.guidestar.org/four-famous-organizations-you-might-not-know-are-nonprofits 4 Famous Organization You Might Not Know Are Nonprofits”, Guidestar Blog, October 13, 2016
#_ednref2″ name=”_edn2 ^[ii] Drew Harwell and Will Hobson, “ https://www.washingtonpost.com/news/business/wp/2015/04/28/the-nfl-is-dropping-its-tax-exempt-status-why-that-ends-up-helping-them-out/?noredirect=on&utm_term=.3b08e4d86418 The NFL is dropping its tax-exempt status” Washington Post, April 28, 2015 
#_ednref3″ name=”_edn3 ^[iii] Muttart Foundation “ https://www.muttart.org/wp-content/uploads/2015/11/3.-Talking-About-Charities-Full-Report-2013.pdf Talking about Charities 2013: Canadian’s Opinions on Charities and Issues Affecting Charities”, 2013
 
 
 
 
 
 
 

Teaching elephants to dance
Canadian Cancer Society cuts $67 million in costs following merger with Canadian Breast Cancer Foundation.
text-align: right; Kate Bahen
In October 2016, Canadian Cancer Society (CCS) and Canadian Breast Cancer Foundation announced a mega-merger. Management set the goal to cut administrative costs by $15 million.   Here were two of Canada’s “lumbering elephants” in the charity sector. Both were large, among Canada’s 100 Major charities. Both had overhead costs far above the reasonable range. For every dollar donated 53 cents and 51 cents went to “the cause”, respectively. Neither had a track record for frugality, efficiency or nimble innovation. Yet on July 4, Canadian Cancer Society’s new management reported its results. It had axed administrative costs by $22.9 million, far more than $15 million goal.
The cost cutting did not stop with administrative costs. Across the board, Canadian Cancer Society trimmed and consolidated, reducing total operating costs by a whopping $67 million. Canadian Cancer Society shed 29% of its costs from its 2016 operations. 
“We really pushed ourselves to look at the organization differently and really re-examine every type of cost”, said Sara Oates, executive vice-president, finance and operations on behalf of CCS’s management team. #_edn1″ name=”_ednref1 [1]
Donors should cheer. Loudly. This is an unprecedented, bold shakeup at one of Canada’s largest charities to be more cost efficient. Other large Canadian charities ought to look around and push themselves as well.
For donors this means that, for every dollar donated, $0.61 goes to the cause in 2018. This is still less than the Canadian average of $0.75, but close to the average of $0.65 at Canada’s large cancer charities, see .
These cuts will have a full year effect in F2019. This will likely improve ratios further, if donations remain at current levels.
That is a big ‘if’. Donations are down. Over the last two years, donations to cancer charities have declined 7% across Canada. In the most recent year, Canadians donated $471 million to Canada’s 26 largest cancer charities compared with $504 million two years ago.  Canadian Cancer Society has been particularly hard hit, with donations declining 15%. On a pro-forma basis, donations fell from $168.1 million in 2016 to $146.4 million in 2018.
Charities comment that donations are down due to donor fatigue. Yes, donors are tired. Tired of waste. Giving is a scarce resource. Giving is static at 1.7% of GDP, a constant level since the 1970s. There is a finite pool of disposable income to support charities. More cost-efficient and productive charities may rejuvenate donor support for Canadian Cancer Society.
 
Setting the record straight
News headlines in 2011 unfairly criticized Canadian Cancer Society for spending more on fundraising than on cancer research. #_edn2″ name=”_ednref2 [2] Yes, this is factually correct, both in 2018 as it was in 2011. In F2018, Canadian Cancer Society spent $52.8 million on fundraising compared to $48.9 million spent on cancer research grants. And yes, Canadian Cancer Society does have huge fundraising costs to raise money for its operations. link to fundraising costs.
However, unlike most large cancer charities, Canadian Cancer Society has two core programs, not just one.  It runs cancer programs for people with cancer and it funds cancer research. Canada’s other large cancer charities fundraise and only grant money to cancer research. Think a United Way model, or a mutual fund. This fundraising/granting/investing work is very different from being on the frontline, working with people with cancer. Few charities provide hands on help to people living with cancer. Canadian Cancer Society is an exception.
In its cancer programs, across Canada, CCS convenes support groups, provides online resources, organizes rides to cancer treatment, operates lodges (Ronald McDonald-type housing for adult cancer patients undergoing treatment), and loans wigs to people with cancer. At every cancer treatment centre across Canada, Canadian Cancer Society volunteers provide refreshments to patients waiting for cancer treatments.
In 2018, in addition to its research grants of $48.9 million, Canadian Cancer Society spent $51.4 million on cancer support programs. Cancer programs, research grants, and advocacy totaled $103.6 million in 2018. When undertaking a fair assessment of fundraising costs, spending on cancer research and cancer programs must also be considered.

 
Getting ahead of the pack
CCS made a tremendous improvement in a very short time. Management says it wants to be, not just inline with other comparable health charities, but “ahead of the pack”. #_edn3″ name=”_ednref3 [3] This will require significant further effort. Average overhead costs are 35% at Canada’s largest cancer charities. Canadian Cancer Society is currently at 39%.
To get to average, Canadian Cancer Society will need to trim fundraising costs by $7-$8 million, assuming donations hold at current levels of $146 million.
Princess Margaret Cancer Foundation and Terry Fox Foundation lead Canada’s large cancer charities with low overhead costs. Their overhead costs are 21% and 24% respectively. To get “ahead of the pack” Canadian Cancer Society will need to get fundraising costs to $31 million. That will require a $21 million cut in fundraising costs.
This can be done. Currently, Canadian Cancer Society spends $52 million on fundraising. This is more than the combined fundraising costs at other large cancer charities. Cancer is a cause near and dear to Canadians. Fundraising should be easy – and cheaper.

To the skeptics who doubt this will happen, CCS’s management may just prove us wrong, again.

Read more Charity Intelligence reports:
https://www.charityintelligence.ca/charity-details/242-canadian-cancer-society  
Sources: 
Sheryl Ubelacker, , Canadian Press, July 4, 2018 
Jason Kirby,, Macleans Business, July 28, 2011 
Erica Johnson,, CBC News, July 6, 2011