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In Charity We Trust?

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.

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In Charity We Trust?

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  1. 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

  2. Part I The Three and a Half Minutes That Tripped the Alarm

  3. 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.

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

  5. 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.

  6. 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.

  7. 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.

  8. 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).

  9. 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

  10. 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.

  11. Factors & Dimensions At Play • Transparency & Trust • Relationships, Image & Reputation • Reporting & Rankings • Leadership and Visibility • The Halo Effect

  12. 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.

  13. 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).

  14. Sysomos:News Mentions (N=60)

  15. Sysomos: Blogs (N=19)

  16. Topsy Pro: Original Tweets N=149

  17. Part II How Should Charities Demonstrate Transparency and Trust?

  18. 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.

  19. 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

  20. 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.

  21. 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)

  22. 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.

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