Teaching an elephant to dance

Canadian Cancer Society cuts $67 million in costs following merger with Canadian Breast Cancer Foundation.

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. Charity Intelligence was sceptical. 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, 2018 Canadian Cancer Society’s new management reported its results. It had axed administrative costs by $22.9 million, far more than its $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.1

For more details on the cost reductions.

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 Charity Intelligence’s star rating on Canadian Cancer Society. 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 13%. 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.

 

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”.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 sceptics who doubt this will happen, CCS’s management may just prove us wrong, again.

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This report focuses on financial overhead costs not social results or impact. The news is about the cuts in overhead costs at Canadian Cancer Society with the release of its financial statements. Canadian Cancer Society expects to release its all-important operating results in October 2018. From CCS’s management statements, Charity Intelligence does not expect program results to be materially affected by cuts. We will see.

Figures for Canadian Cancer Society, Cancer Research Society and Terry Fox Foundation are already released. Charities with a March year end (Princess Margaret Cancer Foundation, BC Cancer Foundation, Alberta Cancer Foundation) are based on F2017 figures.

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Read more Charity Intelligence reports on Canadian Cancer Society:

Donor report on Canadian Cancer Society, updated July 4, 2018

Setting the record straight: all the facts on fundraising relative to research grants, updated July 10, 2018

Mega cancer charity merger: Canadian Breast Cancer Foundation to merge with Canadian Cancer Society, October 28, 2016

Cancer in Canada, indepth report looking at cancer, identifying 4 underfunded cancers that have the highest toll on Canada: colon, lung, pancreatic, and stomach cancer, April 2011

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To see reports on other Canadian cancer charities

About Charity Intelligence: Charity Intelligence’s mission is to help Canadian donors be informed and give intelligently. We do this through objective and independent research on Canadian charities. Our research is entirely funded by donors. 

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Sources:

1. Sheryl Ubelacker, “Canadian Cancer Society turns around finances after cutting excesses post-merger”, Canadian Press, July 4, 2018 

2. Jason Kirby, “Buy, sell, donate: A new breed of analysts is using investing techniques to better scrutinize the booming charity business”, Macleans Business, July 28, 2011

and Erica Johnson, “Cancer Society spends more on fundraising than research”, CBC News, July 6, 2011 

3.Sheryl Ubelacker, Canadian Cancer Society turns around finances after cutting excesses post-merger”, Canadian Press, July 4, 2018 

 

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