Teaching elephants to dance

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

Kate Bahen, July 11, 2018

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, 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.[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 Charity Intelligence’s report 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 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.

Link – more details on how costs were cut 

Setting the record straight

News headlines in 2011 unfairly criticized Canadian Cancer Society for spending more on fundraising than on cancer research.[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”.[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:

Canadian Cancer Society - rating and review updated July 2018


Mega Cancer Charity Merger: Canadian Breast Cancer Foundation to merge with Canadian Cancer Society, October 28, 2016

Link – details on how costs were cut

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Sources: 

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

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 

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

 

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