CEO SleepOut: questions
NO TRANSPARENCY: PROFITABILITY ALMOST RHYMES WITH PHILANTHROPY
It’s not clear who decides on allocating funds to charity, how decision-making works and if it is material that only one trustee remains.
The CEO SleepOut Initiative stormed SA’s philanthropy industry in 2015 and appears to have raised over R50 million in three years for various charities. However, a few cracks have appeared in its public edifice and questions regarding financial transparency and how much money reached the beneficiaries have emerged.
We make no allegations of financial impropriety. The information here comes from interviews with key stakeholders and former employees, most of whom didn’t speak on record.
Australian concept, American business model
The CEO SleepOut Initiative started a few years ago when Alison Gregg brought the brainchild of Australian philanthropist Bernard Fehon to SA. It aimed to get C-suite execs to spend a winter night on a pavement to reflect on those less fortunate and raise funds for charity.
Gregg married this noble concept with the for-profit business model mooted by philanthropist Dan Pallotta, seen as a US for-profit philanthropy pioneer.
The first CEO SleepOut was in 2015, with Girls and Boys Town (GBT) as the sole beneficiary. It was a success: 246 top CEOs camped on the JSE’s pavement, raising R26 million for GBT.
In 2016, 167 CEOs slept on Nelson Mandela Bridge, raising R20 million for ASHA Trust, Columba Leadership and the Steve Biko Foundation.
At August 2017’s CEO SleepOut, at Constitution Hill, about 57 female CEOs raised roughly R4.8 million for the Door of Hope (numbers not audited or confirmed).
These three events are said to have raised over R50 million for various charities.
Cracks
But shortly after the 2015 event a few hairline cracks appeared. GBT severed ties with the initiative, despite an initial three-year understanding. The break-up was less than amicable, with Gregg later taking GBT to court in 2017 for copyright infringement.
The relationship with media partner Primedia also ended after the first event.
Sun International terminated its sponsorship following the 2016 event, despite previously committing to a three-year involvement.
Several former employees of Gregg’s businesses that Moneyweb spoke to expressed discontent with their working environment. One staffer, dismissed this year, said staff turnover was close to 100% a year.
CEO SleepOut Trust and The Philanthropic Collection
The CEO SleepOut Trust couldn’t acquire NPO certification prior to the 2015 event, thus couldn’t issue 18A tax certificates to donors. GBT had such certification, and in 2015 was in full control of the financial admininstration.
In 2016 this structure changed. The CEO SleepOut Trust had received NPO certification and the trust took over control, including the responsibility to determine the funds to be paid to beneficiaries afterwards and to actually pay these amounts.
The trust was to be administered by trustees who would consult a working group of other stakeholders. The 2016 event also saw Gregg’s new business, The Philanthropic Collection Proprietary Limited (TPC), becoming involved. This business came about after Gregg converted her previous business, Alison Gregg PR, from a CC to a company. TPC was a for-profit enterprise and owned and managed all the CEO SleepOut events and trademarks. It would charge the CEO SleepOut Trust for professional services rendered, as Alison Gregg PR had done before.
How much of it reached the beneficiaries?
GBT’s 2015 audited statements confirm the initiative raised R26 million, received directly into its bank account. GBT paid R1.3 million (ex VAT) to Gregg after the event, via Alison Gregg PR, as compensation (calculated as 5% of R26 million).
BDO’s still auditing the 2016 event – six-and-a-half months after the trust’s year-end.
But unaudited amounts are disclosed. From the CEO SleepOut website it’s clear R20.2 million was raised in 2016 and R46.2 million for both 2015 and 2016. It states that 75% of the R46.2 million was paid to beneficiaries.
Thus, about R11 million was retained from funds raised in 2016 to cover operational expenses and allow for a profit for TPC. It also suggests a portion of the funds raised was used to cover the 2015 event’s expenses. This excludes the R1.3 million already paid to Gregg the previous year.
Gregg denied this assumption was accurate, without explaining. The CEO SleepOut Trust took full administrative control of the event in 2016, and could therefore decide how much of the raised funds could be used to cover expenses.
The retained R11 million represents about 55% of the R20.2 million raised in that year.
For an international charity-running cost benchmark, the UK’s Giving Evidence and Givewell looked at 265 charities from 2008-2011 and found charities recommended by Givewell spent an average of 11.5% of costs on administration.
However, asked about the R11 million, Gregg said: “At the time (December 2016), we budgeted roughly R9 million in costs (over the 12-month period) and held back a further R3 million for the 2017 (and where relevant 2018) working capital requirements. This was on advice from our accountants. Depending on the reconciliation and final accounts, further payouts will be considered.”
She didn’t divulge how much of the R11 million remains in the trust, how much was paid to TPC and what profits TPC made.
Trustees
The decision-making authority within the trust is also concerning. The CEO SleepOut was registered in 2015 with four trustees: Gregg, Patricia Stewart, Dick Sher and Darren Olivier. The latter three resigned, leaving only Gregg. She didn’t respond to questions on the resignations and whether new trustees have been appointed.
Many questions regarding the initiative are yet to be answered. Hopefully, more information will be available once BDO signs off the CEO SleepOut Trust’s financial statements.