Cancer charity expenses sky high
Little money donated to Leukemia Society goes to research, internal documents reveal
For every dollar raised by Canada’s premier leukemia charity in the past two years, just 11 cents went to researchers working to find a cure for blood cancers.
Much of the $30 million the Leukemia & Lymphoma Society of Canada raised in this time period through walks, runs and bottle drives covered fundraising and administrative costs, a Star investigation has found.
An internal breakdown of the leukemia charity’s finances, obtained by the Star, shows donor money being spent on high office rents (including two separate spaces in Toronto and two in Montreal), on travel budgets and on “professional fees” that include a “design and brand” consulting contract costing more than $18,000 per month.
Most importantly, the documents show high costs associated with raising money, including one event — an obstacle course called the Pineapple Challenge — that in 2013 cost more money than it raised.
The documents were prepared by the charity’s controller and presented to a “shocked” room at a management meeting last summer. They were given to the Star by a person who noted that volunteers and donors expect money to be spent responsibly and it was becoming increasingly difficult to work within the organization. The documents have been posted online at thestar.com.
The charity downplayed the files the Star obtained as “working documents” and said the numbers included other expenses — “administrative” and “mission” costs — that should not have been part of the tally and had the effect of making fundraising costs seem higher.
In written responses to the Star’s questions, the charity said it does “invaluable work” across the country and regularly benchmarks its performance “to ensure we are using precious donations effectively.” The charity directed the Star to its publicly filed financial statements, which say the charity devotes more than 64 per cent of donor dollars to research and other good works that include education programs and patient support.
Several insiders interviewed by the Star raised concerns about how the charity uses donor dollars. Some requested anonymity because they were concerned that speaking out would affect their job security. At least four executives have left in recent years over frustrations that the charity was betraying its central mission.
Mary Ann Sanderson, who was executive director for the leukemia charity’s Prairie region for six years before resigning in 2012, had serious concerns. “There became a lack of financial fiduciary responsibility,” said Sanderson. She also saw a culture shift within the charity during her last few years, with more and more decisions being made out of the U.S. office. There were a series of abrupt firings and “hand-picked, inexperienced staff” were promoted to positions “beyond their abilities,” she said.
The charity, formerly the Leukemia Research Fund of Canada, became affiliated with the U.S. Leukemia & Lymphoma Society in 2004. The Canadian charity has about 70 employees in six regional offices and two national offices. The U.S. charity has 56 chapters and raises $300 million per year.
The Star, which has a long history of reporting on charity accountability, found serious issues with the Canadian society. Chief among them was the relatively few Canadian donor dollars devoted to research, and the question of whether the charity was counting fundraising expenses as part of “public education programs.” The Star researched the charity for three months.
The society boasts that $6 million is donated annually to Canadian researchers. The Star found this was misleading because roughly $4 million of that money comes from the U.S. charity, from money raised by Americans.
The Canadian charity did give $1.7 million in both 2012 and 2013 to research, about 11 per cent of the $15 million it took in each year. That money, though, is the same amount gifted to the charity annually by Beer Store employees who raise money largely through their annual “Returns for Leukemia” bottle drive. The drive encourages people to bring in their empty beer bottles to stores across Ontario and donate the proceeds. Insiders suggested it would be more effective for the Beer Store to make its donation directly to researchers.
The charity’s management, including its new president, Shelagh Tippet-Fagyas, refused to be interviewed in person by the Star, despite several requests, but did respond via email to questions. The responses are also posted online.
Tippet-Fagyas, who started with the charity in March, said some of the Star’s questions indicated “confusion” about the charity’s mission, which also includes “public education programs” and patient support.
The charity claims $4.1 million was spent on education and $2.8 million on patient support in 2013.
She said the charity is “proud of the millions of program dollars we spend annually educating Canadians — including health-care professionals — about the challenges of these daunting diseases and the resources that we provide to them for free.
“We are also extremely proud of the important work our staff and volunteers do to support the patients and their families who are facing the diagnosis of a blood cancer, to help them survive and, hopefully, be cured,” she wrote.
The Star has found that the charity is not transparent about its claims that it spends nearly $7 million annually on education programs and patient support.
Insiders called the numbers “creative accounting.” They pointed out: Many of the roughly 70 employees appear to be engaged in fundraising, not public education. In one internal document, the charity includes $2.3 million in salaries and benefits — about half its total salaries — in the education category.
Many of the educational resources, such as information sheets about various blood cancers, originate in the United States. This is backed up by several website links the charity provides that direct Canadian users to the U.S. site for information.
Direct mail campaigns, used to fundraise, which do include pamphlets about the charity, are included in the education category. The same document mentioned above includes more than $700,000 spent on “postage and shipping” and “professional fees,” placed in the education category.
The charity states that $2.8 million is spent on patient support, yet this work is carried out by six patient outreach staff who in total make about $400,000 per year providing assistance to people affected by blood cancers. For instance, they connect patients with local resources and help to run 15 support groups across the country. The internal document, however, notes $1.7 million in salaries devoted to patient support.
The Star asked the leukemia charity on two occasions what value donors are receiving from the education and patient support categories.
Among the examples provided by the charity was information about 200 parents and educators who benefited from a program that helped support children with leukemia transition back to school in 2013. The charity also said it participates in about 50 health fairs each year.
“The value the (charity) provides is in the hope, comfort and care we are able to give blood cancer patients and their families,” the charity said, noting that other staff assist in this area as well. People connected to the charity over the past few years criticized the quality of patient support services it provided. When David Swan started with the leukemia charity in 2010 as executive director for the British Columbia/Yukon region, he thought the organization’s strength lay in its patient services. “As I was leaving, these services were being eroded, with social workers being replaced by untrained community program co-ordinators. It was my belief that services would suffer as a result,” said Swan, who also resigned in 2012. The charity said patient services have not been affected. The internal documents show very little money is available for charitable works after fundraising and other expenses. For example, an internal document labelled “Cost of raising money” states the price of the charity’s several fundraising events in 2013, revealing an average cost of 72 cents per dollar raised. The documents reveal that Team in Training, a marathon event, cost 85 cents for every dollar raised; Light the Night, a nighttime walk where participants carry lanterns, 62 cents; School and Youth, a fundraising program in the schools, 82 cents; and the Pineapple Challenge, an obstacle course event, lost money. The Pineapple Challenge’s fundraising cost was $1.22 for every dollar raised. The Canada Revenue Agency recommends a limit of 35 per cent of donor dollars spent on fundraising — a guideline the Leukemia & Lymphoma Society of Canada says it adheres to, according to its public documents. By comparison, the Terry Fox Foundation, which has an excellent reputation among charity experts, spends just 15 per cent of the roughly $25 million raised annually on fundraising. The Terry Fox Foundation has half the staff of the leukemia charity. The leukemia society told the Star its “Cost of raising money” document was “inaccurately named” and included some administrative costs that were wrongly included. The charity said some of its fundraising events have a “natural tie-in” to education or patient support, and those numbers were included as well. For example, at each of the 11 Light the Night walks across the country each year, a remembrance ceremony for the bereaved is held and there is special recognition for survivors, the charity said. Insiders also raised concerns about the more than $2 million the documents say was spent on “professional fees” in 2013. The Star has obtained a confidential “Design and Brand Consulting Services Agreement” contract between the charity and a Miltonbased company called Spin Design Solutions. The contract states that Spin Design is to be paid more than $18,000 per month to dedicate up to 245 hours of work to the charity. Spin Design declined to comment, directing queries to the leukemia society. The Star asked the charity whether these services could be supplied in house at a cheaper rate, particularly considering that much of the charity’s branding material originates in the U.S. In her written letter, president Tippet-Fagyas said the Star’s “characterization of our relationship with our outsourced marketing and design partners is unfair to them and to us.” The charity refused to say what services the company provided, citing confidentiality, but Tippet-Fagyas said the charity could not replicate the quality of the communication and marketing material as well as the professionalism that the company provided by doing the work internally. The charity said that “professional fees” include services such as translation, online donation processing, website maintenance and accounting. Insiders also said that spending at the leukemia charity was more indicative of a “corporate” mentality than of a charity counting donor pennies. Rent costs for seven regional offices and two national offices (in both Toronto and Montreal, there are two offices, one national and another regional) amounted to more than $700,000 in 2013. The lease at the Toronto regional office on University Ave. cost $13,000 per month for 11 employees, according to the documents. The charity told the Star it closed its Ottawa office this year and plans to combine its regional and national offices in Toronto, resulting in “cost savings.” The internal documents also break down travel and meeting costs, recording $620,000 in this category in 2013.
Swan, the former executive director of the B.C./Yukon region, said he flew across the country at least monthly for corporate meetings and trainings. “This is a model that I was unused to,” he said.
“The vast travel interrupted regional service delivery and reduced the level of fundraising for the mission,” said Sanderson, the former Prairies executive director.
Insiders spoke of trips to scout events in Florida or New Orleans that were not relevant to work being done in Canada; a request to send staff and volunteers to New York for a four-hour meeting on how to train pregnant women participating in a marathon; and a yearly conference in Washington or Orlando where volunteers and staff are put up in hotels and provided meals. The conference, said one source, was geared largely to the U.S. chapters, with talk of “marching on Capitol Hill.” Sources also mentioned dinners where alcohol was expensed.
The charity said the document outlining travel and meeting costs contained “preliminary numbers” and also included travel costs for patient support. It added that a review of these costs in the first quarter of this year resulted in more than $100,000 in savings. Alcohol, the charity said, can no longer be expensed.
The chair of the charity’s board of directors, Gilles Legault, a lawyer for CN Rail, told the Star the executive committee of the board had decided against an interview.
Reached earlier by phone, the board’s treasurer and vice-chair, Rita Middleton, a financial and management consultant at Western Tidal Holdings Ltd., said she has seen the charity’s budget and felt comfortable with it. “The governance at the (charity) is quite high,” she said.
The union that represents Beer Store employees is the United Food and Commercial Workers Union. In addition to the $1.7 million raised on behalf of the charity by Beer Store employees, the union raised an additional $800,000 for the leukemia charity in 2013, from events such as charity golf tournaments and bake sales.
The union, one of the largest in the country, has been affiliated with the leukemia charity and its predecessor for nearly 30 years and has raised $28 million for it, new union president Paul Meinema told the Star in a recent interview.
Meinema said he was “not interested” in looking at any of the information collected by the Star and said he would get his facts from the charity’s board.
Meinema said he was “comfortable with the difference that our money that we contribute to this organization has made in lives, in real lives, in real differences and in cure rates.” He later referred to statistics that show how leukemia treatments and cure rates have improved over the past several decades. With files from Allan Woods Jayme Poisson can be reached at 416-814-2725 or jpoisson@thestar.ca.