Canadian Cancer Society turns around finances after cutting excess fat post-merger

TORONTO — The Canadian Cancer Society says last year’s merger with the Canadian Breast Cancer Foundation has paid healthy dividends, taking the charity from running a substantial deficit to a solid surplus.

The charity was carrying a $24.8-million shortfall on its books prior to the Feb. 1, 2017 merger. 

But the revamped organization, which operates under the Canadian Cancer Society banner, has posted a nearly $8-million surplus as of Jan. 31 for the year after it joined forces with the Breast Cancer Foundation.  

“That is really the result of a tremendous amount of efficiencies and savings that we’ve done through a series of tactics throughout the year, primarily in the area of operating and fundraising costs,” said president and CEO Lynne Hudson, who had previously held that title with the foundation.

To attain those savings, the amalgamated charity moved to a consolidated business model, creating a national board of directors with representatives from each province and centralizing operations like IT, human resources, communications and marketing at head office, instead of having those functions organized separately in multiple regional offices, as was the case pre-merger.

The CCS also targeted redundancies in the combined entity, cutting a quarter of staff — going from about 1,060 to just under 800 — and closing 27 offices.

The reduction has left it with 65 offices across all 10 provinces.

“We did not want to lose that pan-Canadian grassroots and community presence,” Hudson said of the organization’s commitment to provide services and programs in all parts of the country. “We feel that passionately, as cancer patients are coming to us and looking to us for support. It’s where our volunteers work and operate.”

Sara Oates, executive vice-president of finance and operations, said the charity had to take a hard look at itself in order to turn around its financial picture.   

“We really pushed ourselves to look at the organization differently and really re-examine every type of costs,” she said.

Like many others in the philanthropy sector, the CCS found itself contending with dwindling revenues as a result of falling donations, a phenomenon dubbed “donor fatigue” that arose in part from the proliferation of health charities competing for benefactors’ dollars.

“Last year, obviously, we weren’t living within our means,” conceded Oates. “We were running a deficit … We were spending 112 per cent of what we raised last year, and it’s really not sustainable.”

Still, a year after the merger, the CCS was able to bump up the percentage of how much it designated for “mission costs.” The proportion allocated to funding for research,  services and programs for cancer patients and their families and advocacy efforts rose to 58 per cent — up three percentage points from the previous year.

“The 58 per cent represents a total of $103 million,” said Oates, with 47 per cent of that money going to research and 50 per cent to programs and services.

“And that’s an increase we’re really, really proud of.”

Over the years, the society has faced criticism that its administration and fundraising costs were disproportionately bloated, sapping the amount it could earmark for cancer research — among the prime reasons Canadians donate to the 80-year-old charity.

Hudson said the organization has cut the proportion it spends on those costs by 10 percentage points, to about 36 per cent of donations.

“That is a substantive change and was part of what very much drove our cost-cutting efforts this year,” she said.

Fundraising alone takes a huge bite from CCS coffers: in 2016-17, 41 per cent of revenues went to campaigns and events aimed at securing donations, from small amounts given by individuals during the April daffodil drive and Relay for Life pledges to more significant gifts tapped from large corporate benefactors.

Last year, the joint CCS-CBCF whittled those costs down to a third of its spending budget.

“I think that for any organization to make a movement of 41 per cent to 33 per cent in the space of one year is unprecedented, quite frankly,” said Oates. “And I think that kind of movement puts us not just in line with others that are comparable in the health-care sector, but really moves us ahead of the pack.”

Kate Bahen, managing director of Charity Intelligence Canada, agreed, saying she is “thrilled” to see the turnaround in the Cancer Society’s fortunes.

“From a donor’s point of view, these are phenomenal results,” said Bahen, whose organization provides in-depth analyses and ratings of more than 700 Canadian charities on its website.

“Two years ago, for every dollar you donated, 50 cents went to the cause … (Now) every dollar you donate, 61 cents goes to the cause,” she said after crunching the numbers in the CCS’s Jan. 31 financial statement.

“That’s a tremendous improvement in a very short period of time.”

There’s no doubt taking the Canadian Breast Cancer Foundation into the CCS fold paid off: the CBCF contributed about $28 million in fund balances with the merger, while the CIBC-sponsored Run for the Cure — an event started by the foundation — brought in about $17 million last year.   

Hudson said marrying the two charities, which were “quite different” both organizationally and culturally, created a synergy by capitalizing on each of their strengths.

The Breast Cancer Foundation had a big-city presence, while the Cancer Society had community-based operations Canada-wide; CBCF employees were more familiar with  corporate approaches to fundraising and centralized operations, while the CCS was more grassroots, she said.

“Both could learn and leverage the best of both worlds.”

Bahen said the CCS is unique among the many cancer charities in Canada because not only does it fund research, but it also “helps people who have cancer.”

Though previously given an “average” rating by Charity Intelligence because it was considered “massively inefficient” with costs “in the red zone,” seeing this leaner Canadian Cancer Society should change the story for prospective donors, she said.

“I think it’s going to go up in our ratings now.”

— Follow @SherylUbelacker on Twitter.

Sheryl Ubelacker, The Canadian Press