My visit with telemarketer from the Children’s Cancer Recovery Foundation

Children’s Cancer Recovery Foundation (CCRF) is the latest charity to announce the revision of their financial statements.

Chronicle of Philanthropy reported this morning that the organization will revise their 2011 financial statements and 990 for the medicine they received from World Help – Cancer Charity Shrinks Its Revenue.  Mr. Doug Donovan, who wrote the article, indicates there is another donation that CCRF ought to address as well.  You can see CCRF’s announcement at the bottom of this page.

Mr. William Barrett tells of his telemarketing call from CCRF. The call was made by Associated Community Services (ACS). See his blog, New To Seattle, for his experience:  Really? Iffy charity says gift will benefit Seattle hospital. The script for the call he received said a portion of the donation would go to a nearby hospital that he’d not heard of. Some research revealed that hospital actually exists but had changed their name five years earlier.

A bit of research by Mr. Barrett identified the same issues that the Chronicle of Philanthropy has been discussing in their recent articles.

Mr. Barrett mentioned the Chronicle article and CCRF restatement this morning, calling it another shoe dropping in the ongoing issues over valuation. He suggests we may soon have a closet full of shoes – Iffy charity soliciting in Seattle gets more iffy.

Sometime soon I’ll have a series of posts on the accounting concept of joint cost allocation using the CCRF 990 as a case study. Before going into that discussion, it would be helpful to describe my call from ACS

A few months ago I received a telemarketing call for CCRF. The caller identified herself as working for ACS. I didn’t catch her name.

She said that CCRF was raising money to help children with cancer who were in the hospital. Being attentive to the overall issue of telemarketing costs and the attention cancer charities are getting, I started asking questions. She indicated that 15% of my contribution would go to the program providing toys and things to sick children. I said that seemed low and asked where the rest of the funds went. She said the 85% went to pay other bills of the organization.

We went through that info a couple of times to make sure I got the data correctly. Yes, 15% to the children’s program and 85% for other bills of the organization. Tried to get into more detail but she faithfully kept to her script by turning back to how much I would like to donate.

For future reference, the call did not contain even one syllable of discussion about cancer awareness or prevention or treatment. That idea will be relevant when I eventually have time to write a post about joint cost allocation. Hint: I was listening for a call to action and did not hear one.

Many years ago I audited an organization that used a telemarketing company. Part of the audit involved reading a few of the scripts used in calls. Every word and every alternate path of the discussion were spelled out verbatim. I still get calls from that company on behalf of other charities and can recognize the script as a script.

In the call from ACS, it was obvious to me that she was jumping to different screens to get the correct response. All of her statements ended with an effort to return to the main point of getting me to make a commitment. Both ACS and CCRF should be pleased because it seemed to me that the caller followed her script very closely.

I asked for more information on the organization. The conversation ended after just a few minutes.

Like Mr. Barrett, I then did some research.

You can find the following CCRF filings with the North Carolina Secretary of State:

• 2011 990
• 2010 audited financials

I can’t find the 990 for 2010 at the NC site.

Let’s look at the gift program in relation to total costs.

Here is some information from the 2011 990:

• $11,905,351  – total expenses on page 10
• $234,402 – costs of gift program on line 24a of page 10
• $645,512 – program service accomplishment #2 on page 2, described as “gift program: delivering gifts to children hospitalized while undergoing cancer treatment”. That would be the signature program of the organization and the purpose for which my contribution was being solicited.

The $645K includes the costs of the gift program on page 10 plus other allocable costs related to the gift program.

Now some math based on how I would typically think of an NPO’s expenses:

• 1.97% – $234k of gift program costs divided by $11.9M total expenses
• 5.42% – $645k program costs divided by $11.9M total expenses

Not quite 15%.

Perhaps that 15% amount is in relation to the cash giving, since the GIK is raised outside the channel that raises direct support.

Let’s compare to cash contributions. Total contributions are $11,797,406. Of this, $7,250,458 is noncash. Those amounts are from page 9 of the 990.

That leaves $4,546,948 of cash contributions.

So as a percentage of cash contributions, the gift program costs are:

• 5.15% – $234k of gift program costs divided by $4.55M cash contributions
• 14.18% – $645k program costs divided by $4.55M cash contributions

That’s getting close.

Perhaps that cited 15% is in relation to the amounts raised by ACS.

Schedule G on page 30 of the 990 package shows ACS raised $3.19M and retained $1.76M. That means that 44.9% of my contribution would have gone to the organization after costs.

Now let’s go back to the expense detail on page 10.

Let’s take total expenses ($11.9m), back out the GIK ($7.2m) and subtract the fundraisers ($1.56m and $2.4m). That leaves $750,904 of non-GIK/non-fundraiser costs, which would represent the core activities which are funded by cash contributions.

(If you dear reader wish to assert that the $2.4M on line 11g for other fees paid to fundraising organizations is not fundraising, then I could revise the remainder of this analysis which would shrink the percentages dramatically.)

(Of course a cynic would point out that $750K is 6.3% of total expenses, but that isn’t my analysis).

At this point, the gift program expenses of $234K would be 31.2% of the $750K costs (which, again, represent the core programs funded by cash contributions).

So, multiply the 44.9% of my requested donation remaining after the ACS costs by the 31.2% of non-gik/non-fundraiser costs that go to the gift program, means that 14.0% of my check would have gone to the gift program.

That’s pretty close to the 15%.

So overall, that claim of 15% of contributions going to the gift program is reasonably accurate if you follow the path above.

What donors infer the other 85% is used for is up to the donor to infer.

I have spelled out my calculations so you may recalculate my numbers, or critique my methodology, or dismiss my analysis, or revise it for your different assumptions, or extend the analysis in another direction. Take your pick.

Memo to the nonprofit community, especially evangelical R&D organizations – media attention has not waned. See Mr. Donovan’s article linked above and the other articles at the Chronicle of Philanthropy.  I fear time to clean things up is running out.