by Daniel Borochoff, AIP President

- published in the August 2007 issue of the Charity Rating Guide & Watchdog Report

Over 40% of people born today will get cancer during their lifetime based on current rates of cancer incidence, according to the government’s National Cancer Institute. Nearly everyone has had a loved one or friend touched by cancer. Americans are very sympathetic with cancer sufferers and generously open their pocketbooks to solicitors raising money for many types of cancer research, prevention education and patient care. It is sad that cancer charities, one of the most serious and popular giving categories, perform so poorly—half of the cancer charities that AIP rates in this Charity Rating Guide receive a D or F grade and only 37% receive an A or B.

Many hundreds of breast cancer organizations have sprung up over the last few decades. With all of the soliciting and cause-oriented marketing being done to cure or assist victims of breast cancer, one might assume that it is the form of cancer that women are most likely to be diagnosed with, yet this is not the case. According to government statistics, more women have non-melanoma skin cancer than breast cancer and more women die of lung and bronchus cancer (68,084 in 2003, the latest figures available) than those that die of breast cancer (41,619 in 2003). Two-thirds as many women died of colorectal cancer as those that died of breast cancer in 2003. Yet based on a search of Guidestar’s database of charity tax forms, 1,326 charities mention being involved with breast cancer and only 56 charities mention work in colon cancer and 11 in rectal cancer. Why are there only 5% as many groups addressing colorectal cancer as breast cancer victims? A likely reason is that colorectal cancer, also called bowel cancer, is not as attractive from a fundraising or marketing perspective as a disease that affects what is considered one of the most beautiful parts of a woman’s body.

Look-a-like charities abound in the cancer area, some with opposite grades. National Breast Cancer Coalition Fund receives an A rating from AIP, yet the similarly named National Cancer Coalition and Coalition Against Breast Cancer receive F’s. In fiscal 2006, the A rated Breast Cancer Research Foundation granted nearly $25 million or 87% of its budget to medical research, whereas the closely named F rated American Breast Cancer Foundation (ABCF) spent nearly 87% of its budget on solicitations that included an educational message and only $357,500 or 2.4% on research grants. According to ABCF’s fiscal 2006 tax form $5,175,000 of the $12,726,000 that this charity pays to professional fundraisers goes to Non Profit Promotions, which is owned by ABCF co-founder Joe Wolf, who is also the son of ABCF’s president and co-founder, Phyllis Wolf. ABCF was created in 1998 and Non Profit Promotions was started a year later. Ms. Wolf told AIP that her son “decided that he wanted to move on and raise funds for us.”

Since potentially anyone could contract cancer it is very easy under current AICPA nonprofit accounting rules for a charity to claim that its solicitations are conducted for public education purposes. Nearly two-thirds of the cancer charities that AIP rates make such a claim in their financial statements. Charities can disguise the true cost of fundraising by throwing into a solicitation an action message such as “stop smoking,” “don’t stay in the sun too long,” or “check your breasts for lumps.” Adding educational messages to solicitations, even if nearly everyone not living under a rock is already familiar with them, allow charities to allocate a portion of the cost of their direct mail and telemarketing solicitation costs to program service expense.

The famous American Cancer Society (ACS), which reaps far more contributions ($848 million in 2005) than any other cancer charity that AIP covers, is only able to get 60% of its budget to program services not related to solicitations and receives a C+ grade from AIP. The $1.6 billion fiscal 2005 budget of the AIP A rated Memorial Sloan-Kettering Cancer Center is nearly twice the size of ACS’s, yet only about $206 million of it comes from public contributions. Unlike ACS, which utilizes contributions to cover 97% of its budget, Sloan-Kettering’s hospital and medical care fees fund over 75% of its budget.

Some of the highest pay available in the nonprofit field is at cancer charities. The cancer category of your Charity Rating Guide has more Top 25 Compensation Packages (see page 19) than any other Guide category. Cancer charity executives hold the first and third spots: Harold Vamus, MD President/ CEO of Sloan-Kettering at $3,016,138 and Donald E. Thomas, COO of ACS at $974,819.

Early this year Dana-Farber Cancer Institute launched a $1 billion fundraising campaign, according to the charity, the largest in its history. Yet this charity, which includes the Jimmy Fund, has not presented its audited financial statements in a form that would allow AIP to issue it a rating. According to Mary Rebecca Mix, Dana-Farber’s Manager of Regulatory Affairs, it has no plans to do so. She told AIP last September that GAAP (generally accepted accounting principals) does not require them to break out their functional expenses in their audit. Other hospitals that AIP rates, such as City of Hope, do include this information in their audits. AIP awarded Dana-Farber a “?” rating for having an incomplete description of its functional expenses in its most recent (fiscal 2005) audited financial statements and its unwillingness to offer additional information.

The Lance Armstrong Foundation (LAF), founded by the champion bicyclist and cancer survivor of the same name, is celebrating its 10-year anniversary this year. Wouldn’t you think a charity that receives massive publicity for having one of the most popular causes and most admired celebrities as the face of the organization would be able to easily raise lots of money? Unfortunately this is not the case. LAF spent as much as $45 to raise each $100, exceeding AIP’s 35% recommended fundraising ceiling by a significant margin. While LAF had difficulty raising contributions efficiently, it did prove to be a savvy merchandise marketer. LAF sold over $24 million in merchandise, including the ubiquitous yellow “LIVESTRONG” wristband, as well as clothing, sports gear and even dog leashes. Yet after spending $10 million in solicitation costs, the group brought in only $22 million in contributions, according to AIP’s analysis of LAF’s 2005 financial statements.

Last April the Georgia Governor’s Office of Consumer Affairs reached a settlement with the Cancer Fund of America (CFA). This AIP F rated charity, which only spends 17% of its budget on program services, was accused of making false and misleading claims in its direct mail solicitations. Georgia alleges that CFA falsely claimed that it provided transportation to cancer patients for chemotherapy treatments and gave medication to patients. The Governor’s Office also alleges that CFA overstated the number of cancer patients that it provided services to and made false statements about its fundraising costs. As part of the settlement, CFA “agreed to eliminate any false or misleading statements from its web site and from future direct mail solicitations.” The charity is required to pay $50,000 to the Georgia Cancer Coalition to be used specifically to benefit cancer patients.

AIP strongly encourages its members to know about the groups that they donate to, particularly when it comes to cancer charities. Just because a charity has the word “cancer,” “leukemia,” or “research” in its name does not mean that it is directing a substantial amount of its money to finding a cure for cancer, alleviating suffering or offering prevention education. One needs to be careful to not allow personal emotions, such as the grief from the loss of a loved one, to keep you from scrutinizing a charity before making a donation. While there are many outstanding cancer charities, there are also many F rated groups that bank on the donating public’s ignorance of how their funds are being spent.