Two prominent Canadian charities – Sick Kids Foundation and World Vision Canada – have admitted to using a discredited fundraising technique and are moving swiftly to clean up their act.
Each has been using commission-based techniques frowned upon in the charity world because they can lead to aggressive tactics. When canvassers get paid only if you donate, there's a tendency to embellish or even lie – anything to close the deal and sign up a donor to a monthly giving plan.
Both charities have long told the public and the federal regulator that only flat fees were paid to fundraisers who knocked on doors. The Star investigated and found commissions or "success payments" have been paid for years.
Sick Kids and World Vision now say they were duped by a fundraising company that promised it would never pay commissions.
Here's how it has been working:
A canvasser knocks on your door, tells you about the charity and its need for monthly donors. At Sick Kids they require money to support the world-class children's hospital; at World Vision you are asked to support a child in a developing nation.
If you agree to sign up, the canvasser takes a void cheque or a credit card number and your monthly promise to donate $10, $20, $30 or more in Sick Kids' case, or a $35 monthly sponsorship in World Vision's case.
What you don't know is that the canvasser and his company get a commission of $180 or more to sign you up. Depending on the size of your donation, it could be six months to a year before your donation starts helping children.
"We do not want (commission fundraising) happening any more," said Dirk Booy, executive vice-president of World Vision.
Sick Kids Foundation President Michael O'Mahoney said this type of fundraising "breaks the trust you want to build with the donor."
World Vision ended its relationship with the fundraising company when the Star revealed its findings to senior officials at the Christian relief charity earlier this year. Sick Kids, told two weeks ago, immediately suspended its door-to-door fundraising and has called in its external auditor.
Both charities were using a large, British-based international company called Fundraising Initiatives Inc., which has a client list (past and present) of about 50 Canadian charities. It's not known how many are also paying commissions.
Top executives at Sick Kids and World Vision are blaming FII, saying the contract signed with the fundraiser states that doorknockers are only to be paid either a flat fee for each "presentation" at a home (in Sick Kids' case), or either hourly wages or per presentation (World Vision).
The Star found out that after FII signs its contract with a charity, it then hires subcontractors to knock on doors and pays them only for a successful donor sign-up. A source with intimate knowledge of the FII-subcontractor set-up confirmed this.
FII's training manual (which covers all charities for which it solicits funds) indicates that at least some charities it works for have been directly paying commissions. The manual reminds doorknockers that "a one-time fee is paid to Fundraising Initiatives Inc. for each new donor acquired."
Told of what the Star has learned, both charities said they must be more careful in the future.
"We have to dig deeper," said O'Mahoney.
FII's Canadian boss Jamieson Jackson declined to be interviewed by the Star.
In response to written questions, he said only that he joined the company on June 11, reviewed the practices of the firm and (as of a week ago, when he wrote the statement) "our present business model does not provide either staff or subcontractors with commissions or success payments."
World Vision and Sick Kids Foundation are among the largest charities in Canada. Both do ample good work and make important contributions to society, though both are now grappling with a serious issue involving their fundraising practices.
According to their most recent financial statements, World Vision Canada has annual fundraising revenue of about $303 million. Sick Kids Foundation, the fundraising arm of the world-renowned children's hospital, had 2006 fundraising revenue of $71 million, according to its statement filed with the federal charities directorate. It is projecting $100 million in annual revenues by next year.
Charities in Canada raise money by using volunteers, their own paid staff or third-party fundraising companies. While volunteer fundraising is the least costly, it's sometimes hard to get volunteers. So charities, particularly big ones, often turn to a third-party company to knock on doors, stop people in the street, telemarket or run events.
The public is very concerned about how that money is raised, a national philanthropy study has shown. The Star's ongoing charity series has prompted more than 1,000 requests from the public to check out charities' fundraising practices. World Vision and Sick Kids were in the top 15 on the Star's list of charities people most often want the Star to check out.
There's no law across Canada governing charitable fundraising, although some provinces (not including Ontario) have set up fundraising regulations for charities.
Imagine Canada, a group considered the voice of charity in this country, is dead set against commission fundraising, preferring that canvassers be paid an hourly wage or for each presentation.
Sick Kids has signed Imagine Canada's ethical fundraising code, which bans commission fundraising. World Vision agrees with Imagine Canada's anti-commission fundraising stand but has not yet signed the code. The Association of Fundraising Professionals also has a code against commission fundraising. Sick Kids and World Vision agree with this code, and FII is a member of the fundraising association.
In their annual filings to the Charities Directorate, Sick Kids Foundation and World Vision are asked if they use incentive-, bonus- or commission-style fundraising. Both routinely answer "no" on the forms, which are posted on the federal government's website.
The Star found that this type of commission-based fundraising is quite common with monthly donation plans, a style of donating that is gaining popularity with charities. For example, in the past five years, World Vision's fundraisers have knocked on 5 million doors in Canada seeking sponsors ($35 monthly).
Sick Kids is expanding its monthly donor program. One script used by a Sick Kids/FII subcontractor reads:
"What your neighbours have decided to do is set aside something small ... at the absolute most a loonie a day to give these kids the gift of life ... My job today is simply to get everyone set up and involved so that next month when the program actually starts you'll be in a position to join hands with the rest of your neighbours and start helping out."
Sick Kids Foundation CEO O'Mahoney said monthly donations make a large gift more manageable for donors, and the charity follows up with news and information about donations in action. It may later ask donors to increase the monthly amount.
"The idea is to keep the experience close and rewarding," he said during an interview in the Sick Kids cafeteria (the charity's public relations official would not allow the Star into the foundation offices at the hospital).
Acquiring monthly donors is expensive work up front that charities hope will pay off as each year goes by. For example, in 2005 new monthly donors brought in to Sick Kids earned the charity $4 million. But the cost of acquiring those doors was $3.5 million, leaving the charity just over $500,000 in actual contributions. What Sick Kids is banking on is that these donors will stay on, because the charity will keep all of the money they donate the next year.
World Vision's Booy says its donors, who are supporting a child and a community overseas, typically donate for an average of seven years. The charity currently has 414,121 children sponsored by Canadians.
"World Vision is committed to honouring our donors' trust in us and to being good stewards of their gifts," Booy said.
If the fundraisers they use break that trust, "we will not continue those activities."
Sick Kids Foundation could not tell the Star the average time its donors stay in the program, but it noted it currently has 56,800 monthly donors who contribute a total of $13.5 million annually.
FII's training manual sets out the need for donors to be committed to the monthly program.
"The reason we need long-term supporters is because on average, the charity needs at least 11 months of donations just to break even on the costs of acquiring a donor," the FII manual reads.
Neither World Vision nor the Sick Kids Foundation would reveal their contracts, citing confidentiality agreements.
World Vision decided not to renew its contract with FII and is using another company it is paying on either a per-visit or per-hour basis.
"We are always looking for the best and cheapest way to engage Canadians," said Booy.
Sick Kids has suspended its door-to-door fundraising while it continues to look into the allegations raised by the Star. O'Mahoney said this does not affect its other fundraising company, Public Outreach (it has the contract for street fundraising in Toronto), which has stated that it pays its fundraisers by the hour.
The Star's ongoing investigation into charity in Canada began with an analysis of charities' tax returns by the Star's Andrew Bailey. With 82,000 groups vying for donors, the Star is looking at the best and worst charities, lax federal regulations; and the way charities raise and spend money.