Wednesday, March 16, 2011

Komen By The Numbers: 2010 And Still No Answers

Stewardship: the conducting, supervising, or managing of something; especially : the careful and responsible management of something entrusted to one's care.

In September 2010, Susan G. Komen for the Cure® ("Komen"), proudly announced they had received a four-star rating from Charity Navigator, a popular charity evaluator whose reports are accessible by the general public.
“Achieving Charity Navigator’s highest rating for fiscal soundness is an incredible achievement for even one year during these economic times,” said Ambassador Nancy G. Brinker, Komen’s founder and CEO. “But to garner this rating four consecutive years is a true testament to the hard work of our entire Susan G. Komen for the Cure family. My gratitude also goes out to our Affiliates, our volunteers and our staff, who have proven once again to be responsible stewards of our contributors’ money as everyone continues to try to fulfill our promise of saving lives and ending breast cancer forever.” 

Essentially, Charity Navigator  evaluates charities based on their "organization efficiency" and their "organizational capacity",  which speaks to how sustainable an organization is. Charity Navigator then uses the results of this evaluation to assign rating stars;  zero stars being the lowest  to four stars being the highest. A four-star or "exceptional" rating means that a charity "exceeds industry standards and outperforms most charities in its Cause".  In the words of Charity Navigator;
"By utilizing our ratings, givers can truly know how a charity's financial health compares with other charities throughout the country. Givers can be confident that in supporting those charities rated highly by Charity Navigator, they will be supporting organizations that are fiscally responsible and financially healthy."
This all sounds very nice, but what does all this really mean?

In the case of Komen, the award of a four-star rating tells us that it is a highly-rated fiscally responsible and financially responsible organization. Not whether it lives up to its mission, aligns its programs and allocates funds to its mission, buries overhead within program budgets, uses evidence-based practices, etc. In essence, the ratings say nothing about how effective Komen has been in fulfilling its mission of "saving lives and ending breast cancer forever". These are fair questions and should be part of any independent evaluation. To say that an organization is "efficient" and has "capacity" says absolutely nothing about whether an organization is doing right by its donors, nor the cause(s) it purports to aid. And it should.  Although, if one bothers to read the methodology  statements on Charity Navigator's website, it states that a "..limitation to our ratings is that we do not currently evaluate the quality of the programs and services a charity provides." This seems like a pretty important omission in the ratings system to me.

Indeed, it was recently reported by Information Today, Inc. that Charity Navigator is adjusting its ratings to respond to such limitations;
"In 2011, it plans on incorporating criteria that analyze the charity’s effectiveness. Charity Navigator CEO Ken Berger said it’s responding to its audience since 85 percent of its users surveyed “thought knowing something about a charity’s effectiveness was important.” 
But Charity Navigator doesn’t have the resources to hire staff to review 5,500 charities and therefore must find cost-effective ways to evaluate them. It will train an “army of volunteers and graduate students” to evaluate charity’s effectiveness, says CEO Berger. Its new rating system will be based 33% on financial health, 17% on accountability, and 50% on results, though it hasn’t made it clear how it will judge results."
So how "effective" is Komen?  Given that breast cancer remains incurable;  breast cancer mortality rates have remain unchanged in decades;  early detection does not guarantee that anyone will avoid metastasis at any point after diagnosis; available treatments are of questionable efficacy; acceptable screening methods and their effectiveness are still being debated; and awareness and education programs have yet to prove that anyone can escape diagnosis in the first place, Komen's "effectiveness" rating in my book would be not very.

But will Charity Navigator concur when they update Komen's ratings under their new evaluation system? What will their indicators of an organization's "effectiveness" consist of? Perhaps effectiveness criteria* for a non-profit like Komen might include;

  • how successful an organization has been in accomplishing its stated mission;
  • how efficiently it raises and invests funds, and how it then uses those funds;
  • whether the organization is a source of satisfaction for its founders, employees, volunteers, sponsors, donors, other stakeholders and society as a whole;
  • how adaptive the organization is to new opportunities, information and challenges;
  • how capable the organization is of developing and evolving in the face of change;
  • how capable the organization is of surviving in a world of uncertainty
(*Criteria adapted from an Indiana University Northwest educational resource)

In judging "effectiveness" close attention should be paid to an organization's financials, to see how it's spending ties with it's mission.  In previous instalments of this series (Komen By The Numbers, The Context of Research, and Education In Focus) I have analyzed Komen's financial statements to make my own judgements about how "effective" Komen has been in spending it's precious resources.

Komen recently released audited financial statements for the financial year ended March 31, 2010, and today I continue my evaluation of how Komen's spends it's donors funds.

The first chart summarizes how Komen spent the $389.3M it received in Total Public Support and Other Revenue ("revenue").  As in previous years, Education received the highest allocation of $140.8M or 37% of revenue; Research $75.4M / 19%; Screening $46.8M / 12%; Treatment $20.1M / 5%; Race for the Cure and Other Fundraising Expenses were $36.1M / 9%.  The remainder was spent on Affiliate Relationsand Other Administrative Expenses of $40.6M / 10% and increase to Assets of $29.3M / 8%.



The second chart, compares the results of 2010 in total dollars to all prior years for which financial statements are available from Komen's website.



Once again I have to question the level of Komen's investment in it's Research program.  In 2009 the Research program received $70.1M or 21% of total revenue, and in 2010 it received $75.4M which, although a slight increase in terms of dollars, only represents 19% of total revenue.

As this third chart shows, relative to dollars earned, allocations to the Research program (purple line) seem to be on a definite downward trend, whilst the other programs remain fairly flat, and Administrative Expenses (orange line) seem to be on the increase.


Analyzing further the financials for Komen's Research program, I find that from the $75.4M allocated to the Research program, that only $62.7M was spent on actual research awards and grants with the remaining $12.7M spent on Professional Fees expense of $6.3M; Salaries and Benefits of $2.8M; and other Operating expenses of $3.6M.

To recap; although the Research program was allocated 19% of total revenue only 16%  of total revenue was used to fund actual research!  And why the need to spend $6.3M on Professional Fees expense, which is generally fees like accounting, legal, public relations, financial management etc.?  16% to Research is significantly less than the 25% Komen repeatedly claims is used to fund research.  And the annual Research program allocation percentage, when compared to total revenue, keeps decreasing!

These types of line-item expenses buried within all of Komen's Program allocations are not captured in detail in the high-level "Program Expenses" as reported by Charity Navigator.  Although it is feasible that charities do incur expenses directly attributable to their Programs, and are correctly reported under each Program budget allocation, Charity Navigator's ratings make no judgements as to whether such expenses buried within the Program Allocations, are in fact reasonable.  If all Administrative Expenses and Changes to Assets were tabulated, regardless of the Program budget to which they related to,  for 2010 actual awards and grants across the Research, Education, Screening and Treatment Programs accounted for 40% or $156M of total revenue of $389M. The remaining 60% of revenue or $233M was spent on Administrative Expenses (about 18% for General Overhead and Increases to Assets, and about 42% attributable to Program Expenses).  Again I ask, is this reasonable?  What do we have to compare to?

Perhaps this is another criteria for Charity Navigator to consider when establishing their new ratings system.  How do the level of administrative expenses buried within Komen's Program allocations compare to other similar charities? How much does it cost to run a Research Program?  An Education Program?  How much is Komen doing in-house? How much are they out-sourcing?  Until we understand the answers to these and other questions, a four-star rating doesn't mean much in my opinion.

How can Komen continue to justify it's position on Research and honestly think that it's living up to it's mission of "saving lives and ending breast cancer forever”? From its financials, its mission seems to shout Education.  Not curing breast cancer. Are Komen really being "responsible stewards" of their contributors money? Has Komen been "effective" in the way it has spent the estimated $2Billion it has raised since 1982?  NO.

13 comments:

  1. SUCH a great, well-written & explained post! Thank you for sharing. Everyone should know this. I think that a lot of the people with breast cancer can't even stand the site of pink ribbons, but people who know someone with breast cancer, it seems like Komen or ACS are the places to go if you want to help. If only people would look deeper into nonprofits they support.

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  2. A real eye-opener. Thanks for bringing all of this to light. I used to support Komen, but you have built a strong case for why our society should not.

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  3. Anna, How an organization spends its raised dollars toward meeting its own stated mission should be the primary way they are judged in my opinion. Otherwise, what's the point of having a mission? Is is just for appearance sake? I hope Charity Navigator makes some changes in how they evaluate. Perhaps you should send them some of your suggestions, Anna, or suggest they read this post.

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  4. Thank you for crunching the numbers yet again, Anna, to uncover the story beneath them. Komen does a good job with the research grants it funds, but the research allocation is abysmal. This has to change. You're giving us all tools to make that happen. Would love to republish on PRB.

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  5. I agree with many of your main points. However, I work at a public university, which charges a high overhead rate (46.5%) on any funded project. This rate has been negotiated with the federal government and represents the costs for providing the infrastructure necessary to show that grant funds are being used responsibly. It pays for the ethical treatment of human subjects, the ethical treatment of animals, potential conflicts of interests between faculty and any consulting jobs, p,us some funds are used to improve equipment and facilities and as incentives to faculty to write more grants. I say this because a colleague has received Komen funds for setting up an educational library and she may have had to include a budget item for overhead costs, which might represent the "professional fees" listed in Komen's research allocation.

    Last year, I received travel funds (a gas card to travel from OR to WA) to participate in a clinical trial at UW. Those gas cards were administered via ACS, but with funds from Komen. The funds were appreciated. I personally would like to see Komen use more funds allocated for patient support ( for bills and prescriptions) swell as more funds for research and less on education. Seems like our society is pretty saturated with pink ribbon education already.

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  6. why not forward this to a NYTimes report and let them look at it. Although, maybe it's already been done.

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  7. Great post, Anna! The part that struck me most was this: "how capable the organization is of developing and evolving in the face of change." I believe Komen struck out to do a very good and worthy thing in the 1980s, and did achieve a lot of success; however, the evolution has stalled. It's no longer about awareness, though. We gotta keep talking about how far Komen has gone off course.

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  8. Wow, you really did your homework here!! Great job. Maybe that explains the nagging question of "With so much money going to breast cancer, why haven't we found a cure by now?"

    I agree; this is worthy of a New York Times article. Let's hold these organizations accountable for their claims.

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  9. I hope you don't mind that I linked to your post. Thank you SO much for the information!

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  10. Thanks, Barbara. I've been waiting for you to weigh in. ;--) Liz

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  11. My mother died of metastastic(sp?) breast cancer in December 1968. I thought back then "surely it will be cured by the time I reach her age!" Fast forward to 2012 (and I'm thankfully comfortably past her age of diagnosis) and not too much has changed when you really think about it.
    I read a few years ago in Fortune Magazine that the vast majority of cancer research goes toward reducing tumor size. Most of us who have watched a loved one die from cancer know that what kills people is metastasis, which is not as easy to measure in a research project and is therefore not funded as heavily. It's like the joke where a man was seen searching the ground in a parking lot at night looking for his car keys. When asked where he dropped them, he said he dropped them about ten feet away but he was searching under the lamppost because the light was better there. Current research seems to be searching in areas of "good" light.
    I have become cynical about these large cancer organizations because if a cure were truly found, such an organization would cease to be meaningful and would logically cease to exist. But large organizations really don't want to cease, they want to keep growing. Kind of like cancer.
    With this latest controversy, I think I'm done doing Race For the Cure. I just found out about this article today. Thank you for shining the light for us.

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