Wednesday, December 02, 2015

Bedrock behind Giving

Despite reduced corporate support, Calgary’s key charitable groups are still in the game

This article appears in the December 2015 issue of Oilweek magazine.

By Peter McKenzie-Brown
Three of Calgary’s great philanthropic organizations are celebrating important anniversaries –the United Way (75 years) the Calgary Foundation (60) and the Corporate Challenge (20). Yet the commodity-price downturn means a lot of people aren’t celebrating at all.

In terms of raw statistics, about 37,000 industry workers have lost their jobs. The secondary impacts, though, are sometimes deplorable. For example, the United Way’s Lucy Miller notes a 300% increase in the use of the Women’s Emergency Shelter and a 91% increase in calls to the Calgary Counselling Centre, both of which her organization funds. Also, of course, there is greater demand at food banks across the province when, presumably, donations are down. Participation in the arts is so poor that the Calgary Opera, for example, is selling tickets to all three of this year’s performance for the price of one.

Yet in a number of ways Alberta’s cyclical economy benefits provincial charities. For one, increasingly sophisticated investment systems have given investment professionals the skills and the motivation to manage funds professionally for well-heeled not-for-profits. This enables big charitable agencies to make sure they don’t find themselves short when their clients’ needs are long.

What happens during downturns: Eighteen years ago, Steve Austin founded Energy Service Accounting, which provides accounting services for fifty or so of oil and gas companies – “the smallest of the small,” he calls them. His clients range from two-person start-up operations to somewhat bigger operations. The one characteristic they have in common is that they are too small to hire in-house accounting staff. “They are cutting everywhere they can,” he says. “I have never seen conditions so bad. So, you can’t make a large donation and then lay off half your staff; that wouldn’t play very well.”

Garth Toombs is the grand old man of oil industry outplacement. He came to Calgary from Toronto in 1981 to help set up the first agency to specialize in this area, and innumerable laid-off employees still use the counselling and other services of Toombs Inc., which he sold when he retired.

People are less likely to make donations when the economy tanks. “They put in less because they’re worried about their own situation; they feel insecure about the future,” says Toombs. “The same thing happens when you retire. You have less money, so you donate less.”

One of his observations is that older people who had done well in the oil industry were ready for a change. “They would go into a little business, selling something or other. However when you are coming out of the oil sector, you generally can’t find something that’s as lucrative or pays as well,” he says. “Older people in particular often decide to get into social services – working for United Way agencies, for example.”

And then there are the retirees who work as volunteers. This augments the roles industry leaders play, sitting on not-for-profit boards and urging their employers and industry contacts to donate to the cause.

This deployment of talented people from the oil industry into the not-for-profit sector is one way bad times in the oil patch can benefit the charitable sector. However, Calgary’s big charitable foundations have found ways to use good investment practices to make the bad times virtually disappear. One such is the 60-year-old Calgary Foundation.

For Calgary, forever: With endowments of more than $834 million, the Calgary Foundation is the largest philanthropic foundation in Canada “because we are a rich and prosperous people despite the downturn,” says chairman and CEO Eva Friesen.

The business model the foundation uses “is not directly affected by the cycle in the price of oil, because that’s not where our revenue sources come from,” New gifts to the foundation ($47 million last year) are one source of endowment funds. Returns from the foundation’s endowment (entrusted to wealth management firms, and up 13% last year) are the other. “The foundation measures its success over a ten-year window,” she says. “Our target is an annual 7% return over each ten-year period.”

For the decade ending last March 31 it was 7.6% – notwithstanding the 2008-09
collapse of global stock markets (by half, in the case of the TSX).

Many Albertans live from paycheck to paycheck, so when someone loses a job it’s a tough thing for the family, says Friesen. “The fact that the needs are greater out there during a downturn puts pressure on us to want to give more. One of the things we ask ourselves in these distressed times is, ‘How can we grant more or grant differently to meet the greater the needs of our community?’

Over the next ten years the Calgary foundation will focus on five priority areas, she says: “Reduction of poverty; the arts; health and well-being; a sustainable future; and community connectedness.” Connectedness refers to people’s sense of belonging. “To feel as though you belong is critical for mental health and well-being. Sixty-seven per cent of Calgarians say they feel as though they belong, down from 84% last year,” she says. “One area where we believe this is particularly important has to do with the indigenous people in our community. That’s a long-overdue priority.”

The United Way: This charity uses quite a different model from that of the Calgary Foundation. It conducts annual campaigns to raise money for a suite of client organizations – in effect, eliminating the need for many campaigns by many worthy charities. While the United Way/Centraide organization is a century old, it organizes itself city by city, with funds going to local charities.

Last year, the United Way of Calgary raised $59 million – despite the beginning of the downturn, the most successful campaign in its 75-year history. But at that time the impact of dropping oil prices was not too evident – after all, there hadn’t been a lot of layoffs, for example. While 10 percent of its funds went toward fund-raising and administration, the extensive use of volunteers by most charities means that the money raised got good value.

Using the fundraiser’s argot, the organization’s CEO, Lucy Miller, says “We knew going into campaign this year that it was going to be a difficult year, so we had to be intentional about landing our campaign. This year, it’s going to be harder to be successful in campaign.”

While the United Way involves fundraising campaigns among individual companies, each year two corporate executives lead the charge. For this year’s campaign, the co-chairs are Lorraine Mitchelmore, president of Shell Canada, and Brian Boulanger, senior VP and director of ARC Energy. “They really understand the way the oil industry works, and the state of the economy,” Miller says. Their job is to rally the troops – to encourage other leaders within the oil patch to do their best for the cause.

Where there are fewer employees, the corporate campaigns are obviously smaller, but those campaigns can still be successful “if you consider them on a relative basis,” Miller says. “The people still working are saying, ‘Okay, I’ve still got a job so that makes it especially important that I step up and give.’ That’s the message we’ve been giving to people.” As this year’s campaign began, she says, ENMAX Corporation, Spartan Controls and Pembina Pipelines all came in ahead of last year. Among oil producers, there are fewer employees but “greater participation by those who remain.”

At Shell, which raised $3.8 million last year, Mitchelmore told her organizers that “the city is going to need your help this year,” Miller says. “Vulnerable people are counting on us to step up.”

At engineering giant Fluor Canada’s kick-off event this year, the company set up a huge Rube Goldberg machine. Cutting a ribbon set into motion a long and complex series of actions, which ultimately unveiled the campaign slogan, “I dare you.” The concept was that one motion sets in action a series of events, and “that shows the power of giving.”

Service above self: We earlier met Steve Austin, whose accounting business shows how grim business is for oil and gas operators. He plays another role in his private life, as volunteer treasurer of the Calgary Rotary Clubs Foundation. Founded in 1977, this low-profile foundation began with an endowment of $325,000. Today, its assets are in the order of $45 million, and it is one of the largest local foundations in the Rotary world – a big deal, since there are 1.2 million Rotarians in 34,000 clubs in almost every country in the world. The Rotary motto is “service above self.”

“In any given year we distribute about $1.75 million back into the community through Calgary’s 13 Rotary clubs,” Austin says. “That money goes directly back into the community through the clubs.” One of the best-funded district foundations in the Rotary world, it’s managed in much the same way as the Calgary Foundation. Two wealth management firms manage about half of the endowment each.In the last few years, our return has been something in the order of 11% per year,” Austin says.

Members of the organization may not receive compensation for work they do with Rotary. “Because volunteers do our fund-raising and much of the administration, our G&A is less than 2½% per year.”

Matching magic: Almost half of the Calgary Rotary Foundation’s annual distributions – $700,000 per year – funds international projects. International projects are eligible for further funding from US-based Rotary International.

A Rotarian myself, I recently helped lead a project to introduce a new technology (developed at the University of Calgary) to a “village” of 60,000 in India. A Calgary-based charity – the Centre for Affordable Water and Sanitation Systems (CAWST) – provides training around the developing world in the construction of a technology known as biosand filters, and we agreed to fund a project which that charity would supervise. The outcome will be clean household drinking water in a community which has long suffered from water-borne disease.

With leadership from Anil Jain, a Calgary-based Rotarian with roots in northern India, four Calgary Rotary clubs and the Rotary club of Olds collaborated with one in Phoenix, Arizona, and another in India. Together, the clubs provided about $33,000.

The government of Alberta – the only province to help fund overseas development programs – contributed $7,200. Beginning immediately and for the next five years, the Canadian government will also support such projects with grants totalling as much as $1.2 million annually.

Then the Rotary foundations in Calgary and the United States performed a kind of formulaic magic by providing progressively greater matching grants for the funds we had raised. By the time the dust settled, the amount allocated for this project was $150,000. Constructing and installing CAWST’s biosand water filters will take about 18 months to complete. And it will do more than provide clean drinking water to a community where dirty water transmits disease. It will also transfer important technological know-how to a poor community.

Once they have received training and experience in delivering these systems, villagers will be able to take their tools and molds, knowledge and experience to install these systems in communities nearby – for a price, of course.

Perhaps philanthropic foundations which are active overseas should actively and openly endorse the strategy of nurturing technologies which simultaneously benefit the developing world and present business opportunities there.
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