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Canada's two largest cancer charities have merged in an attempt to stave off a financial crisis, triggered by plummeting donations, that threatened to shrink the research funds they have been reliably delivering for decades to hospitals and universities. The merger of the Canadian Cancer Society (CCS) and the Canadian Breast Cancer Foundation (CBCF) is designed to cut costs by eliminating overlapping operations and is to be officially announced Friday in Toronto. The two charities had revealed in October their intention to join forces, but gave no details about the effort, nor the financial reasons that were making the deal a matter of financial necessity.

CCS chairman Robert Lawrie, the Toronto-based lawyer and international mergers and acquisitions specialist who is driving the merger, said the deal in effect amounts to the reinvention of the cancer charities and might be copied by other charities that are struggling under the burden of bloated costs and falling donations. "What we are doing is the long-delayed first step in the consolidation of the cancer charity sector," Mr. Lawrie said in an interview.

He said that the new group, which will operate under the Canadian Cancer Society name, is in preliminary merger discussions with four other charities and others will inevitably join – there are about 300 cancer charities in Canada, most of them small. "Absolutely, yes, we will bring in more charities," he said. "Everyone has the same cost and revenue challenges."

The CCS and the CBCF are essential components of cancer research in Canada and provide services to cancer patients and their families. "We're hugely significant in this area," said Lynne Hudson, chief executive officer of CCS and the former boss of CBCF.

Total annual funding for all cancer research in Canada is about $500-million. Of that amount, more than 10 per cent comes from the CCS and CBCF alone. If their financial deterioration is not arrested, the two would have no choice but to curtail their spending substantially – spending is already shrinking – hurting cancer research efforts across the country. "This merger is about looking to the future," Ms. Hudson said. "Consolidation and efficiency is all about serving our stakeholders better."

The financial statements of the CCS and the CBCF depict shocking declines in recent years, hurting cancer research and services spending. At the CCS, which is about four times larger than the CBCF, revenue (that is, income from donations and other sources, including lotteries) fell from $215.2-million in 2012 to $180.3-million in 2016 – a reduction of more than 16 per cent.

The falling revenue meant that the CCS had to dip into its reserves (broadly defined as total assets minus total liabilities) to cover program spending and operating expenses. As a result, the CCS's reserves fell from $151-million in 2012 to $76.1-million in 2016 – a 50-per-cent decline. If the deficits were to continue at the current pace, the CCS would entirely deplete its reserves within four years or less, putting the charity on the edge of failure.

The deterioration at the CBCF was just as bad. Over the four years to 2016, its revenue fell by a third, to $36.1-million, while its reserves fell 39 per cent, to $22.3-million.

As their revenues went into steep decline, both charities have been spending less on cancer research and services for everything from help lines to free wigs for cancer-treatment patients who have lost their hair. Between 2012 and 2016, the CCS's spending dropped by more than $9-million to $120.4-million. At the CBCF, spending went into near free fall. Last year, it was $21.9-million, down from $36.6-million four years earlier.

Mr. Lawrie and Ms. Hudson attribute the declines to "donor fatigue," the explosion in the number of health charities in the last decade or so, which mean more competition for dwindling donor dollars, and one-off events, notably last May's fire in Fort McMurray, Alta., which diverted some donor money from the health charities.

A January study from the Fraser Institute, a Canadian think tank, said that Canadians in general are becoming less generous. The study found that 21.3 per cent of Canadians claimed charitable donations on their taxes in 2014 (the last year available), down from 25.1 per cent in 2004 (Americans are far more generous). The size of the donations has also fallen from 0.78 per cent of income in 2006 to 0.56 per cent – a 10-year low.

Charles Lammam, director of fiscal studies at the Fraser Institute, said "with Canadians becoming less generous every year, charities face greater challenges to secure resources to help those in need."

With donations spiralling downward, both the CCS and the CBCF realized well before they agreed to merge that they had to cut costs by reducing the number of employees and ending expensive duplication of infrastructure across the country.

The CCS, for instance, maintained separate operations, from payroll services to insurance providers, in 10 provinces and one territory. These various operations are being consolidated at the national level, with the goal of removing more than $15-million a year in expenses. Meanwhile, the employee headcount went from about 1,150 to 900 and more reductions are planned. The combined group, in time, will have about 850 employees (the CBCF has about 130 employees today) and share operations and infrastructure.

For Mr. Lawrie, 71, the mission to bring the CCS and the CBCF together to strip out costs and preserve program spending was partly personal.

Mr. Lawrie has raised funds for cancer research. He put together a biking team, called Docs' Choice, that entered the Ride to Conquer Cancer. In five years, the team has raised more than $600,000 for Toronto's Princess Margaret Cancer Foundation.

In 2015, he met Pamela Fralick, who was then chief executive officer of the CCS, and tried to convince her to join Doc's Choice. "I tried to recruit her and she ended up recruiting me, first as a director, later as chair," Mr. Lawrie said.

By last spring, after realizing that the CCS's financial condition was grim, he pushed through a management overhaul that saw Ms. Fralick leave and floated a merger idea with Ms. Hudson at the CBCF, though the merger idea originally came from Paul Alofs, president of the Princess Margaret Cancer Foundation. "Lynne and I clicked and agreed that an appropriate way to correct our problems was consolidation," Mr. Lawrie said.

Now that the merger is completed, Mr. Lawrie and Ms. Hudson said they will address the new group's funding model. The idea is to approach wealthy, big-name donors and form more partnerships with other cancer charities to pool research funding.

Other Canadian health charities are overhauling their operations, too, as donors prove scarce. Heart & Stroke (formerly the Heart and Stroke Foundation of Canada) also had been the victim of falling revenue and has run deficits while its cash reserves dwindled.

Diego Marchese, Heart & Stroke's interim CEO, said the charity started to attack the cost side five years ago by replacing its province-by-province confederation structure with a national structure. Some employees were let go. The consolidation moved saved about $10-million a year. It also fixed its ailing lottery-funding model.

But since Heart & Stroke, unlike the cancer charities, has no competing charities, mergers aimed at cutting costs are not an option. So it is now trying to boost revenues through new fund-raising techniques. "We have to change," Mr. Marchese said. "We hadn't changed in 60 years."

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