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Wednesday, July 18, 2012

A Charity ‘Suddenly’ Closes Its Doors

According to a report in a local newspaper, last week the Chicago based Y-ME National Breast Cancer Organization (which is also known as Breast Cancer Network of Strength, a name it attempted to rebrand itself within recent years)  fired its staff and shut its doors. The charity’s phones and website are not operational. And according to the news reports, a board member has indicated that the charity will be filing for Chapter 7 bankruptcy this week.

Looking at this charity’s 1-star financial rating (which is no longer posted as it has been replaced by a Donor Advisory), we can see in the sustainability metrics (primary revenue growth, program expense growth  and working capital ratio), that this shouldn’t be a complete surprise to anyone. 

First, have a look at the trend in primary revenue growth and program expense growth over the years. We see a sharp decline in both over the last few years. In fact, the charity went from a high of $16.7 million in primary revenue in 2008 to only  $5.2 million in 2011 and a high of $11.8 million in program expenses in 2009 to just $5.6 million in 2011.  We often warn donors that when they see this pattern that the charity is in a risky, unsustainable financial position and that it is likely to cut critical staff and vital programs.

Second, look at what happened to the charity’s working capital ratio (“rainy-day fund”). We like to see charities have at least 6 months to a year of liquid funds to fall back on when times get difficult. If they have such reserves, then they have a much better chance of avoiding massive layoffs and shuttering their doors. Sadly, as revenues dried up, Y-Me begin to tap into its working capital, which went from a high of more than a year in 2003 to just a month in 2011.

Although it appears this charity is no longer operational, there are many other 4-star breast cancer charities. But before you donate, be sure to check our listing of breast cancer charities to see which ones are financially healthy, accountable and transparent.

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