Fundraising Lotteries In Canada

Introduction

Charities have long used gambling as a way to earn money to support their charitable programs. In fact, gambling was once the sole domain of charities or religious organizations until provincial governments launched their own gambling corporations after realizing how lucrative gaming could be. Charitable gaming has come a long way from the simple bingo hall and 50/50 ticket, although these certainly still exist. "Mega-raffles" – those with revenues over $1 million – are more common than ever and lotteries such as the Princess Margaret Hospital Lottery and Canadian Cancer Society Lottery are virtually household names in Canada. As in other nations, charity gaming is big business in Canada. For example, 44% of non-religious charities in Canada use gaming as a fundraising method, and 69% of charities receiving funds from gaming sources report those revenues to be important to the operation of the organization.

In 2011, 16,962 charity lotteries were licensed for operation Canada-wide and this number includes only the larger lotteries that required provincial rather than municipal licensing. Charity Intelligence (CI), a non-profit that advises funders across Canada, estimates total revenue from all charity lotteries Canada-wide in excess of $750 million, with net funding available to the charities (lottery revenue less all costs for prizes, marketing, and lottery operations) of $200 million. Although this is but a fraction of the $2 billion that government lotteries earned in profit, it is still an important revenue stream for charities. Moreover, lottery profits are typically an unrestricted source of funding, meaning that charities can use the money to support programs at their own discretion, without needing to spend the funds for a pre-determined purpose, as is often the case for charitable donations.

Despite their benefits, lotteries do have some drawbacks. First, charity lotteries are not guaranteed to be profitable. In fact, in 2011 in British Columbia, 2% of charities actually lost money in operating lotteries. The most striking case is that of the Royal Columbian Hospital Foundation. After selling only 44,000 out of a maximum of 120,000 tickets, the charity lost $3.3 million in its first attempted vacation home lottery. In fiscal 2010, both the New Brunswick and Newfoundland divisions of the Canadian Cancer Society introduced lotteries that lost money for the charities and were subsequently discontinued.

The second drawback is how costly lotteries are to run. Charity lottery ticket buyers may not be aware of how much of each dollar spent on lottery ticket revenue actually goes towards funding charitable programming. To that end, in 2013, Charity Intelligence examined each of the major 100 charities in Canada (the charities receiving the most in donations from Canadians) and found fourteen that reported lottery results in their audited financial statements. CI included an additional 16 charities that held lotteries with revenues over $1.5 million. Over 2012, these 30 charities captured lottery revenues of $376 million – about 50% of estimated Canada-wide charitable lottery revenue.

CI’s analysis indicated a wide range of performance in terms of how much of each dollar of ticket revenue went towards "doing good", i.e., being spent on the charity's programs. The two best lotteries in this respect were operated by the Fondation Maurice Tanguay in Quebec and STARS in Alberta, which retained 60% and 54% respectively for their programs over the past three years. The STARS lottery has a long history of consistently selling out its allotment of tickets, and also doing so rapidly (allowing the charity to reclaim some planned marketing expenses). The Fondation Maurice Tanguay has consistently held a relatively modest house lottery for over 15 years with the lowest three-year prize payout of charities disclosing this information. The least efficient lotteries examined kept less than 5% for charity purposes.

It is also notable that CI found only three major lotteries for which the charities did not disclose a breakdown of lottery operations to allow it to include them in the analysis. The Children’s Hospital of Eastern Ontario in Ottawa operated a lottery with 2012 revenues of $8.2 million, but no breakout of associated costs. This would rank as the 10th largest charity lottery revenue. As well, the St. Boniface Hospital and Research Foundation in Winnipeg had $6.4 million in revenue from lotteries and events in 2012 and the Pacific National Exhibition in Vancouver had $4.9 million in lottery revenue in 2011 with no further details.

Government Regulation

While the Canadian government ultimately has control over all forms of charitable gaming, the large charity lotteries are held to a higher regulatory standard and undergo greater scrutiny. This more stringent regulatory environment has been introduced to mitigate the risk of corruption while simultaneously protecting charities from undue financial risk. First, all charities in Canada must apply for a license to operate a lottery or raffle. Second, raffles with a prize pool over $10,000 are governed by a unique set of rules and regulations and require that a licensed and bonded manager is appointed to manage the lottery. Thus, an individual charity cannot manage a lottery internally unless it has a licensed lottery manager on staff. The ticket sales process is monitored and audited closely and supporting documentation of ticket sales is routinely checked by government officials. Finally, all promotional materials for the large lotteries must be approved by government regulators, and all advertising must contain the lottery license number issued by the government.

Government vs. Charity Lotteries

By way of comparison, government lotteries retained 31.4% of their ticket revenues as profit. This makes them, on average, more efficient than all but five of the charity lotteries examined by CI. There are some significant structural differences that can account for the difference in efficiency. One reason is the fact that provincial lotteries typically run continuously throughout the year; customers do not need to receive direct mail nor as much mass media advertising to remind them that the lottery exists and what the deadlines may be to buy tickets. Another is how prize amounts are determined and paid for. Charity lotteries (officially referred to as raffles) are required to commit to a certain set of prizes ahead of time; if not enough tickets sell, prize payouts may be disproportionately large. In the case of government lotteries, jackpot announcements are only estimates, as prize amounts are fixed percentages of actual ticket revenue. Thus, the government is never at risk of overspending on prizes.

How do the odds of winning a charity lottery stack up against government lotteries? “When you do the analysis, if you are a gambler and if you want to have a higher chance of winning back the purchase price of your ticket, you're actually better off playing provincial lotteries than charity lotteries,” says Kate Bahen of CI. Not only that, in most cases, government lotteries are more efficient at raising money for a cause. Of the 30 charity lotteries in the investigation by CI, only five made more money per dollar than government lotteries. More money goes to the charitable programs in the provincial lotteries than at the charity lotteries on average.

But the biggest difference between charity lotteries and provincial lotteries? Lotteries can, in fact, be a huge gamble for the charities themselves. Some have lost a lot of money. Running a charity lottery is not guaranteed to bring money into the charity. As charities offer bigger prizes, more expensive prizes, it raises the break-even point. It becomes a high-stakes game, and that means that they have to sell out their tickets more. If they don't sell out the tickets, that's where there is financial loss.

The Costs of Running a Lottery

There are two major expenses that explain why charity lotteries have such high costs. The first is paying for prizes. While some ticket buyers may assume that charity lottery prizes are donated, this is far from true. Of the 30 lotteries examined, 14 provided specifics on prize payouts and these charities spent an average of 38% of revenues on lottery prizes. From the perspective of a lottery ticket buyer, getting a high proportion of money paid back in the form of prizes is desirable, but for the purposes of a charity it is not.

The second major cost category is the expenditure on marketing and operations of the lotteries. The mega-raffles typically provide 24/7 call centres and websites to buy tickets online. Often charities use experienced external lottery management providers to handle these functions on their behalf. Further, marketing a lottery is a major cost, frequently involving sending a direct mail piece to every household in the province, coupled with television, print, and radio advertising.

It is important to bear in mind that the portion of the operational expense going into marketing can be seen as another benefit to the charity. Lottery advertising may increase awareness of the charity, which in turn may help when conducting other fundraising events. This may explain why lotteries that capture even small amounts of ticket revenue for charitable programs are still in operation; as long as the lottery can cover its own costs, the charity benefits from the marketing that is included in the operation of the lottery. The increased awareness may increase direct fundraising dollars and help the charity educate an increased audience. While this makes sense from the standpoint of the charity, there may be some drawbacks from the donor’s perspective for two reasons.

First, if one charity increases its marketing spending, other charities are likely to follow suit, resulting in minimal benefit for charities overall and increased costs for all. Second, inefficient lotteries “dilute” the value of the entire pool of charity lottery dollars, with less of the pool of funds available for charitable programming. It is better for the sector overall if more funds can be allocated to the most efficient lotteries.

Some provinces have regulations that mandate a minimum level of efficiency and prize payout to prevent charity lotteries from being unfair to ticket purchasers. For example, the Alberta Gaming and Liquor Commission mandates that prizes must be at least 20% of ticket revenue and other expenses less than 30% of ticket revenue. On the other hand, in Nova Scotia there are no such stipulations. Ticket buyers who may be surprised by the relatively small amounts that are retained by some charity lotteries may want to consider the alternative of direct donation over buying a lottery ticket. While there may not be the possibility of winning a prize, a significantly larger share of each dollar goes towards funding the charity's actual programs. Of the 30 CI selected charities, an average of 27% of lottery revenue was retained for charity purposes. Compare that figure to 72% for the same charities if the funds were raised via fundraising methods other than the lottery. This is not to say that charity lotteries should be avoided by donors, only that CI believes that ticket buyers should not think of charity lotteries as a replacement for direct donations. So long as the tickets are paid for out of the donor's "lottery" budget rather than from their donation budget, the lottery can still be a beneficial fundraising tool.

Of course, many lottery ticket purchasers view the charity lottery as a combination of philanthropy and gambling. To appeal to the gambler, some charities emphasize the limited number of tickets or the high odds of winning a prize, thus making the lottery odds seem favourable. In fact, in comparison with government lotteries, the charities with published data on prize payouts showed the opposite – in most cases, charity lotteries paid out less on average than the most popular government lotteries. CI did not use odds of winning a prize in this comparison, as prize values and ticket prices vary significantly by lottery. Instead, CI looked at, on average, how much of each dollar spent can the ticket buyer expect to get back each time they purchase a ticket. What it found is that the provincial government lotteries provided higher payouts (average of 54%) than the charity lotteries, which provided a range of 27% to 53%. So while payouts vary, lottery ticket buyers should not assume that the odds for charity lotteries are any better than those for typical government lotteries.

Using lotteries to raise funds introduces high marketing and operational costs and is less efficient than directly-donated funds. However, from the perspective of the charity, lotteries can bring in millions of additional funding dollars that they would not have access to if they had not held these events. On balance, so long as donors view charity lotteries primarily as entertainment and do not buy tickets out of their “donations” budget, lotteries can be a great benefit to charities.

Donor Attitudes Towards Charity Lotteries

Canada underwent a significant transformation in the 20th century. The Canadian public has become openly tolerant of an activity once seen as disreputable and unsavoury. Indeed, many Canadians now see participation in gambling as an acceptable recreational activity done at bingos, racetracks, and legal casinos or by purchasing provincial government lottery tickets. On the whole, many Canadians deem gambling to be an acceptable activity

It is generally agreed that motives for supporting a given charity are subsumed by either altruism or egoism. However, the majority of motives for supporting a charity are subsumed by egoism, where egoistic motives are defined as those that are self-serving in nature. Egoistic motives include self-esteem, stress avoidance, and social pressures/public recognition. Moreover, many of the egoistic motives have an economic rationale with economic self-interest having been found to not only motivate support for a charity, but also the selection of which charity to support. For example, it has been reported that as much as 80% of all individual giving is significantly affected by tax policies. It has also been shown that the higher the cost to the helper (monetary costs, effort, etc.), the lower the rate of helping behavior. Therefore, the popularity of charity gaming may be due, in part, to its combination of two activities that are firmly inculcated in North American society – charitable support and gambling. In fact, charity gaming can be viewed as an almost perfect means of fundraising for charities. Specifically, it is expected that charity gaming satisfies both the egoistic (i.e., benefits me) and altruistic (benefits others) motives for charitable behavior, while simultaneously satisfying the recreational (i.e., softer) motives of gambling. Furthermore, charity gaming represents a synergistic combination of these two desirable activities, insofar as each activity is improved by the association – gambling for a good cause and giving in a way that is fun.

Warning about Lotteries by the Canadian Medical Association

An August 2013 editorial in the Canadian Medical Association Journal warned that charities that run fundraising lotteries offering houses, cars, and mega-dollar prizes should take steps to protect players who are susceptible to problem gambling. Editor-in-chief Dr. John Fletcher said hospitals and other non-profits have a responsibility to prevent harm, but fundraising lotteries have the potential to severely affect people with a gambling addiction. Fletcher said out-of-control gambling can have devastating consequences for an individual addicted to playing the odds as they spend more and more chasing losses and looking for the big win. “It is contradictory for legislation to ban hospitals from selling one potentially harmful, but legal, addictive product on their premises — tobacco — while allowing them to actively promote another — lotteries,” he writes. “Have we lost our moral compass to such an extent that we are blinded to our duty to “first do no harm” by the attraction of easy revenue?”

Fletcher said he was not arguing for a ban on gambling or an end to hospital lotteries, noting the latter are a way of raising money for good causes while providing "a bit of fun" for most people. But he believes measures are needed to protect people vulnerable to a gambling addiction, who could blow through hundreds of dollars on a hospital lottery website in a few minutes because of incentives that "entice more and more spending."

For most lotteries offered by hospitals and health advocacy groups, buying tickets in bulk saves money. For example, the cost of one ticket in Canada's longest-running hospital lottery – that mounted by Toronto's Sick Kids – is $100. But buy 10 at once and the cost is $500; buy 30 in one go and the total cost is $900. "It gets cheaper the more you spend," said Fletcher, who advocates for a removal of such incentives, an individual spending cap, and warnings to the public about spending too much on lotteries. "The direction I'm coming from is that doctors are in a privileged position in society, as are hospitals. We trust doctors and hospitals to look after us when we're sick and to put our health and well-being to the fore. So that's why we as doctors should do no harm and why hospitals and other health-related organizations have a responsibility to ensure that their fundraising doesn't harm vulnerable people."

A 2013 article in the Journal of Evaluation in Clinical Practice (JECP) asserts that lotteries do contribute to gambling‐ related harms and take the form of a regressive tax, with the poor spending a greater percentage of their income than their wealthier counterparts. For non-profits who do not utilize gambling initiatives, ‘ethical concerns’, ‘risk’ and ‘not philanthropy’ are primary reasons cited.

Debates over the acceptance of funding from dangerous consumption industries have taken place in recent years. While debates have primarily focused on industries such as pharmaceuticals, tobacco, cannabis, and alcohol, a growing interest in expanding the discussion to include gambling has emerged. Organizations and individuals can find themselves in situations of moral jeopardy when they move into contexts or relationships where it is highly probable that they will be seen to violate norms of morality. With respect to hospital charitable lotteries, significant ethical challenges can arise when organizations claim to serve the good of the community but derive part of their revenue from sources that are known to cause harm to that same community.

The 2013 JCEP article concludes: “Charitable lotteries are currently being utilized as an economic panacea for many hospitals; however, research confirms that lotteries can cause gambling‐related harms, and the continued use, marketing, and promotions of this activity are cause for ethical concerns. The risk for moral jeopardy for hospitals [and any health-related organization] is increased as a result of the incorporation and promotion of charitable lotteries into their fundraising strategy. By participating in the normalization of gambling and continuing to perpetuate the charitable gambling ‘good works’ discourse, hospitals may be contributing to possible negative impacts on individuals and families within their communities who, in turn, may seek their council.”

Conversely, a 2011 Swedish study of different forms of gambling found lotteries were far less hazardous to at-risk and problem gamblers than other games of chance, including interactive Internet gambling, casino gambling, and electronic gaming machines, for instance. The study found that lotteries are least associated with problem gambling. And, of course, hospital lotteries can do a tremendous amount of good in providing funding for enhancing patient care and funding research -- funding that may be difficult to raise in other ways.

There are numerous hospital lotteries across Canada, from the B.C. Children's Hospital Dream Lottery to the Lifestyles Lottery put on by the QEII Health Sciences Centre in Halifax. Many health advocacy groups, such as the Heart and Stroke Foundation and the Canadian Cancer Society, also mount their own fundraising lotteries. Larger hospitals often raise $10 million or more from annual lotteries, while smaller hospitals can generate close to $1 million.

Charity Lottery Failures

The Canadian Cancer Society lost big in two of their provincial lotteries in 2010. The Newfoundland lottery lost $174,000. The New Brunswick lottery lost $341,000. That's more than a half a million dollars lost that could have gone into research. “In those two cases, both of those divisions did the adequate due diligence that's expected through every lottery,” said Rowena Pinto, the Cancer Society's VP of Public Affairs. “With every fundraising activity, there's an inherent risk. So lotteries are no different. They're actually highly regulated, highly competitive, and so there's a lot of due diligence and risk management that goes into that. We learned from that experience.”

In 2011, the University Hospital and Royal Alexandra Hospital foundations ran the “Dream Away” lottery in Edmonton. They lost $800,000 each.

In White Rock, BC, losing money was enough to knock the Peace Arch Hospital Foundation out of the game. In 2011, they lost $746,000.

The Royal Columbian Hospital Foundation in New Westminster, BC had Canada's biggest losses after their 2011 lottery. They lost $3.3 million, enough to buy a couple of MRI machines, and they quit the lottery game.

And there's no question about what is being achieved at one of the most efficient charity lotteries: STARS, the air ambulance service in Alberta. Their lottery keeps 54 percent of ticket sales. “However you approach raising money I think has inherent risk,” said STARS CEO Andrea Robertson. “Every single year when we run a lottery, I think about it. Not all communities have the capacity. Some are saturated, there's no question. And the intelligence on where to run lotteries and where not to is changing, and I think the market's changing. We have to really be aware of that.”

If a donor is looking at either buying a charity lottery ticket or making a donation with the hard-earned money they have, which is the better way to stretch the dollar as far as it can go? Studies have shown that it's making a donation directly to the charity rather than buying a charity lottery ticket.

2010 Toronto Star Investigation

In 2009, more than half the money raised in the name of charity by Maple Leaf Sports and Entertainment (MLSE) was spent on fundraising and administration. And the story is much the same at many professional sports foundations across Canada, a Toronto Star investigation found.

Lavish gala dinners, golf tournaments, and lotteries held by Canadian NHL club foundations routinely eat up between 40 and 65 per cent of revenues – and as much as 80 per cent in the case of the Edmonton Oilers' foundation in 2008 – intended for disadvantaged children and community development. "Canadians love their hockey teams, but it appears the charitable spending among these teams doesn't return that affection as expected," said Toronto forensic accountant Charles Smedmor. "As community investments go, there are much better places to put your charitable dollars."

Bruce Kidd, chair of MLSE's Team Up foundation, said his board is very concerned about the costs. "We are looking at the costs and the return on all of our activities and we're trying to make them more effective to get the costs down to where they represent the industry standards or better than that."

Fundraising and administration consumed 55 per cent of the $1.5 million raised last year by Team Up, according to the foundation's self-reported figures to the Canada Revenue Agency. That compares to 17 per cent reported by the Montreal Canadiens Children's Foundation, the lowest figure among the country's six NHL club foundations. The other four team foundations reported internal costs of between 42 and 65 per cent in 2009.

Many of the typical fundraising activities of sports foundations like Team Up come with big overhead. Every dollar that comes in from game night 50/50 draws – lotteries that direct half the ticket sale proceeds to the charity and the other half to a winning ticket holder – only bring in 40 to 45 cents on the dollar. It has the lowest net and highest expenses against it. ... From the 50 cents the foundation is getting, it must pay for the lottery licences, the ticket printing, and someone to manage the program. It's a high cost.

The Edmonton Oilers Community Foundation showed the highest fundraising costs among Canadian NHL club foundations. It spent 65 per cent of its revenues on internal costs in 2010. That dramatically high spending - totalling $6.5 million last year and $9.1 million a year earlier – is largely attributable to a high-profile lottery that includes lavish prizes such as cars, trips, and a luxury home.

The Edmonton Oilers Community Foundation Experience

Research suggests the EOCF’s Winner’s Choice Lottery was discontinued around 2013 following negative publicity (including the Toronto Star article referenced above). A 2010 article in the Edmonton Sun stated:

A lavish lottery puts Edmonton Oilers Community Foundation in last place among Canada's hockey team charity foundations, with it spending a large majority of its donated money on fundraising. The foundation spent 81% of its income on fundraising costs in 2008, and 67% in 2009, according to Canada Revenue Agency files. CRA wants charities to spend 35% or less on fundraising costs, says Kate Bahen of Charity Intelligence. "Ideally it should be below 20%," she said.

The EOCF brought in $11.7 million from fundraising in 2008, according to their tax return, published online by CRA. They spent $9.4 million on fundraising and administration -- 81% of what they took in. They were slightly more efficient in 2009, spending $6.9 million to rake in $10.3 million. That's about 67 cents on every dollar raised going to costs. In both years, the foundation hired professional fundraisers and paid for big ticket prizes.

If you discount the professionally run lotto, Oilers spokesman Allan Watt said the foundation would only spend about 40% on administration. "I'll admit that the lottery expenses are high, but the profile is fabulous, and at the end of the day, we're setting aside millions for a (new downtown high school) that may cost as much as $20 million," said Watt. Oilers Foundation numbers tower over those of other Canadian clubs.

The numbers for the Oilers and other Canadian sports team foundations were published by the Toronto Star. The Calgary Flames Foundation raised less than the Oilers', raking in $3.9 million in 2008. But they spent only $1.5 million to raise donations -- 37% of revenues. The Star reported fundraising and administration consumed 55% of the $1.5 million raised last year by Team Up, a Toronto foundation supported by a number of its major sports clubs. The Montreal Canadiens Children's Foundation spent 17% of its take on fundraising costs, the lowest figure among the country's six NHL club foundations. Back here at home, the Edmonton Community Foundation raised $21.5 million in 2008 by tax-receipted donations and spent only $4.2 million. "It doesn't apparently seem to matter that when you raise serious money you have to spend serious money ... It's what they do with the money that really counts," said Bahen. "I think people get fixated on how much is spent on fundraising and what is spent on administration. "You like to see absolutely the most of what you give go to charities. "But how many disadvantaged youth are better off today because of the Edmonton Oilers, and that's what counts," she said.

In a May 2, 2010, rebuttal to the Edmonton Sun article, Bruce Saville, chairman of the Edmonton Oilers Community Foundation, stated:

All charities are required to report financial records annually by Canada Revenue Agency (CRA), but the financial reporting format required by Revenue Canada with regards to foundations makes some large assumptions that require some explanation. Most importantly, according to CRA, all fundraising expenses are reported in one category -- total expenditures. The report stated our total expenditures are 81% of revenues. However, the EOCF administration expenses last year were only $262,000 after raising $10.3 million of revenue, or about 2.6% of revenues. The balance of these costs was all "program expenses," as I will explain further.

The Edmonton Oilers Community Foundation is unique among NHL teams in that we hold an annual lottery as part of our annual fundraising strategy. In fact, in accordance with CRA regulations, all Winner's Choice Lottery prizes are reported as fundraising expenses. The industry standard for prizing expenses for large lotteries is between 60-80% of gross ticket sales, no matter if you sell 85% of available tickets or 100%. Lotteries of this kind are risky business, but this is just one of the obstacles foundations manoeuvre in order to raise substantial funds for our charities.

Our lottery and all charity lotteries are highly regulated by the Alberta Gaming and Liquor Commission and all the prizes must be awarded. Sure, there is a certain amount of risk associated with these types of fundraising activities, but there is also substantial opportunity and that's why charitable organizations undertake them. It is also extremely important for the many fans in Oil Country, and especially those people who have supported our foundation, to know that when we have a 50/50 draw at every Oilers home game, the $60,000 prize pool distributed to a winner and to charitable groups, minor hockey, and ringette teams are both recorded as a fundraising expense. That's right -- 100% of our 50/50 revenue is expenses (the charitable donations and lucky winners' prize payouts), according to CRA reporting rules. Since 2002, more than $5 million has been paid out from 50/50 activities at Rexall Place to minor hockey, ringette, and charitable groups in northern Alberta -- no small feat -- and another $5 million to hundreds of lucky winners.

We would like Sun readers to know we have also committed to redevelop a new and much needed Edmonton Inner City High School for the Inner City Youth Development Association. When our financial year was completed in June 2009, the Edmonton Oilers Community Foundation had proudly distributed $1.5 million to charitable groups and contributed more than $1.9 million to our Inner City High project, generating over $3.4 million for local charities. Our volunteer board of directors makes sure our work and our community contribution are very worthwhile. And, our organization is involved from top to bottom, including Oilers staff, players, wives, and families who see it as a requirement to help us as a result of being part of the Oilers family.

The original story didn't delve into how important and difficult the job of fundraising for charities really is. Yes, it is risky, because we, the foundation, must pay upfront costs and develop brilliant marketing campaigns that will attract donations from you, the people of Oil Country. On top of that, we have to find volunteers who can sell more than $60,000 worth of 50/50 tickets at Oilers and Oil Kings home games. All EOCF costs are scrutinized by a volunteer board of directors, and staff members work nights and weekends to do good things for those in need. The work of the Edmonton Oilers Community Foundation will continue. But, like so many charities, we can't do what we do without support from capable and hard-working media like the Sun. We don't mind answering questions. We are committed to living up to the ethical standards of the community and we handle every penny we get with utmost frugality.

The EOCF now only operates 50/50 draws that take place during Edmonton Oilers home games.

The Heart and Stroke Foundation and the Cancer Society

The Heart and Stroke Foundation of Canada and Canadian Cancer Society spend a significant amount of money fundraising for their lotteries. In 2010, the CCS spent $26.7 million to promote its lottery, which in turn brought in $29.5 million for the organization, a profit of $2.8 million. The HSFC spent $31.9 million on fundraising for its lottery, which brought in a total of $44.7 million, a profit of $12.8 million.

In 2014, the two Alberta Cancer Foundation lotteries brought in $929,237 after expenses. In 2013, the prizes cost the foundation a total of $2,631,792 while marketing and other expenses came to $1,627,883. Daryl Silzer, the associate vice president of fund development with the Alberta Cancer Foundation, said that lotteries can be expensive to run but raise valuable awareness about cancer research.

4 Kids Provincial Lottery

In 2010, a lottery that benefits three Alberta children's charities was in danger of losing money. With less than a week to go before the draw, the 4 Kids Provincial Lottery had sold just 57 per cent of its tickets. Organizers said they must sell at least 62 per cent to break even, and more if they hope to provide proceeds to three children's groups, including Big Brothers Big Sisters of Edmonton. "Being one of our largest fundraising efforts, this causes us some challenges," said Lana Tordoff, spokeswoman for Big Brothers Big Sisters. "This will not impact our ongoing program delivery, but it will impact the development of programs."

At the rate of ticket sales, the lottery was projected to finish about $18,000 below its break-even point. The lottery, in its 16th year, brought in a total of $4.5 million for its charities over that time. But it struggled in 2009 and 2010, which organizers say is due to a combination of factors. Tordoff said the sluggish economy remains a problem, and the lottery recently went through a rebranding that may have confused some consumers. In addition, there was a change in the prize structure. Previously the top prize was $1 million cash, and valuable consumer goods were offered as secondary prizes. The lottery went to an all-cash format, with the top prize lowered to $700,000.

"There are lots of lotteries, and there are a range you can buy. So I expect reducing that prize did reduce the excitement or interest around the project," said Elizabeth O'Neill, long-time executive director of Big Brothers Big Sisters of Edmonton. She said the charity groups will meet to talk about how to improve the lottery's performance. Besides Big Brothers and Big Sisters of Edmonton, it benefits the same group in Calgary as well as the Children's Cottage Society of Calgary. Tordoff said organizers had the option of extending the deadline but chose not to because it would increase advertising costs.

Big Brothers and Big Sisters of Edmonton currently still conducts a Dream Home Lottery annually.

Calgary Lotteries During the Economic Downturn

Calgary lotteries that offer up lavish homes, luxury cars, and exotic vacations in support of local charities have seldom struggled to convince people to take a chance at winning big in support of a worthy cause. But as Alberta's economy continues to struggle, those who run the lotteries are being forced to adapt. "The times are changing – the economy is in a difficult situation right now," said Sean Libin, president of the Kinsmen Club of Stampede City, which runs the annual Kinsmen Lotto for the Children's Hospital. "We wanted to sell out this year [2016], but the math and trajectory do not indicate that's feasible."

In May 2016, the lottery that supports Alberta Children's Hospital kicked off with special entry-level ticket pricing, creating a $50 single ticket alongside pricier ticket packs. The charity also took the city's economic realities into account with its prizes, offering up a pair of more modest homes as grand prizes, and ditching the usual luxury vehicle offered in its early bird draw for $4,000 of tax-free cash monthly over the next five years.

Even with those incentives, Libin said sales haven't been what they were hoping. On average, the lottery had been able to hand over about $1.2 million to Alberta Children's Hospital annually, but last year only managed about half that amount. "This year we expect that to drop even further," Libin said.

In July 2016, the 17th Cash and Cars Lottery in support of the Alberta Cancer Foundation launched with lower ticket prices prompted in part by the economic downturn. Daryl Silzer with the Alberta Cancer Foundation said they've managed to weather the storm over the past couple of years, but recognize times are tough for their supporters, even those who step up every year to support a cause close to their hearts.

Silzer noted in addition to rolling out lower ticket prices, they're going back to basics on their brochures, swapping out pictures of the top prizes on the glossy cover with images of Calgary's Tom Baker Cancer Centre and Edmonton's Cross Cancer Institute, the two facilities supported by the lottery. Earlier in 2016, STARS Air Ambulance made an unprecedented plea to supporters of its annual lottery, with only 80 per cent of tickets sold by its early bird cut-off. The appeal had the desired effect, with people snapping up nearly $2 million worth of tickets in three days, allowing it to sell out. The eleventh-hour support prompted a heartfelt thank you from the non-profit society that operates the aircraft, with special decals declaring "Times are tough Albertans are tougher" placed on its choppers until next year's lottery to honour their benefactors.

Insights, Counsel, and Cautioning, from Stride Management

On September 9, 2019, ViTreo’s Andrea McManus spoke with Dean Faithful, President, and Shane Simmons, Senior Vice-President, of Stride Management. Stride has been involved in almost every major charity lottery in Alberta in the past 20 years including the Alberta Cancer Foundation, STARS, the Children’s Hospital Foundation, Big Brothers / Big Sisters, Stampede, and many others. Dean and Shane offered a forthright assessment of the lottery market in Alberta. Their observations are summarized here:

·      Selling tickets has been a struggle in the past four years due to the economy and reduction in disposable income.

·      There is not really an open window for any new campaigns. Any new lottery would be competing against well- established ones. For example, Stars has been in the market for 26 years, the Alberta Cancer Foundation almost as long.

·      Outside of health care, lotteries are challenging because many other causes, e.g. amateur sport, are not seen as a necessity.

·      Very few lotteries are selling out these days. Most are topping out at 75%.

·      The dollar commitment depends on the size. Smaller lotteries ($4-5 million) must put dollars up front by way of a bond. 

·      A conservative estimate to initiate a lottery is $250,000 (to cover assessments, planning, creative design).

·      An estimate of a marketing budget would be $500,000 - $750,000 for a $5 million province-wide lottery.

·      A prize pool must be guaranteed through a financial institution re payment and a warrant must be executed that the organization will not spend $1 of gaming dollars until the prizes are paid for.

·      Budgets are typically 1/3 prize purchases, 1/3 expenses, and 1/3 revenue – although with lower uptake on tickets this is usually 18 – 25% currently.

·      The Stollery Children’s Hospital Foundation is the most recent entry into the market (5 years) and they lost $2 million their first year.

·      The Calgary Home Builder’s Association launched a lottery several years ago thinking their members would buy tickets. They lost a significant amount of money and cancelled it halfway through.

·      Relying on user groups to sell tickets is not realistic and there is usually little uptake. They simply don’t buy and Stride considers this to be a high risk lottery approach.

·      Stride gets calls every day re new lotteries. Many of these calls they don’t take and they wouldn’t handle a lottery for amateur sport that was relying on user groups to sell tickets. They would, however, take a meeting as a professional courtesy.

Inventory of Major Fundraising Lotteries Operating in Alberta in 2019

Alberta Cancer Foundation

Founded in 1985, the Alberta Cancer Foundation's (ACF) mission is to deliver progress in cancer research, prevention, treatment and care by generating community investment for Alberta's coordinated research strategy, the Cross Cancer Institute, Tom Baker Cancer Centre, and 15 other cancer centres throughout the province. The ACF makes grants to research, patient programs, screening and early diagnosis, access to leading-edge equipment, continuing education for clinicians and researchers, and training for the next generation of cancer specialists and researchers.

The ACF hosts the Cash & Cars and More Lottery jointly with the Canadian Cancer Society Alberta. Proceeds are split by the two organizations. 2019 is the 20th annual ACF lottery.

Features

·      Cash value of the “You Win 50” prize will be a minimum payout ($360,000) or 50% of ticket sales, whichever is greater. The current jackpot as of this report is $816,475.

·      The Cash and Cars Lottery has three grand prizes and two early bird prizes.

·      2,675 prizes worth more than $3.8 million.

Historical Data

·       In 2014, the two lotteries brought in $929,237 after expenses.

·       The prizes cost the foundation a total of $2,631,792 while marketing and other expenses came to $1,627,883.

STARS

Shock Trauma Air Rescue Service's (STARS) primary service is a helicopter air ambulance service to provide transportation and emergency medical care to patients in need. STARS operates in Alberta, Saskatchewan, and Manitoba. STARS also offers education and training services for its staff and medical care partners, and operates an Emergency Link Centre (ELC) to coordinate emergency rescue activities across its service area.

STARS holds an annual lottery. 2019 is the 26th annual STARS lottery.

Features

·      The organization's single largest fundraiser.

·      The 2019 STARS lottery offered 2,809 prizes valued at over $4.5 million, including three dream homes, a loyalty prize of $100,000 cash, an early bird prize worth $963,395 in retail value, a 50/50 of up to $2 million, and others.

·      The projected net for the 2019 Alberta Lottery is $11 million at sell-out, enough to run a STARS base for a year, and will go to its three bases in Grande Prairie, Edmonton, and Calgary.

·      Lottery is managed by Black Fund Development Inc. and the auditor is Stewart and Associates.

·      STARS lottery ticket purchasers have made the STARS lottery a success for more than two decades, raising more than $11 million net annually.

·      In 2016, though overall demand for tickets for the STARS Alberta Lottery was down, demand for smaller ticket packages was high, with $25 and $60 ticket packages selling out quickly. In response, the STARS Lottery has redistributed some of the pricier ticket packages, splitting them into more $25 and $60 packages in the hopes of reaching its fundraising goal.

·      The lottery retains an average of 55% of revenues for the charity.

Calgary Health Trust

Founded in 1996, Calgary Health Trust (CHT) connects donor passions with health care needs in the Calgary region. CHT raises funds for medical equipment, capital projects, and patient care and program support at the Foothills Medical Centre, Peter Lougheed Centre, Rockyview General Hospital, and Women's Health.

CHT operates two lotteries annually; the Lottery and the Foothills Home Lottery with a most recent grand prize of a $2.6 million estate home in the lake community of Mahogany. Established in 1993, the Foothills is the city's first and longest-running home lottery.

·      Over the course of its first 21 years, the lottery raised more than $53 million and sold in excess of 1.6 million tickets.

Alberta Children’s Hospital Lottery

The Kinsmen Care Foundation operates a lottery to fund the Alberta Children’s Hospital Foundation (ACHF). Founded in 1957, ACHF raises funds for excellence in child health, research, and family-centred care. In 2006, it helped fund the building of a new children's hospital.

Annually, the Kinsmen Care Foundation runs the Kinsmen Lotto on behalf of the ACHF with a current grand prize of a $925,000 show home. 2019 is the 27th annual ACH lottery.

·      1,376 prizes worth over $2 million.

·      26,000 single tickets at $100 each, 5,200 sets of 5 for $250, 2,750 sets of 16 for $400, Total of 96,000 tickets sold.

·      Lottery is managed by Stride Management Corp.

Big Brothers Big Sisters of Edmonton

Big Brothers Big Sisters of Edmonton merged with the Boys and Girls Clubs of Edmonton in 2011 to jointly support the children and youth of Edmonton through the provision of safe places to be between school and home, and caring, supportive mentoring relationships.

The 2019 Dream Home Lottery represents the 39th annual lottery for BBBS Edmonton. The two Dream Home grand prize packages were worth $1.3 million each. 

Stollery Children's Hospital Foundation's Mighty Millions Lottery

The Stollery Children’s Hospital Foundation raises money in support of the pursuit of excellence in children’s health care.

·      The 2019 grand prize is a $2.4 million show home.

·      In 2018, Albertans made the SCHF’s lottery a sold-out success for a second straight year with net proceeds exceeding $2 million.

Red Deer Regional Health Foundation

The Red Deer Regional Health Foundation was founded in 1993 and has the mission of enhancing health care excellence in central Alberta by raising funds to provide state-of-the-art medical equipment and services.

The Foundation holds their annual Hospitals’ Lottery offering a Grand Prize Dream Home (value of $881,000 in 2018).

·      Tickets: 1 for $10 | 10 for $25 | 25 for $50.

·      Total Tickets Printed: 217,950.

·      Project auditor is BDO Dunwoody Limited.

·      Ticket control and distribution is managed by Stride Management Corp. in Calgary.

Royal Alexandra Hospital Foundation

The Royal Alexandra Hospital Foundation (RAHF) raises funds to support the Alberta-based Royal Alexandra Hospital, as well as other causes such as the Lois Hole Hospital for Women and the CK Hui Heart Centre.

RAHF operates the Full House Lottery, which is shared with the University Hospital Foundation. Full House Lottery is in its 26th year of operation.

·      Over $77 million raised and more than 100,000 winners in the 25 years of the Full House Lottery.

·      Grand prize in 2019 was a $2.4 million show home.

·      50,900 single tickets for $100.

·      14,500 bundles of 3 for $250 (43,500 actual tickets).

·      1,500 bundles of 5 for $375 (7,500 actual tickets).

·      5,900 bundles of 10 for $575 (59,000 actual tickets).

·      In 2019, if all Full House Lottery tickets, 50/50 Extra tickets, and Thousands a Day Giveaway tickets are sold, the Royal Alexandra Hospital Foundation and the University Hospital Foundation will receive over $5.6 million.

Alberta SPCA Spring Cash Lottery

The Alberta Society for the Prevention of Cruelty to Animals (Alberta SPCA) is a registered charity dedicated to the welfare of animals. It encourages the humane treatment of animals through enforcement of animal protection legislation and through education programs throughout Alberta.

The Alberta SPCA holds an annual Spring Cash Lottery.

·      Grand prize is $25,000.

·      $90,000 in total prizes.

Calgary Stampede Lotteries

Proceeds are shared with Stampede service club partners, the Rotary Club of Calgary South, and Kinsmen Club of Calgary to support the programs they operate.

·      $1.3 million donated in 2018.

·      Over the last 10 years, more than $21 million has gone back to support community programs.

Caritas Foundation Dream Lottery

The Caritas Foundation supports Covenant Health in Edmonton.

The Foundation holds an annual “Dreamlife” lottery. The lottery is in its 27th year of operation.

·      Grand prize in 2019 is a $2 million home.

·      Total 379,220 Split 50 tickets sold.  

·      Lottery managers are Calder Bateman Communications and ZGM Modern Marketing Partners.

·      The ticket management company is Stride Management Corp.

Swan City Rotary Club Cash and Camping Lottery

Rotary is an organization of business and professional leaders united worldwide, who provide humanitarian service, encourage high ethical standards in all vocations, and help build goodwill and peace in the world. The Swan City Rotary club is made up of more than 100 men and women representing a large cross section of the business and professional community.

The Swan City Rotary Club, founded in May 1985, offers two annual lotteries (“Cars for Christmas” and “Cash and Camping”) to fund numerous service projects and support a variety of local organizations.

·      In 16 years, the lottery has raised over $4.7 million.

Edmonton Humane Society Spring Lottery

The Edmonton Humane Society enriches the lives of people and companion animals through animal sheltering, programs and services, and community engagement.

The EHS operates a lottery every spring.

Prizes:

·      Early Bird: 2 @ $6,000 (April 10, 2019).

·      32 @ $500 (June 12, 2019).

·      6 @ $1,000 (June 12, 2019).

·      2 @ $2,500 (June 12, 2019).

·      Grand Prize: $15,000 (June 12, 2019).

Rotary Club of Grande Prairie Dream Home Lottery

Rotary in Grande Prairie dates back to its charter on January 22, 1951. It holds an annual Dream Home lottery.

Chinook Regional Hospital Foundation 50/50 Pay Day Lottery

The purpose of the Chinook Regional Hospital Foundation is to raise, receive, and distribute funds for equipment and programs that will enhance patient services and health programs in the Lethbridge area.

The Chinook Regional Hospital Foundation 50/50 Pay Day Lottery is a bi-weekly draw, drawn every second Wednesday.  

·      Tickets are $5.00 each.

·      On average, winners take home over $5,200.

Oil Barons Dream Home Lottery

The Fort McMurray Oil Barons are a Junior A ice hockey team in the Alberta Junior Hockey League.

The team holds an annual Dream Home lottery.

·      2018 grand prize was a $1.1 million home.

·      500 sets of 7 for $500, 3,500 sets of 3 for $250, and 10,000 single tickets for $100 available.

·      Total Tickets Printed: 24,000.

Medicine Hat Kinsman Home Lotto

The Kinsmen Club is an all-Canadian service organization made up of active community volunteers.

The Medicine Hat club operates an annual home lottery.

·      2019 grand prize was a $500,000 home.

Red Deer Kinsman Club Dream Home Lottery

The Dream Home Lottery is the main fundraising project of the Kinsmen Club of Red Deer

Sources

Campbell, Colin. “Non-profits and gambling expansion.” Gambling in Canada Research Report No. 9. Canada West Foundation. December 2000.

 Cribb, Robert. “Donor dollars eaten up by costs: Lavish dinners, administration costs consuming sports charity donation cash, investigation finds.” Toronto Star. 24 Apr 2010: 1.

Gerein, Keith. “Lottery to help kids doesn't have enough tickets sold; Edmonton's Big Sisters Big Brothers affected.” Edmonton Journal. 17 Oct 2010: A.7.

Logan, Shawn. “Calgary lotteries slash prices, expectations as ticket sales decline.” Edmonton Journal. 27 July 2016: A.7.

Peloza, John and Derek Hassay. “Does vice make nice?: The viability and virtuousness of charity lotteries.” Journal of Nonprofit and Public Sector Marketing. Vol. 18 (1) 2007, pp.57-80.

Reynolds, Jennifer. “Hospital charitable lotteries: Taking a gamble on systems thinking.” Journal of Evaluation in Clinical Practice. Dec 2013, Vol. 19 Issue 6, p 1090-1094.

Robinet, Karen. “Cancer Society under scrutiny nationally.” The Courier Press. 14 July 2011: 5.

Sylvester, Erin. “Two dream homes, cash up for grabs; Alberta Cancer Foundation launches fundraising lottery.” Calgary Herald. 07 Aug 2015: A.6.

Ubelacker, Sheryl. “Hospital lotteries could pose danger to problem gamblers.” The Canadian Press. Sep 2013.

“Winners and Losers.” W - FIVE - CTV Television; Toronto. 16 Nov 2013.

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