July 23 (Bloomberg) -- Livestrong, the cancer support charity that in November ended its relationship with founder Lance Armstrong because of his use of performance-enhancing drugs, had donations drop 8.1 percent to $22.7 million last year from 2011, according to an Internal Revenue Service filing.
The U.S. Anti-Doping Agency banned seven-time Tour de France winner Armstrong from cycling in August, and he resigned as Livestrong’s chairman in October. Armstrong said in January that he cheated in all of his tour victories from 1999-2005.
Last year marked Livestrong’s third straight in which donations fell as speculation swirled about whether Armstrong used drugs to become cycling’s most successful rider. Support dropped 25 percent from 2010 levels and 45 percent from its $40.1 million in 2009 donations, according to the IRS Form 990 filing, which was provided to Bloomberg News by the charity.
“It could get worse,” said Doug White, an adjunct professor in the Fundraising Management masters program at Columbia University in New York.
Livestrong, based in Austin, Texas, generated $38.1 million in revenue in 2012, a 19 percent decline from the previous year, according to the filing. The charity’s own measurement of revenue, including items such as unrealized investment gains and in-kind donations, put it at $48.2 million in 2012, about $613,000 less than the previous year, according to Livestrong Chief Financial Officer Greg Lee.
“Considering the headwinds, with Lance’s activity, with the ongoing investigation that was happening, and forgetting just the general economic condition of the country and still finding its way out of that, we felt very good that we came out of the year literally being $700,000 down,” Lee said in a telephone interview.
Livestrong also deferred about $745,000 in donations that would have been tied to the New York City Marathon, which was canceled in the aftermath of Superstorm Sandy, Lee said.
“In the grand scheme of things we don’t view 2011 and 2012 as being any different,” Lee said, adding that the number of contributions rose 3.5 percent in 2012. “Contributions changed a little bit, license fees changed a little bit, but in overall terms, there was not any dramatic change.”
Licensing revenue was down $5.5 million, or 35 percent. In 2011, Livestrong got $2.6 million for its ownership stake in Demand Media Inc., which operates the for-profit website Livestrong.com, when it went public.
Nike Inc. will discontinue its production of Livestrong-branded apparel, accessories and shoes following the 2013 holiday collection, though it will continue to honor the terms of its relationship with the charity through 2014, according to Katherine McLane, a spokeswoman for Livestrong.
“We look at 2013 as a rebuilding year,” McLane said in a telephone interview. “We expect there to be impact on the foundation’s revenues.”
The charity is at about $16.4 million in revenue through April, compared to about $17 million a year earlier, Lee said.
White, who teaches fundraising, ethics and non-profit governance, in June 2011 said that Livestrong could lose 10 percent to 20 percent of its support if doping allegations that were then swirling around Armstrong turned out to be true.
“What I predicted to you two years ago has been horrifyingly confirmed,” White said in a telephone interview. “At the time I gulped, thinking I might have overstated the prediction, but it’s actually been a 45 percent drop in a three-year period.”
Livestrong is undertaking a strategic planning process to ensure “that patients and survivors receive the maximum return on the foundation’s programmatic investments,” McLane said.
Some charity experts, including White, suggested during the Armstrong scandal that Livestrong consider changing its name or merging with a charity whose mission is similar.
“Every idea has been on the table,” McLane said. “We found that there is tremendously positive association around the Livestrong brand in the minds of the public and it would be a mistake to abandon it.”
Livestrong raised its investment in programs to 84 cents per dollar of support from 81 to 82 cents, McLane said.
“At a time where some would say, ‘Wow, your income is going down,’ our expense and investment in the cancer community was going the other way,” Lee said.
Livestrong’s mission is to work with cancer patients and survivors to determine what challenges they face, to develop programs in English and Spanish to anyone in the U.S. who suffers from those challenges, and to advocate on the local, federal and global levels for funding and policies that benefit survivors.
It had $962,974 in legal fees in 2012, of which “not one red nickel” was related to Armstrong’s personal or business activities,” Lee said.
“We continually get calls, questions about legal fees,” Lee said. “There is some belief that this is just a sham to do stuff for Lance. That is simply not true.”
The charity appears well-run, with “a lot of good mission activity” and financial numbers that are balanced,” according to White.
Armstrong, 41, was diagnosed in 1996 with testicular cancer that spread to his lungs and brain. He created the foundation the following year and is its biggest donor, having given more than $6.5 million. He also made at least $221 million since turning professional, according to a compilation of his earnings by Bloomberg News.
Colorado Springs, Colorado-based USADA detailed its case against Armstrong on Oct. 11, calling his cycling career one “fueled start to finish by doping.” He resigned as Livestrong chairman on Oct. 17 and left its board on Nov. 4.
There were 28 mentions of the word Armstrong in the charity’s 2011 annual report. A year later there was one, the inclusion of the Armstrong Family Fund under a listing of endowments.
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