Sometimes you just have to take a chance and see what happens.

This philosophy applies to many of us who like a little risk in our lives, especially when the gambling bug bites us. So it’s little wonder that some charities have made the charity lottery a staple fundraising mechanism in their yearly campaign drives. It’s a sexy way to entice donors – huge cash, home, car and boat lotteries have become in vogue, and with better odds of winning – to make a contribution all for a good cause.

But with the worldwide recession in full swing, is the charity lottery still a sure bet when donors are watching their dollars more than ever? Perhaps more importantly, is it still ethical to continue using them?

According to some, the recession has actually increased participation in lotteries.

No whammies

Andrea Lloyd, general manager of response marketing for the Heart and Stroke Foundation of Ontario, says their lottery is still in great shape and has garnered considerable funds for the foundation’s research arm since it first rolled the dice more than a decade ago.

“The foundation runs two lotteries per year in Ontario and has raised $156 million net revenue since it was first launched in 1997,” she tells CharityVillage. “The past couple of years have shown positive results for the Heart and Stroke Foundation of Ontario Lotteries. Our Winter 2009 lottery, which just ended in February 2009, sold out early. The recession has not had a negative effect on our performance so far.”

Despite this positive outlook for HSF Ontario’s lottery, figures relayed by Lloyd to CharityVillage show that actual ticket revenue for the last two lotteries has dropped more that $2 million. The 2007 lottery garnered $12,870,000, while the 2008 campaign brought in $10,741,000. That’s still impressive, considering the economic times, but a decided drop nonetheless.

However, other large charities in the country also echo no major impediments to their events.

Wish upon lady luck

The Saskatchewan chapter of the Children’s Wish Foundation (CWF) has so far managed to weather the economic storm with its annual lottery. Carla Loney-Tindall, director of CWF Saskatchewan chapter, says she is optimistic about the prairie province’s campaign this year, anticipating a great ticket haul.

“Let me start by saying that the Saskatchewan economy is holding strong and we have not experienced the economic downturn that other Canadian provinces have,” she asserts. “The CWF [Saskatchewan] Home Lottery has had great success in the past two years with ticket sales tracking slightly better each year. This may be a combination of having a strong Saskatchewan economy, growing awareness of CWF, plus new marketing initiatives to sell tickets into other regions of the province.”

Loney-Tindall adds that her chapter recently made the switch from focusing its lottery strictly on the city of Saskatoon – something it had done for 20 years – to canvassing a larger area of the province, which may also account for maintaining revenue and growth throughout the last two years.

But that doesn’t mean everyone’s a winner.

A January report in the Edmonton Journal told how the Caritas Hospital charity lottery – one of the city’s more high profile and longest-running lotteries – was struggling mightily to break even this year. It had hoped to net more than $2.3 million from ticket sales but settled for less than half that amount after extending the deadline for purchasing tickets.

Despite the upside of generating a lot of needed cash for worthy causes, there are those who continue to question whether this method of fundraising is truly necessary.

Raising the ethical stakes

Ken Wyman, CFRE and one of the country’s more renowned gurus on fundraising, raised the thorny question of ethics in charity lotteries when contacted by CharityVillage for this article.

“We have to take the ethics of the situation into account. Is it really appropriate for charities to make money off a technique that may victimize gambling addicts, and make a disproportionate share of the revenue from people who are not economically secure?” he asks rhetorically.

Wyman says that though lucrative for many larger charities, the lotteries and the advertising dollars that go into them “worry” him.

“The [Canada Revenue Agency] rule is that you must give away all the prizes whether or not you sell enough tickets. In most cases the prizes are purchased, not donated, so the expenses are staggering. Marketing alone can consume a third of the revenue in a successful lottery,” he says.

Lloyd disputes this, insisting that while most prizes in the Heart and Stroke lottery are indeed purchased, the expenses are “not at retail prices – wholesale or discounted prices based on volume. Some prizes are donated or sponsored, whereby the cost is subsidized in exchange for exposure in the lottery marketing materials.” She adds that the foundation’s lottery “has always generated a strong return after all prizing marketing costs.”

Wyman says he’s heard of lotteries losing “more than $1 million each” due to undersold ticket revenue over the last couple of years, and deciding to get out of the lottery game. “They did their best, tested the waters, and there were not enough buyers. Happens to businesses too,” he qualifies.

Another of Wyman’s concerns is that he feels charity lotteries fail to attract a stable donor base for those involved.

“Lottery ticket buyers seldom convert into pure donors to the charity. If you want to get more support from them, you usually have to run another lottery,” he says. “As prize packages get bigger, it is harder than ever for small charities to compete. Why would I buy a $5 ticket for a local draw when the same money might win mega-millions? Well, because the odds are better…or because a friend asked me to, and I don’t really care about the prizes.”

Additionally, for those who don’t know, Wyman reminds that according to CRA regulations, charity lottery ticket purchases are considered entertainment, not a direct donation, so tax receipts are not issued for them. Meaning most “donors” aren’t even getting that incentive. But if a charity absolutely has to go the lottery route, Wyman suggests the following:

“I’d love to see a lottery where every ticket was a winner, by making them worth at least the purchase price in discounts off purchases of pizza, doughnuts, hardware, clothes, or some other product,” he states.

Still, he agrees that for smaller scale charities, lotteries and raffles are still sometimes the best option to keep the operation afloat.

Andy Levy-Ajzenkopf is president of WordLaunch professional writing services in Toronto. He can be reached at andy@wordlaunch.com.

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