Board Annual Giving

Every foundation board must give to the Annual Fund at the level of 100 percent participation. Board participation rates are publicized in proposals to foundations, to the staff and faculty during the employee annual giving campaign and in annual reports to the community. Taking board support as a given, the goal is to realize the maximum amount of support in the most efficient manner.

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Begin the fiscal year with board of directors giving, to “prime the pump”, and put some numbers on the board during July, the slowest month of the fiscal year. Board giving often comprises between 12 and 15 percent of the Annual Fund goal. The chair of the annual fund committee makes the pitch during a July board meeting. Ask amounts are determined by the CDO using the guidelines of past giving as well as the overall goal of making board giving meaningful. I start with an automatic “floor amount” of $1,000 per member. The most common board Annual Fund Ask amounts are between $1,000 and $5,000. Any amount above that is all for the better.

Thirty thousand dollars plus would be a normal yield from a board of 20 members. In fact, this is a conservative estimate. And usually, this is their personal giving, not the dollars that members may also leverage from their companies.

Here is how to make a group pitch at a board meeting: the annual fund committee chair hands out personalized pledge cards containing a specific ask amount. The chair explains that board members will have 11 months to fulfill their pledges. The chair requests that board members hand in their pledge cards at the meeting if possible. This will prevent the director of annual giving from having to chase down board members individually for their gifts over the ensuing months. You want to report 100 percent participation by the time you launch your employee annual giving campaign in August. By all means, encourage gifts of securities. These are usually paid in December.

Reduce you annual workload if you prefer by introducing multi-year Annual Fund pledges, perhaps tied to board membership terms. Just recognize that you may sacrifice a bit of flexibility for gift upgrades with this approach.

If you have difficulty reaching the board Annual Fund goal, it is usually an indication that something is wrong at the board level—unless you simply miscalculated the goal. Most likely, the problem lies in the previous practice of not making giving expectations clear. You will need to enlist your annual fund committee and chair to have private conversations with any members who do not understand that it is their obligation to give. If you are serious about the Annual Fund then you are serious about board of directors giving. Board giving is where college philanthropy begins.

The Perils of a Staff-Driven Advancement Program

The classic public higher ed advancement model is built on the triad of the college president, the foundation board, and the professional development staff. If the triad is in place and functioning well, do everything you can to maintain its effectiveness. If it is not in place, do everything to can to support the formation of the triad.

Without the president and board onboard you have a staff-driven program, and with a staff-driven program you limit your revenue to 50% of potential. You can do a lot of things right, and effectively, and still have a staff-driven program. You may have a strong Annual Fund and grants program, but you will have a weak major gifts program.

When you limit your revenue to 50% of potential you become irrelevant. That is, you cease to matter in the power dynamic of the college. You won’t receive an adequate budget or sufficient attention to get the job done. If advancement isn’t an engine, it’s a caboose. If advancement is the caboose, it will fail.

When I refer to the engine, I mean the resource engine, that term Jim Collins talks about. The major gifts program is more potent resource engine of the development program, as compared to the Annual Fund, and, it goes without saying, special events. Yet the Annual Fund must be well established for the major gifts program to launch. So there is hope for anyone running a staff-driven program raising most of the annual revenue from the Annual Fund. You just have to shift the dynamics of the advancement triad to put the president front and center and the foundation board firmly—and actively—behind you.

I wrote about engaging the president in my last blog entry. As to engaging the foundation board, you might refer to Tip #19 in my book: “Members of effective boards actively support the fundraising activities of the Annual Fund and make it a priority for personal involvement.”

After that, major gifts!

The CASE Interview: Advice for Building a Strong Advancement Program

Rereading this March 2012 interview recently reminded me that the more things change, the more we talk about the same confounding paradigm shift. I wrote awhile back in a grant analysis for a consortium of national corporate foundations that community college advancement programs tended to fall into two groups: those that “get it,” and those that sort of “get it” but don’t act. In that study, I found that 50% of colleges “got it,” with performance that correlated to that comprehension. Today, as I consider the sector as a whole, I think everyone could go farther faster, but I particularly worry about the colleges that fall into the lower 50%. It turns out that the dynamics I touched on in an interview that coincided with the publication of my book remain at the center of discussion in the current moment.

 

CASE: Given the uniqueness of community colleges and the diversity of individuals they serve, why do you think they should adopt techniques used by four-year institutions?

Klingaman: My nine-year experience as campaign director at a two-year technical college proved to me that the paradigm works.  That said, two-year colleges need to adapt techniques used by four-year institutions before they adopt them. My book covers these adaptations in detail.  But when you look at academic fundraising as a whole, the techniques of the private primary and secondary education sectors share much in common with collegiate fundraising.  The core is the academic fundraising model.  One big difference between two-year and four-year experiences is the degree to which people remain loyal to their alma maters.  I advise two-year colleges to help their alumni celebrate academic beginnings as well as graduations.

CASE: You note that you’re often shocked to hear about the state of many community college fundraising programs, which you say go through the motions without achieving defensible outcomes. Why do you think community colleges should pay more attention to metrics like return on investment? And, with this shift, what else about their fundraising culture should change?

Klingaman: Metrics begin with mission and stewardship. If we are going to devote precious resources to two-year college advancement, we should adhere to standards that exist throughout the nonprofit sector.  Fundraising costs should not exceed 25 percent to 30 percent of gross fundraising revenues, and it doesn’t matter if the college is paying the foundation program expenses. It’s not what shows up on the Form 990; it’s what we know to be the real ROI on development dollars spent. That’s stewardship. What gets measured gets done, and what gets done, gets noticed. Colleges that can show significant ROI on their advancement programs will thrive for the reasons that all well-resourced philanthropic missions do.

The degree of culture change required depends on baseline advancement performance. But if you want to create a high-performing advancement program raising a million or two million dollars a year, it will have to become a top five, or better, top three priority of the leadership culture.

CASE: You suggest that a community college designing a development program should avoid holding gala events and instead focus on establishing an annual fund. Why do you think this is a better investment? Also, when are events appropriate as a fundraising tool?

Klingaman: An annual fund is a better investment from an ROI standard. You have to take personnel costs into account when you evaluate development performance. If you are tying up three or four months around an event, the real net plummets. When you look at the performance of a major gifts program, you calculate the investment of staff time against the revenues. In addition, the opportunity cost of events is exceedingly high. You displace a range of other giving opportunities when you focus on events, including employee annual giving, giving clubs and major gifts.  It’s more productive to lead with the mission, cultivate personally and close gifts where you can put 100 percent of the gift toward the mission.  Then thank people at a recognition event.

Events are appropriate as a fundraising tool when they augment mature programs, serve niche needs and can be proven not to cannibalize other, more potentially productive programs. But if you are relying on events, the more successful they are, the more dependent on them you become.

CASE: You write that, ideally, a community college should make development “a top-three institutional priority” and that its president and foundation board should lend active support to the development initiative. Why is this kind of institutional and personal commitment important for development success?

Klingaman: Development must be a top priority of the institution to overcome the inertia that surrounds nascent, or stagnant, programs.  Fundraising—development—is hard work.  I always say you don’t do it unless you have to.  Without a significant leadership commitment on the part of the president, the leadership team and the foundation board, you end up, even under the best of circumstances, with a staff-driven program that raises perhaps 50 percent of your potential. Or you revert to special events. But the involvement and active interest of the president is key, absolutely key.  Any college that wants to raise a million dollars a year—and up—must have an escalating commitment from the president. Think 15 to 20 percent of the president’s time—and that’s for starters.

For many colleges, meaningful advancement is a challenging new world. But the proven effectiveness of leading with mission, creating personalized cultivation, building a diversified program, and closing gifts to support essential programs remains viable regardless of the intrinsic challenges experienced by the sector.  It’s a new frontier, but public secondary education is joining the fray, and it will be a more competitive universe in the future. The two-year sector needs to claim its rightful place in the philanthropic world because its mission as the gateway to the middle class is so essential.

“Five Ideas for Fifty Thousand”—for the Community College with the Tiniest Shop—or One That Doesn’t Even Have a Shop

Rudimentary as this is, it outperforms the net on many special events

Employee Leadership Giving:  Even without a complete employee annual giving program, you can launch a giving initiative that focuses on the top leadership team of the college. Because these gifts can be in the $200 – $1,000 range, this simple effort can yield $5,000 to $10,00o.

Board Giving:  Every board should give at a rate of 100%. The board Ask should start at $1,000 and go up or down from there. Yield: $15,000

Grants:  Most community colleges have grant programs in place, upon which we can leverage new proposals to private funders using a standard template for operating or scholarship support. Yield: $10,000

President’s Personal Asks:  Every president knows 5 to 10 community leaders who can be approached directly for gifts. When the president asks, the importance of the initiative is reinforced. Yield:  $7,500

Board Asking Peers: Every board member knows one or two people who can be approached for a gift in the $100 to $1000 range. I call this an “Each One Ask One” campaign.   In my book, I discuss a more robust version of this approach in context of a board-initiated giving program. A single prospect, a single Ask, and a single follow-up on the part of the board member is all it takes. It is a way to build a volunteer culture and reinforce the importance of the mission to the board. Yield:  $7,500

Total Yield: $50,000

These techniques will work for a college that has little in the way of a fundraising program in place. If you need help, a consultant can help tailor the initiative to the needs of a particular college via a phone conversation with the chief development officer or president of the college.

It’s Time to Focus on Individual Giving

More than 80 cents of every dollar given to charity comes from individuals. In good times and bad, that figure remains remarkably constant. Historically, the precise number has hovered around 83 cents per dollar raised.

Community college fundraising, however, has tended to rely on institutional giving, primarily from business and foundations, for as much as two-thirds of philanthropic revenue.

This means that opportunity abounds when it comes to donor cultivation of individuals. The sector would do well to refocus much of its attention and investment in advancement to target individual major gift prospects. This means that the major gift officer position needs to become the norm in two-year college advancement shops.

Many shops are too small to succeed in this regard. And these two- or three-professional shops often have several thorny issues that tend to be endemic. They are:

  • The chief development officer (CDO) is too wrapped up in administrative duties and meetings to meet with prospects.
  • The program has a special events focus that occupies most of the staff for most of the year.
  • Foundation staff is preoccupied with a portfolio of activities that are relatively ineffective from an ROI perspective.

Classic donor pyramid logic informs us that we need to expand the base and move ‘em up. That means we need to focus primarily on individuals. We need to test the commitment level of loyal Annual Fund donors by cultivating them to make special gifts—that giving category one step up from their baseline Annual Fund gift amounts. This often means gifts of $1,000 to $5,000. They are not quite major gifts. Nor are they gifts for which you just send out a personalized letter if indeed they are a stretch commitment for the donor.

We need to remember that stretch capacity and stretch commitment are two different things. It is hardly rocket science to observe that donors who have the capacity to give at a higher level but don’t simply don’t have the commitment, the donative intent. We foster the commitment by cultivating special gifts as if they were major gifts. And, with time, and attention, and properly qualified prospects, they will.

So if I was setting up a major gifts program in a college that is still testing its individual giving prospects, I would have my major gifts officer take a portfolio of some special gift prospects in addition to his or her bona fide major gifts prospects.

The takeaway? People step up to the plate when they are asked to do so, in the context of mutually informed conversations, (not necessarily pitches) where the donor’s wide world of philanthropic opportunities is acknowledged and respected. Very often, the key to a donor’s interest is not what you say, but in how you listen and respond in such a manner that shows that you really did listen.

It’s an advancement perspective that is refined by constant practice. If the advancement staff is only making, in the aggregate, two or three face-to-face donor contacts a week, it will be mighty hard to build the necessary momentum for an institutional major gifts emphasis.

But the time for such a focus has arrived throughout the sector, and you can’t argue with the reality that the real money is in the hands of individual donors.

Sixteen Things to Look For in a College Foundation Form 990

One reason to review a college foundation Form 990 is to verify that the foundation actually does what it says it does—a useful thing to know for grantmakers, development audits, benchmarking, and prospective executives.

Here are 16 issues a Form 990 can help address:

  1. Do the numbers on the Form 990 support the amounts shown elsewhere?
  2. Personnel expenses paid for by the foundation (Usually the college pays for personnel expenses.)
  3. Outside fundraisers or fundraising consultants paid by the foundation
  4. College payments made to the foundation
  5. Endowment information, including decreases in endowment balances that may reveal the foundation is not properly managing endowments
  6. Event revenue and expenses paid by foundation, including grosses & nets (This can be tricky and requires reading the entire return.)
  7. Five-year history of fundraising revenue
  8. Diversification of revenue (you’ll get a partial picture)
  9. Two-year trend in grants amounts paid to college
  10. Program areas of grants to college
  11. Total foundation expenses
  12. Revenue less expenses
  13. Existence of uncommon organizational practices, revenue streams, and operations
  14. Number and names of board members
  15. Unrelated business income
  16. Investment management fees

On Colleges with Advancement Issues

When I talk to college presidents at colleges with dormant or underperforming advancement programs, they are quick to express their commitment to advancement and their good intentions for improved performance. Unless this stated interest is matched with institutional commitments to meet quantifiable metrics, however, the prognosis for improved performance is weak.

Fund raising is hard work. Most nonprofits excel at it only when their survival depends in some measure on their success in this arena. For those that don’t perceive fundraising to be an essential, core activity of the college, promoting culture change from the outside is extremely difficult. If a college tells you they are serious about fund raising but leaves the chief development officer position open for a year, the inertia speaks louder than words.

When a dysfunctional advancement program is an issue, what motivates a change in institutional behavior is real need, a commitment to change, the implementation of real metrics, and evaluation of outcomes. That, and the personal involvement of the president, who must invest time, cultivate prospects, and be prepared to make a few asks.

Visionary leadership on the part of the president can—and should—jump-start the whole process.

 

Six Best Practices for College Annual Funds

The best way to fund annual operating support in the long term is through the development of sources for repeatable, sustainable gifts—in short, the Annual Fund. The following best practices are key indicators of community college capacity to raise funds to support annual operations.

1. Raise funds as part of a well-defined Annual Fund.

2. Develop a diversified funding base with multiple revenue streams specific to the Annual Fund.

3. Raise funds for restricted funds in addition to scholarships by making the case for support to the college beyond scholarships in the same manner as four-year colleges make restricted appeals.

4. Commit to a specific Annual Fund goal and increase that goal by a realistic percentage every year.

5. Ask perennial donors to make additional matching gifts for targeted initiatives.

6. Emphasize the use of individual solicitations, annual grants, and employee annual giving in your Annual Fund appeal.

Rationale

1. Raise funds as part of a well-defined Annual Fund.

By definition, the Annual Fund is the source of repeatable, sustainable gifts. Even if you do not conceive of your annual fund raising efforts as a formal Annual Fund, you do raise repeatable, sustainable gifts every year. My goal is to help you develop long-term, committed stakeholders for the program, year after year by formalizing your approach to the Annual Fund and by clearly defining what types of gifts are for annual operating support and what types of appeals will yield those gifts.

2. Develop a diversified funding base with multiple revenue streams specific to the Annual Fund.

Relying on one fundraising strategy – an event, for example, provides an insufficient funding base for the long-term sustainability of annual funding. Incorporating a variety of fundraising methods that may include grants, individual solicitations, employee annual giving, and targeted written appeals will build a more dependable base of support.

 

3. Raise funds for restricted funds in addition to scholarships by making the case for support to the college beyond scholarships in the same manner as four-year colleges make restricted appeals.

The best way to raise awareness of the value of annual support – and the need for program support – is to make the case for a variety of needs under the umbrella of the Annual Fund. This strategy is advanced in contrast to the strategy of allocating precious unrestricting operating support dollars to fund specific, more or less restricted, priorities. Colleges sometimes seek to allocate unrestricted funds raised through special events and unrestricted mail campaigns to program-focused need. But you can always just sell those needs to charitable stakeholders. The reason you to build a donor base of committed, long-term stakeholders who understand various aspects of you mission.

 

4. Commit to a specific Annual Fund goal and increase that goal by a realistic percentage every year.

Making a public commitment to a specific goal is the best way to align good intentions with a commitment to outcomes. The funding model for annual campaigns is based on goal attainment. Depending on where you are in your developmental curve as an advancement program you may be looking at annual percentage increases as high as 10 to 12 percent if you are just starting out, or as low as 2 to 3 percent if you are raising a million dollars a year via your Annual Fund.

 

5. Ask perennial donors to make additional matching gifts for targeted initiatives.

Once way to raise the bar for long-term donors to increase their giving is to ask them for additional gifts to match the gifts related to a specific initiative or, for example, for first-time gifts. Minnesota Public Radio uses just this strategy with its donors who give via permanent monthly pledges. You could try the same tactic with employee annual giving donors who give via payroll deduction. I do hope you EAG donors are giving via ongoing payroll deductions as opposed to via annual commitments that must be renewed each year.

 

6. Emphasize the use of individual solicitations, annual grants, and employee annual giving in your Annual Fund appeal.

I recommend that you include in your fund raising plan a combination of three proven methods: individual solicitations for higher-dollar gift, annual grants, and employee annual giving.   These methods have been shown to be reliable sources of funding over time. If you wish to raise funds through special events, don’t “cannibalize” these tried-and-true methods to support the event. You don’t need it to close these gifts.

 

Fiscal Year-End Follow-up for the Annual Fund

Fiscal year-end follow-up for the Annual Fund means phoning donors who are in danger of going LYBUNT.

With about a week to go until the end of the fiscal year, it’s time to be in high-gear making phone calls to high-value Annual Fund donors who are about to go LYBUNT. Regardless of which renewal track they are on, now is the time to call.

Who should call? Start with the director of annual giving. That individual should have a good handle on the relationships in question. Others can call, too, especially if the donor is at the $2,500 or above level. At Dunwoody College of Technology, the president would make year-end Annual Fund follow-up calls to particularly high-value donors who had yet to make their gift. At Dunwoody, everyone in the advancement office was on deck to make calls as needed.

The script? “I just wanted to touch bases with you to let you know how close we are to making our Annual Fund goal, and how important your gift is to the college and to me personally. If you’d like to I could: take your credit card information over the phone, drop by to pick up the check later this week, or you could make your gift at our website.”

And then pause…as long as it takes.

One exception to this approach is if the donor routinely makes a gift via a credit card, then I would just go for the presumptive close, as you would during a phonathon. As soon as the donor says yes, just ask, “Which card would like to put that on?”

If you run a phonathon in the fall (and you should), have a student caller on hand in June to call $100 and up donors who are on the brink of LYBUNT-ship.

Ask donors who say they will get their check in the mail to please have it postmarked by June 30, and treat these gifts the same way you enter calendar year-end gifts for tax purposes. But don’t hold the year-end books open longer than a few days past the fiscal year. Most long-term donors will consider making two gifts the following year if they miss a fiscal year.

While the definition of a high-value Annual Fund gift varies, think seriously about having the director call anyone at the $500 a year level or above. Calls to donors below that level may well merit the few minutes it takes to have staff call as well.

Don’t get caught up in call reluctance because you think these donors have lost interest or they would have already given. People forget! I forget. You’ll be pleasantly surprised to see how many people are genuinely grateful that you helped keep them on track with their annual charitable gift plan.

This year-end drill is de rigueur when Annual Fund goals are real, and they matter, and the director of annual giving and the annual giving staff are held accountable for reaching them. When follow-up drills like this are not a priority, it says something about how serious you are about your program goals.

Donors who are contacted in this manner realize that their gifts are essential, that they are noticed, and that their failure to make a gift has consequences. Small organizations like community college foundations can easily make it apparent that these gifts matter.

It doesn’t take the loss of too many high-value gifts to torpedo Annual Fund goals, so take the time to close year-end gifts with strategic follow-up calls and watch your goal attainment go over the top as a result.