Define ⇒ set ⇒ track

The annual fund — the workhorse of the fundraising world — is finally getting some respect. Even at schools where endowment is the "big man on campus," institutional leaders can struggle with cash flow. It's not surprising that the annual fund's unrestricted dollars are especially welcome. To be sure, negative attitudes can die hard. Just a few weeks ago, I heard a trustee refer to "that black hole needing to be filled again this year." But most trustees and administrators recognize that the annual fund is the bread and butter of fundraising.

And it's about time. The average member of the Association of Theological Schools derives 39 percent of its revenues from individuals and/or religious organizations, compared with 13 percent from investments and endowments (all data from the Association of Theological Schools Fact Book 2006-2007). It would have required invested funds of more than $7.8 billion (based on a 5 percent distribution) to throw off the $390.4 million that ATS schools were given for current operations in 2010. The case for strong annual funds is written in these numbers.

Healthy, growing annual giving programs are the foundation of theological education's economic vitality, and the sooner board members grab hold of this truth, the better. It's not enough for board members to approve the annual fund goal, make their own gifts, and then send staff off to "just do it." As the fiduciary of the institution, the board must:

  • Define the parameters in which the annual fund operates. 

  • Participate in setting a realistic goal for the annual giving program. 

  • Monitor progress and respond quickly to early signs of trouble.

Define parameters 

How is "annual fund" described by the experts? Fundraising guru Henry Rosso calls it "the cornerstone and the key to success for all aspects of an organization's resources development programs." Similarly, development veteran Michael Worth describes it as "the lifeblood of development programs." And William Tromble, writing in Excellence in Advancement, defines the annual fund as "a program of ongoing support that brings in gifts throughout the year, every year."

It is essential that the board understand their own school's definition of annual fund. Not surprisingly, given the lack of specificity in the textbook definitions, there is considerable diversity in how theological schools raise and count annual gifts. For example, at some schools, "annual fund" refers only to gifts generated by specific mailings or telephone solicitations. At other institutions, any unrestricted gifts received during the year, including bequests, count toward the annual fund goal. Yet other school leaders throw restricted gifts that will be spent during the current year — for example, gifts designated for student financial aid — into the annual fund pot along with unrestricted donations.

Board members should understand the full ramifications of their school's definition. For example, an overly narrow take on the annual fund (for example, "only gifts for student scholarships") can result in too little attention to the other gifts necessary to balance the current year's budget. On the other hand, a too-expansive definition can result in one-time gifts like bequests being counted toward the annual fund goal.

Set realistic goals 

Because the annual fund goal frequently hides within the larger institutional budget, trustees can approve an out-of-scale fundraising goal without discussion - or worse, without even being aware of what they have just done. This is a mistake. It's a far superior practice for the board, guided by the institutional advancement committee, to highlight, scrutinize, and approve the annual fund goal separately. This includes seeking answers to three questions.

  1. What is the school's fundraising record of accomplishment? Board members need to understand basic patterns and trends in the institution's financial support. Unless the factors contributing to last year's outcomes in the annual fund have changed markedly, past performance is a sure predictor of future prospects. As Thom Jeavons and I wrote in Growing Givers' Hearts: Treating Fundraising as Ministry (Jossey-Bass, 2000), "There is nothing to be gained by pushing toward goals that are beyond the reach of an organization's historic base of support. Doing so may impede appreciation of the gifts already received and of those who provided them."

  2. At what levels are board members likely to participate in the annual fund? Talking with colleagues, friends, or even family about personal finances does not come easy for most people. Therefore, we should not be surprised if board leaders are squeamish about evaluating the giving potential of their peers. Nonetheless, the board needs to be able to assess the wealth quotient of the membership as it seeks to establish reasonable fundraising goals for the organization. The financial capability of board members is a crucial factor when determining an appropriate goal for the annual fund.

  3. Is the development office staffed and funded for fundraising success? It's the board's responsibility to calibrate fundraising goals to what the school is willing to invest in the development program. The conventional wisdom that it takes money to raise money is true — and most of that money is allocated to salaries. The board must stand with the president in communicating to the campus community the importance of a well-funded development operation. That's especially essential if growing the annual fund is a goal.

Track progress 

There's nothing more discouraging — and unnecessary — than discovering late in the fiscal year that annual fund gifts are running behind goal. A gift range chart based on the current year's annual fund goal is an effective way for the president and development team to keep the board up to speed about progress throughout the year.

A gift range chart is a visual display of what success in the annual fund looks like. It alerts board and staff to gaps in the existing donor base. It also serves as an early alert system if progress toward the goal starts to lag. As the sample table illustrates, the categories of information that are most helpful to board members include:

  • Number of gifts received within each gift range in the previous year. 

  • Number of gifts needed within each gift range in the current year. 

  • Number of prospects required to insure the needed number of gifts. 

  • Number of gifts received to date by gift range.

Using the table, board members can see at a glance what work needs to be done. Then they and the development team, including the president, can continue to identify, cultivate, and secure gifts from old and new sources at the various levels. The development staff should go a step further with the table, listing the names of prospects for gifts of $1,000 and up. With the prospect names in place, the table serves as the basis of the annual fund work plan for the year.

Short-term goals, long-term gains 

Although apparently a short-term initiative, the annual fund is as much about the long term as it is about the present. Every gift binds a donor's heart more tightly to the mission and ministry of the school and helps the school cultivate a precious "living endowment." Gifts for named scholarships, endowed chairs, and new buildings are wonderful, but it is unrestricted gifts that are most crucial to keeping theological education moving forward. The annual fund - that old workhorse of the fundraising world — is finally getting some respect. And it's about time.

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Article from: New Year 2011

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