Wisdom Wednesdays: Endowment Building: The Future of Organizations

by Jon Dize

In fundraising circles, we’re taught that annual giving helps keep the lights on, but endowments ensure your long-term viability.  How do endowments help?  Use the 5 percent rule: if an organization has an endowment of $100,000, then they could earn $5,000 ($100,000 x .05) every year, forever.  Move that example to a $1,000,000 endowment, and leadership could enjoy an extra $50,000 in operating funds without doing anything else.  Period.  Think about that.  What could you do with an extra $50,000 a year?

Should investments in the fund grow more than 5 percent, the annual benefit can grow, too.

Dize-JonNow that you know why you need to support an endowment, I suppose you would like to know how to move forward …

First and foremost, you need a plan.  I love plans.  You can’t get where you want to go without a plan to get there.  Below are some basic suggestions for your plan:

Begin with a GOAL:

  • Start with a program’s funding as your goal.  Want to provide for $50,000 in scholarships every year?  $1,000,000 is your goal (rule of 5 percent).  Want to pay for that new position?  Maybe $250,000 is right.  Want to make sure $5,000 goes to Costa Rica missions every year?  $100,000 will do it.
  • Start with a minimum in mind.  Maximum?  The sky’s the limit with this fundraising system!  Do not limit yourself.

Next, you must PROMOTE the endowment:

  • Promote the endowment in general.
  • Promote the impact that endowments can provide.
  • Promote how the funds will be used.  Talk about your goals.
  • Promote past gifts to your endowment, who made the gift, the impact it made, etc.
  • Promote how to give to the endowment.  Add it to the offering envelope, have brochures in the narthex, list it on your website, etc.
  • Need more promotional ideas?  The ALDE website has resources, or shoot me an email at jond@tlspartnership.org.

Last, (arguably, first!), you need MANAGEMENT of the process:

  • Management should come from an Endowment Committee.
  • Manage the process with an Endowment Policy.  I love helping creating policies for endowments, gift acceptance, distribution, investing and segregated funds because good policy makes work easier and more effective.
  • Manage the investment.  Lutheran and other church bodies have several options to look at, and perhaps your hometown has a good bank trust department.
  • Manage the promotion as listed above.  Fundraising staff, fundraising committees, board members, called staff, etc.  Keep it in front of everyone.

Jon Dize, CFRM, serves as the Director of Development for The Lutheran Schools Partnership in Fort Wayne, Ind.  He is also President of the Indiana-Michigan Chapter ALDE.  Contact him at jond@tlspartnership.org(260) 203-4510, on LinkedIn or via Twitter: @JonDize17.


Wisdom Wednesdays: Can We Accept That Gift From a Donor?, Part Three

by Dawn M.S. Miller, CFRE

In addition to the Gift Acceptance Policy and understanding when and why gifts may be refused or declined – topics we considered in the past two weeks – below are some key points to consider when you evaluate your fundraising policies and procedures.  They may seem obvious or simple, but these are questions you must ask of yourself and your organization to ensure an effective development program.  After all, a small error is no small matter.

  1. Miller-DawnIs there a procedure for processing gifts and maintaining database accuracy?  Is there a written procedure for entering and recording gifts?
    1. Is the Development Office reconciling with the Finance Office?  Different staff members working with the same information can result in data inconsistencies.
    2. Is the word “Street” spelled out or is “St.” used for address?  Is it “Mr. and Mrs.” or “M/M”?  Contact information can directly affect the quality of your data and the number of duplicate records.
    3. Are you using fund codes, appeal codes and campaign codes consistently? Otherwise your reports and queries may not be pulling accurate information.
  2. Is there a donor privacy/confidentiality policy?  A staff and volunteer privacy/confidentiality policy?
    Folks that have access to your database or other donor information need to know and understand that it is a privilege, not a right, and the information is the property of the nonprofit.
  3. Is there a written procedure for acknowledging gifts?
    Is the expectation that gifts are acknowledged within 24-48 hours?  Does the Executive Director sign gifts over $1,000?  Board chair signs gifts over $5,000?  Whatever your parameters are for acknowledging gifts, they need to be stated in your policies and procedures manual.
  4. Is there a donor recognition/stewardship policy?
    1. At what giving level would/should a donor’s name be added to a donor wall
    2. What about recognizing donors in an Annual Report?  Or with a small token of appreciation?  Again, donor recognition practices need to be clearly stated in your manual.
  5. Is there IRS language on receipts and acknowledgement letters?
    For example: ABC Charity is an IRS approved 501(c)3 organization.  This acknowledgment of your contribution is provided pursuant to Section 170(f)(8) of the Internal Revenue Code.  Under present IRS guidelines, since no goods or services were received in return for your contribution, the entire amount is eligible for consideration as a Charitable Tax Deduction.
  6. Is there a permission/opt-in/opt-out policy for sending email communications to benefactors, volunteers, etc.?
    Don’t blast your contacts with e-mail information unless they’ve agreed to it.
  7. Is there a policy for conducting new special events?  Use of the charity’s name and logo?
    Where do you want your organization’s name to appear, or not appear? Could be a sticky point!
  8. Is your organization registered where it raises funds?
    1. Please consult a qualified professional adviser if you are uncertain about state and federal registration issues affecting your nonprofit.
    2. You really don’t want to get into legal trouble over a $50 gift … or a $5,000 gift!

~Partially adapted from AFP’s Ready Reference Series, Developing Fundraising Policies and Procedures: Best Practices for Accountability and Transparency

 Keep a policies and procedures manual within reach in the development office and review annually.

Not sure where to start?  Below are a few quick references that your organization may find helpful:

At the end of the day, we as fundraising professionals are charged with raising funds for our nonprofits and properly stewarding our donors’ gifts.  Policies and procedures should enhance our fundraising operations, not hinder our progress.

Begin to draft, or revise, your fundraising policies and procedures today!

Dawn M.S. Miller, CFRE, is Director of Consulting for Fund Development Services at Zielinski Companies in St. Louis, Missouri. She can be reached at dmiller@zielinskico.com or (800) 489-2150.

Founded in 1957, Zielinski Companies helps nonprofit and religious organizations address their financial, management and planning needs. The firm has a broad range of consulting service areas, including: Fund Development and Mission Advancement Consulting; Audit, Accounting and Tax Services; Property and Facility Planning; Organizational Management and Planning; Long-term Care, Facility and Staffing Consulting and Cash Management and Credit Card Services. For more information, please visit www.zielinskico.com.