Endowment Fundraising - ACSO Presentation August 8, 2008

Banking on the Future: Why Endowments?

Association of California Symphony OrchestrasAugust 8, 2008Walnut Creek

Katherine E. AkosGreg Lassonde, CFRE

Organizational readiness Administrative components Methods for building Questions on topic welcome

throughout Q&A last 15 minutes for general

questions

Why Not Endowment

Organizational needs are all immediate

Strong history using planned gifts for operational use Guide Dogs for the Blind St. Anthony’s Dining Room AIDS organizations in earlier years

Board not ready to make commitment

Need reserve or rainy day fund in place

Organizational Readiness Organization will continue in

perpetuity Board ready and willing to oversee A plan in place to build

Current gifts Deferred gifts

Administrative systems identified/established

Expenses budgeted

The Launch

Develop a case statement The need for endowment Specific program components listed Program component and total goals Time period to achieve goal stated www.plannedgivingcoach.com

How Much Is Enough?

20% of operating budget example $1,000,000 total operating budget 20% = $200,000 5% draw: $4,000,000 fund = $200K

draw Assumes 8% yield▪ 5% draw▪ 3% inflation

Use the Case Statement

Work the board Start with development committee Move to finance committee Full board discussion Case convinces a few board members to

give Board resolution at passage of case

statement Basic premise achieved for

marketing efforts

Board Resolution

Under auspices of Investment Committee Gifts into endowment include

Current gifts so designated All matured planned gifts▪ Some policies will include capital use▪ Few policies will allow operating use

Will follow (newly created?) endowment policies

Will follow (newly created?) investment policies

Endowment Policies

Guide establishment and operation Cover many terms including

Definition of endowment Separate nature of funds Spending policy Exceptions to policy Oversight and investment Administration and monitoring Etc.

Endowment Draw

Spending policy typically 5% - 5 ½% 12 – 20 trailing quarters average

Offsets unusually high gift or investment years

Smooths out economic downturns

Accounting Standards

UMIFA (Uniform Management of Institutional Funds Act)

UPMIFA (Uniform Prudent Management of Institutional Funds Act [pending])

FASB (Financial Accounting Standards Board)

GAAP (Generally Acceptable Accounting Principles)

Investment Policies

Provides authority to Investment Committee

Delineates responsibilities Defines ethics and conflicts of

interest States investment objectives Lists an asset allocation strategy Determines criteria for investment

strategy Sets meeting and communications

schedule Define performance evaluation

Gift Restrictions

FASB 116 & 117 Permanently restricted

Only a donor can restrict or remove restriction

Temporarily restricted Time Purpose Combination of time and purpose

Unrestricted

Unrestricted Endowment

Oxymoron? 3,000 Google hits (mostly higher

education) San Francisco Symphony campaign aka

quasi-endowment Board-designated endowment

What a current board restricts, a future board may remove such a restriction

Unrestricted Endowment

Generally poor reasons to remove restrictions Repeated annual budget shortfalls Increases in budget not sustainable through

earned or contributed revenue in second year Good reasons to remove restrictions

Capital needs Special campaigns Program start

Donor disclosure at time of gift is crucial

Sources of Endowment Gifts

Current gifts Endowment campaign One-off gifts

Deferred gifts Proactive planned giving program Gifts only “over the transom”

Usually from assets (not income)

Naming Opportunities

Keep a current list at hand Attach a price tag Don’t under-value Consider term of years vs. perpetual Provide ample and visible name recognition Include a mix of chairs and programs

Have a generic list for “pool” (smaller gifts) “New Compositions Fund” Steers restricted giving toward acceptable uses

Naming Opportunities

Named funds should: Provide stewardship Encourage others to step forward Be coordinated with annual fund efforts

Gift Acceptance

Agreement document Terms clearly delineated▪ Name of fund▪ Pledge term if not a single payment▪ Cy pres clause▪ Investment and endowment policies referenced▪ Forms of recognition specified

Include finance department Restrictions acceptable and correctly

documented System in place for reporting fund performance

Stewardship

Hold gift celebration that is appropriate and consistent for giving level

Token gifts should be mission-focused

Named funds should be visible to patrons

Visibility should promote other opportunities

Annual fund reporting Strict fund accounting General narrative report Combination of the two

Endowment Campaigns

Usually conducted with campaign counsel Feasibility study with case prospectus Extensive case statement Creation of campaign committee Guidance of staff during solicitation

Without counsel Usually smaller campaigns

Expectation of 100% board participation

Campaign Solicitation

Top down / inside out Quiet phase (typically 1-2 years)

Lead gift (10-25% of campaign total is common)

Usually 50%-75% of total raised All one-on-one

Public phase mostly for smaller gifts One-on-one; direct mail; telemarketing

Multi-year pledges common

Campaign Solicitation Type Gift only (coordinated with annual fund) “Comprehensive” - often multi-year commitments

Campaign gift Annual fund increase

Triple ask (true comprehensive campaign) Campaign gift Annual fund increase (match for new AF gifts) Consider joining legacy society

Planned Giving Program

Ongoing source of endowment funds Proactive program will be more

successful Board policy will direct gifts to

endowment Some policies include capital uses as

well Use for operations is the exception Consider a 10%/$100K maximum

operations cap Encourage 100% participation of life

trustees Aim for a minimum of 50% board

member participation

Planned Giving Program

Use a survey to meet one-on-one Board members and

honorary/emeritus/life trustees Former board members Long-term stakeholders Major donors

Direct mail; newsletter; any opportunity

Marketing premise: “Your Gift Will Live On Forever”

Companion Documents

Gift acceptance policy Board resolutions

Establishing endowment Launch or reinvigorate planned giving

program To conduct an endowment campaign

Staff documents Endowment procedures Investment procedures Planned giving procedures

Final Thoughts

Partner with a community foundation Chronicle of Philanthropy on line article:

philanthropy.com/free/articles/v16/i05/05002201.htm

Presentation / attachments(www.acso.org)

Endowments are: usually a helpful vehicle involve much responsibility can be easy to establish and operate are not for the faint-hearted