Photo by Anthony Hortin on Unsplash
Talking about the Annual Fund
“They don’t like the annual fund.”
More than one frontline fundraiser has told me that about a donor.
I want to understand what that means, so I ask for more information. What is it that they don’t like? Are they uncomfortable with …
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- supporting the people who benefit from our organization’s mission-driven activities?
- joining with others in the community to make an even bigger difference than they could individually?
- providing funding for the organization’s highest priorities, even if they must shift during the year?
- having their gift put to work immediately?
- fueling change that our world so desperately needs?
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For me, these are the most compelling reasons to make an annual fund gift, and, frankly, they’re pretty hard not to like.
Common concerns about unrestricted, immediate-use giving don’t have to be deal breakers. Here are ways to respond the next time a colleague shares a potential donor’s concerns:
- “I think the donor wants to see what their gifts do, and the annual fund is a black hole.”
Shift to Highlighting examples of donor impact, showing that it is even greater because of collective giving
Donors and frontline fundraisers often see restricting gifts as a way to ensure the funds are used the way that the donor would like and for gift officers to be able to talk about something tangible that the donor has helped support. To attract support, we need to shine a bright light on the impact annual fund donors have on our organizations and celebrate them for their generosity.
Tell the stories of the individuals our donors help through their gifts, explain the problems these people were able to overcome or opportunities they were able to seize because of the donor’s support. Provide concrete examples of the funds being used in ways that resonate with donors and their values. While telling these stories, keep donors at the center, as the heroes. Our organizations are behind-the-scenes players, providing donors with a way to ensure that the much-needed resources they contribute truly help others.
Annual fund donors can do significantly more good when they join with others in the community to make a collective gift that is larger than (almost) any one of them could make alone. Encourage them to see their philanthropy being magnified through this lens.
- “The donor told me that they want to be the one to decide how their gift will be used.”
Shift to Offering the power of flexibility
Many annual funds seek “unrestricted” gifts from their community members, which donors contribute with no (or very few) strings attached, allowing the institution’s leadership to spend them as needed. During the recent global pandemic, we got to see how powerful these gifts are as organizations needed to adapt quickly to the changing world. Legally, gifts can only be spent in accordance with the wishes of the donors, making it impossible to redirect restricted gifts during this time of crisis toward implementing health and safety protocols, changing service delivery methods, or meeting new needs arising from the spread of COVID-19. Unrestricted gifts, however, were readily available to organizational leaders to fund the adaptations that would allow them to continue providing their much-needed services to our communities and world. Annual fund donors made these critically needed adjustments possible.
- “The donor is looking to have a lasting impact, not make a gift that will be gone by the end of the year.”
Shift to Making a difference immediately
Donors often want to make the “gift that keeps on giving,” and endowment gifts appear to be the solution. The endowment is intended to help ensure that an organization can continue to exist in the very long term by providing a somewhat predictable and, financial markets permitting, growing source of income.
If a donor makes a $100 gift through the annual fund, the organization has $100 to spend toward its mission in that year; if the donor were to give that $100 to the endowment instead, the organization would be able to spend roughly $5 of the gift toward its mission in that year. Based on online endowment growth and payout calculators from two community foundations, it would take 20 years before the endowment donor has the same impact the annual donor had; that’s when the cumulative annual endowment payouts from that gift would reach $100. After 200 years, the estimated annual payout available to apply to the organization’s activities will have only reached $13.49. Donors who want to make a meaningful difference as quickly as possible can more easily achieve that by giving through the annual fund.
- “The donor doesn’t want to pay to keep the lights on, the snow shoveled, or the bathrooms stocked with paper products.”
Shift to Meeting core, mission-focused needs
Nonprofits, like all organizations, have less-than-glamorous operating expenses that must be met, and the unrestricted, immediate-use gifts can certainly be applied to these. But they leave annual fund donors and potential donors uninspired. If your nonprofit has other sources of unrestricted income, e.g., indirect cost recovery from public and private grants, income from unrestricted endowment, realized bequests, or fees for service (e.g., in education, tuition), you can apply those funds to these areas. This allows you to focus the gifts received from annual fund donors on the core activities that drive your mission forward and have a meaningful, measurable impact on the community you serve.
If you must spend your annual fund dollars on the basics, focus your messaging not on the number of test tubes or bus trips or light bulbs, but on what those expenditures make possible for people. A colleague once shared an appeal that highlighted what a single book purchased for a library could do to change the life of the person who read it (in this case, inspiring them to write the next great American novel). That example has stuck with me—as an annual fund donor, I wouldn’t just be buying a book, I would be providing inspiration that would change a life.
Annual fund donors are incredibly important to the organizations they support and to all those who are touched by the work that they make possible. Tell them clearly the story of their power and their impact. When you do, more donors and fundraisers will agree that there truly is a lot to like about the annual fund!
Tammie L. Ruda