Unfortunately, fund raisers and dominant coalition members currently do not take their stewardship responsibilities seriously, thereby undermining trust in America's charitable organizations. Illustrating, Independent Sector's (IS, 1994) biennial survey of giving and volunteering in the United States found that only 72% of the respondents agree that their gifts to charitable organizations are put to an appropriate use. In 1990, 80% agreed, representing an 8% decline in donor confidence during the early 1990s. Yet, as IS stressed, "Over the survey years, the belief that donations are used appropriately has [had] the highest association with increased rates of giving and volunteering" (p. 58). H. W. Smith (1993) warned, "`Stewardship' is not an empty concept; the recipients of charitable funds are in effect the stewards of those funds and are expected to use them in ways that accord with the goals of those who provide them" (p. 227). The ROPES process ensures that fund raising is carried out effectively; it also promotes ethical behavior.
Chapters 11 through 14 deal with the four programs traditionally used to raise gifts. The programs are categorized by the size of the gifts they generate: lower level or major. Dollar amounts defining the two gift types differ among organizations. Whereas such organizations as universities and hospitals typically use $100,000 as the criterion, this book -- in order to be inclusive -- defines major gifts as those of $10,000 or more and lower level gifts as all gifts below $10,000. Regardless of dollar amount, lower level gifts are raised through the annual giving program, and major gifts are raised through the major gifts program. Major gifts also are raised through planned giving, and both lower level and major gifts are raised through capital campaigns, withan emphasis on the second type. Planned giving and capital campaigns actually are strategies for raising major gifts.
Chapter 11 is on annual giving, often described as the bread-and-butter program of fund raising because it generates annual income that helps pay the organization's operational expenses. Annual gifts are synonymous with lower level gifts; they usually are unrestricted in purpose, meaning they can be used where most needed as determined by the organization's managers after receipt. In contrast, major gifts almost always are restricted and must be used for the specific purposes for which they were given, determined in advance of receipt. Annual gifts usually are made from donors' income, whereas outright major gifts are made from donors' income and assets, and planned major gifts typically come only from donors' assets. As operational expenses are reoccurring, the annual giving program is repeated each year, unlike the major gifts program and planned giving, which are ongoing, and capital campaigns, which are sporadic.
Chapter 11 begins by discussing three subjects of relevance to all programs: (a) the role of volunteers, (b) the principle of proportionate giving, and (c) different forms of gifts. Briefly, there has been confusion over the role of volunteers in fund raising because consultants -- who do not solicit or handle gifts and, therefore, depend on others to do so -- inappropriately refer to paid employees such as the CEO as volunteers. Furthermore, numerous volunteers who help the organization deliver its program services are essential to the charitable subsector, but fund raising relies on only a small number of volunteers, such as trustees. The principle of proportionate giving, based on our society's unequal distribution of wealth, holds that the majority of money will come from a minority of donors -- both among programs and within. For any given organization, the major gifts program will account for the vast majority of dollars raised and only a relatively few gifts will account for most of that money. The principle has been affirmed through decades of practitioners' experience, and fund raisers abide by it when planning programming to meet solicitation objectives. Different forms of gifts are explained, including procedures for handling them. Gifts are grouped into cash, pledges, securities, real property, and personal property.
Chapter 11 continues by examining elements of the annual giving program, such as gift clubs, challenge grants, and corporate matching gifts. Also common are special projects, whereby donors are asked for restricted gifts. Practitioners acknowledge that people are more likely to give and to give higher amounts when the requested gift is for a specific purpose rather than for general operating needs. By breaking down operational expenses into fund-raising opportunities, both restricted and unrestricted options can be offered to donors -- a move that will better meet their needs and still provide the necessary financial support for the organization.
The techniques used most heavily in annual giving are discussed, specifically, direct mail and special events. To communicate with the 10% of prospective donors who will provide 60% or more of the dollars raised through annual giving, the combination of a personal letter and a follow-up telephone call is recommended and described in detail. Chapter 11 ends by touching on the growing impact of new technologies, a subject raised in other chapters as well. The Internet promises to make communication with donors more two-way, and fund raisers must be prepared for the dialogue that will result. The major gifts program is directed at the small portion of individuals, corporations, and foundations that own most of the wealth in the United States -- prospects with the capacity to give $10,000 or more. As explained by theory, however, capacity, or the absence of financial constraints, is only part of the equation when identifying viable prospects. Virtually every major donor has a long-standing, carefully nurtured relationship with the recipient organization and the people who represent it. In almost all cases, major donors have made previous gifts to the organization. Students are advised against following the example of Beloit College in Wisconsin, which -- in 1982 -- ran advertisements in The Wall Street Journal and The New York Times asking for a benefactor willing to invest $1 million in the college (Bergan, 1992). According to its president, inquiries were received from five possible donors; regardless, no gift ever was announced.
Chapter 12 presents a sample of the largest gifts made, emphasizing the relationship between donor and organizational recipient and the fact that mission largely determines gift size. Colleges, universities, and hospitals attract the largest gifts, followed by arts, culture, and humanities organizations, and independent schools. Whereas annual gifts directly increase the organization's spendable income, major gifts generally increase its assets: physical plant, equipment, reserves, and endowment. Endowments consist of multiple, separate funds established in perpetuity. Cash from gifts is invested to generate annual income, not all of which is spent; a portion is returned to the principal as a hedge against inflation. Because major gifts most often are made for endowed purposes, chapter 12 carefully explains the somewhat complicated financing such gifts entail (e.g., income is not available until 1 year after the gift is made).
Because major gifts usually are restricted, often with multiple conditions, negotiation is an inherent part of raising such gifts. Yet negotiation rarely is mentioned in the literature and only occasionally taught in professional development offerings. Chapter 12 rectifies the problem by introducing students to the principles of effective negotiation, drawn from the work of business educators and professional negotiators. Negotiation can be narrowed to two schools of thought: positional bargaining, in which each side takes a position, argues for it, and in a back-and-forth fashion works toward a compromise, and principled negotiation, in which the two parties look beyond position and concentrate on each other's interests, invent options for mutual gain, and strive to preserve the relationship (R. Fisher, Ury, & Patton, 1991). If the parties are involved in a one-time relationship that is not likely to be repeated (e.g., bargaining with a street vendor), positional bargaining is quick, efficient, and appropriate. If, however, the relationship is valued by the parties, the extra effort of principled negotiation is required. Principled negotiation allows fund raisers to think in symmetrical terms, adopting win-win strategies from the inception of the problem-solving process to its conclusion.
Personal attention in cultivating and soliciting prospects is critical in the major gifts program. A working model of moves management, a system refined by Cornell University, is described. Moves management focuses on planning and implementing regular interactions with prospects (i.e., it concentrates on cultivation). A scenario of an in-person solicitation is presented step by step to familiarize students with the techniques, actors, and dynamics involved. Chapter 12 concludes by discussing yet another subject rarely mentioned in the literature: sexual harassment. To effectively manage the organization's relationships with prospects for major gifts, fund raisers must develop their own professional relationship with the gift source. This relationship sometimes is misinterpreted or exploited, particularly when the prospect is a man and the fund raiser is a younger woman. Sexual harassment can interfere with work performance and impair productivity. Above all, it is illegal. Fund raising is not a form of prostitution; no gift is worth anyone being harassed.
The discussion of major gifts continues in chapters 13 and 14, which examine planned giving and capital campaigns, respectively. Although both are strategies to raise major gifts, they represent diametrically different approaches. Planned giving is based on symmetrical presuppositions and two-way communication; it presents an unprecedented opportunity for growth. Capital campaigns, on the other hand, evolved from the press agentry model of practice with asymmetrical presuppositions; their continued use is questionable.
Planned giving is the managed effort by charitable organizations to generate gifts of assets from individuals through the use of estate and financial planning vehicles. Whereas other fund-raising programs are directed at all three donor publics, planned giving is concerned solely with individual donors. It previously was called deferred giving because financial benefits for the recipient organization usually are postponed until years after the donor makes the gift, typically after he or she dies.
Chapter 13 describes the largest transfer of wealth in the nation's history now underway. A staggering $10 trillion is expected to pass from one generation to the next during the coming 50 years (E. Greene, S. G. Greene, & Moore, 1993). Although people rightfully allocate most of their estates to family members, many --particularly those without surviving relatives -- give some of their assets to charitable organizations. Planned gifts are sure to increase in the years ahead, and future fund raisers are advised to learn about this alternative to outright giving.
All practitioners are capable of raising planned gifts, contrary to much of the literature that extols the strategy as a highly complex area reserved for specialists trained in tax laws and finance. Three arguments are presented to refute the conventional wisdom. First, skills in relationship management, not in taxes and finance, are the necessary qualifications. Practitioner Michael Luck (1990) agreed: "If you are interested in leadership gifts, do not hire directors of deferred or planned gifts -- hire directors of major gifts. You are asking potential givers to do great things, whether it be now, later or both. A major gift is a major gift regardless of its immediacy" (p. 31). Second, the estate and financial planning vehicle most commonly used also is the easiest one to understand, the charitable bequest. Consultant Fisher Howe (1991) affirmed, "Because a bequest is the simplest form of planned giving, an organization can begin without delay to encourage selected members of the support constituency to make provision for the organization in their wills" (p. 70). Third, lawyers, accountants, and financial planners -- not fund raisers -- handle and execute the technicalities of complex vehicles. Experts representing the organization's interests and those representing the donor's interests are active and advocated participants.
All planned giving vehicles are grouped into just three categories: (a) charitable bequests, (b) life income agreements, and (c) other vehicles. Life income agree-ments____as their name indicates____provide donors with income, usually until they die, from assets earlier transferred to a charitable organization that benefits from the remainder of the gift. Life income agreements consist of three primary vehicles: (a) the charitable remainder trust, (b) charitable gift annuity, and (c) pooled income fund. Other vehicles, which do not fit in the first two categories, include the charitable lead trust, remainder interest in a home or farm, and life insurance. Chapter 13 explains each vehicle in detail.
A critical issue in understanding planned gifts is the difference between face value and charitable remainder value. For example, because gifts made through life income agreements are encumbered for the term of the agreement in order to produce income for the donor and/or other individuals named income beneficiaries, funds are not available for use by the recipient organization until years after the gift is made. The charitable remainder, or the portion actually benefiting the organization, is substantially less than the value of the original gift, its face value. The difference, experts claim, usually is 50% (Moran, 1991). Fund raisers traditionally and wrongly have reported nonbequest gifts at their face value, knowing full well that their organizations actually will receive much less.
Reform recently was introduced by CASE (1994) as part of its new management and reporting standards for capital campaigns, which then became the basis for new reporting standards beyond campaigns (CASE, 1996). The standards dealing with planned giving require adoption of present value discounting, which promises to dramatically decrease reported fund-raising results. Counting the face value of planned gifts enables trustees, senior managers, and fund raisers to unethically inflate dollar totals, which also is a weakness of capital campaigns, the subject of chapter 14.
Capital campaigns are a strategy sporadically employed by charitable organizations to raise more money than usual in a fixed period of time. They were "invented" in 1902 by Charles Sumner Ward and Lyman Pierce, founders of the YMCA school of fund raisers and the leading historical figures of the press agentry model. Capital campaigns originally were used to raise gifts for physical capital needs, such as buildings. By the 1950s, financial capital, or endowment, needs had been added to their purpose. Starting in the 1970s, campaigns expanded to include all purposes for which gifts are made, thereby encompassing annual giving, major gifts, and planned giving programs. Dollar goals increased as purposes and programs were added. Today, campaigns termed comprehensive rather than capital have the largest goals. Because they count every dollar raised during the campaign period, only about 25% of their goals represents new money; 75% would have been raised through the other programs without a campaign.
The evolution of capital campaigns is closely tied to the evolution of fund raising. The campaign strategy, with definitive beginning and end dates, was formed by the needs of consultants, the first fund raisers, whose primary service until the 1970s was providing full-time resident managers for a campaign's duration -- after which they would move on to another organization's campaign. As increasing numbers of staff practitioners were employed, consultants changed their services from primarily full-time resident management to part-time campaign consulting. Their livelihood, however, remains dependent on campaigns, and they market them in favor of continuous programming. Based on evidence presented, chapter 14 concludes that capital cam-paigns are an artifact of fund raising's earlier eras and are no longer necessary or desirable.
Chapter 14 scrutinizes characteristics of campaigns, including feasibility studies, usage of volunteers, and committee reporting meetings. Feasibility studies, for example, are conducted by consultants to determine the likelihood that a proposed campaign can be successfully completed and a dollar goal reached. The fund-raising literature is adamant that the research be done by consultants because of their objectivity. Howe (1991) illustrated: "To be valid, a feasibility study must be made by an outsider. Survey respondents will speak candidly, if at all, only to a professional outsider who establishes confidence and guarantees confidentiality" (p. 61). Paradoxically, the literature is silent about the self-interests of consultants, who in most cases are retained as part-time counsel for the campaigns they recommend. Furthermore, supposedly confidential information sometimes is used to formulate plans for soliciting specific prospects.
Contrary to popular belief, campaigns are not very effective. Their fundamental purpose is to maximize income, not manage interdependent relationships with donors. Focusing solely on income, campaigns rely on smoke-and-mirror accounting for their success. Only a small portion of their goals represents new, or unique, money. Many campaigns fail, and even organizations that reach dollar goals often find themselves facing a deficit or unable to fund announced needs, termed featured objectives. As Luck (1990) asserted, "Few capital campaigns have achieved both the monetary and need targets. . . . Everyone brags about philanthropic achievement in terms of money raised but rarely do they mention that they missed the mark for funding several defined programmatic needs" (p. 32). Planned gifts, which will not benefit the organization for an average of 20 years, account for much of the money raised, often as great as half the campaign total. The problem is compounded by the traditional practice of reporting nonbequest gifts at their face value, or about 50% more than their worth to the organization. Campaigns commonly include government, or public, funds in their private support totals, distort the value of art and real estate, and count gifts twice by reporting pledges in one campaign and again as cash gifts in the next. Totals also are artificially inflated by extending the length of campaigns to 9 or even 20 years!
Chapter 14 assesses current practice in light of CASE's (1994) new management and reporting standards, which -- among other reforms -- instructs fund raisers to separate planned gifts from outright gifts and report the former at both face and discounted present values in reports to CASE and to trustees. The impact of the standards will be to deflate campaign goals and announced results. Although the standards apply only to educational organizations and adherence is not a requirement of CASE membership, it is predicted that the dissemination of valid statistics -- which CASE started at the end of 1996 -- will alert donors and other stakeholders to deceptive practices and document the ineffectiveness of campaigns. Chapter 14 recommends the continuing major gifts program as an alternative to the historical model. Luck (1990) concurred: "Established long-range development programs make better sense than a series or `string' of three- to five-year campaigns which rarely achieve all the goals set at the beginning of the campaign" (p. 32).
Chapter 15, the final chapter of the book, examines the three sources of gifts, or donor publics: individuals, corporations, and foundations. There are approximately37,600 active U.S. foundations, which collectively account for 8% of all gift dollars (Renz, Lawrence, & Treiber, 1995). They consist of four types: (a) independent, (b) corporate, (c) community, and (d) operating. Independent foundations are by far the largest group, accounting for 88% of the total number, 86% of the assets, and 78% of the annual dollars. Chapter 15 describes independent, corporate, and community foundations in detail, excluding operating foundations because they are not viable prospects for fund raising (i.e., they operate their own program services). The historical development of each type is traced, and operational differences are pointed out. For example, independent and corporate foundations are required by law to give away an amount equal to 5% of their assets each year, whereas community foundations are exempted from this requirement. Community foundations raise gifts as well as make grants. Unlike the other types, therefore, they employ fund raisers. A commonality among all three types is that a small number account for the majority of grant dollars. Illustrating, only about 1% of all independent foundations, or roughly the top 400, give 55% of the dollars.
Foundations, as is true of all major donors, are basically conservative in their giving. Education traditionally receives the largest share of grant dollars. Close to one third of both grants and dollars represent renewed gifts, and almost 90% of all dollars are restricted in purpose. Relationships with foundations, as with corporations and individuals, can best be understood as environmental interdependencies. Whereas the dependency of charitable organizations on donors is widely and often inaccurately portrayed in the literature, much less is said about the dependency of donors on charitable organizations. Foundations, for example, would cease to exist without charitable organizations (i.e., there would be no reason to grant them tax-exempt status or gift deductibility for their donors). As with all donor publics, foundations do not give for the sake of giving; rather mixed motives direct their grants to specific interests that may or may not coincide with those of an organization. Fund raisers manage foundation relations effectively when they identify overlapping interests and needs. Greenfield (1991) explained, "The best time to ask any foundations or corporations for money is when a special project is planned that is matched to their current priorities" (p. 123).
A widespread misunderstanding about corporations is that their giving -- moreso than giving by foundations or individuals -- is motivated by self-interest. Chapter 15 eradicates this fallacy by conceptualizing a continuum of motivation to explain the mixed motives of corporate philanthropy. Points along the continuum are encompassed under the rubric of enlightened self-interest, although the term generally refers to a balanced, or center, position. The benefits corporate donors seek from their relationships with charitable organizations are grouped into five categories: (a) marketing, (b) tax savings, (c) social currency, (d) public relations, and (e) social responsibility. Emphasis on the benefits they expect shifts their position along the continuum, with apparent differences over time and among specific companies.
Although some businesses currently emphasize short-term marketing benefits, recent research shows that major corporate donors still seek benefits from all five categories, but -- in contrast to the past -- they demand measurable results from their giving, quantified and documented by recipients. Chapter 15 traces the evolution of corporate philanthropy from a passive, scattergun activity to strategically managedprograms with set objectives. Today, contributions must generate outcomes that support the corporation's objectives -- requirements similar to those imposed by foundations. According to H. W. Smith (1993), the modern approach to corporate philanthropy "begins with the view that corporations exist primarily for the purpose of making money for their shareholders and that any money given to charity must bear some relationship to the interests of a company and its shareholders" (p. 220). A greater degree of accountability is called for; specifically, fund raisers must pay more attention to stewardship. Corporate donors complain that they do not receive enough appreciation and recognition for their gifts, and reporting on what gifts accomplished is less than acceptable. In short, unsatisfactory performance on the part of charitable organizations has contributed to charges that corporate giving is motivated by self-interest.
Chapter 15 points out further commonalities between corporations and the other two donor publics. Only a few, or less than 0.01% of all 6 million U.S. companies, contribute most of the dollars (Doty, 1994; U.S. Small Business Administration, 1995). Corporations are conservative in their giving, and education is the favored recipient. Corporations are dependent on charitable organizations. At the society level, companies depend on gifts to protect our capitalistic system and avoid big government. On the community level, nonprofits are critical partners in building local economies in terms of employment, services, and quality of life.
Regarding the last and most important of the three donor publics, individuals account for almost 90% of all gift dollars (American Association of Fund-Raising Counsel Trust for Philanthropy, 1997b), and there are about 170 million adults in the United States with diverse interests in charitable organizations. Just 400 of the wealthiest Americans have combined assets greater than all U.S. foundations. As with the other sources, a minority of individuals provide the majority of gift dollars. Only about one fourth of all U.S. households itemize deductions on their federal income tax returns and deduct charitable contributions, yet they give two thirds of all dollars from living individuals (IS, 1994).
Unlike foundations and corporations, the favored recipient of individuals is religion. However, religious organizations receive the biggest share of their gifts from individuals who make less than $40,000 per year, whereas wealthy individuals tend to give to other types of organizations, such as education. Individuals who are major donors are conservative in their giving, perpetuating the status quo from which they obtained their wealth.
Chapter 15 dissects patterns of individual giving to demonstrate that individuals give for altruistic reasons and also seek benefits in return. Members of religious congregations, for example, make gifts to their churches or temples partly for the direct benefits they receive as members (e.g., the employed services of a minister and a building in which to worship). Individuals, then, are dependent on charitable organizations. Due to the interdependency of all three donor publics, fund raisers have no need to apologize for requesting gifts from well-researched prospects. Philanthropy provides donors with a way to put their beliefs into action, beyond what they can express through the ballot box and the marketplace.
As do their counterparts, individuals have objectives they wish to accomplish with their giving. And increasingly they demand greater accountability. J. Michael Cook(cited in Dundjerski, 1995), CEO of the accounting firm of Deloitte & Touche and head of UWA's strategic planning committee, declared, "People these days don't just give you money and say, `Here it is and go do some good.' There is an increasing expectation of impact, of accountability, measurement, and demonstrated results" (p. 28).
Chapter 15 ends with a discussion about the growing concentration of wealth in our country and concludes that fund raisers must make special efforts to ensure that their organization's donors are inclusive of people from across the economic spectrum. Widespread support is necessary to protect the well-being of the charitable subsector, which -- in turn -- promotes the pluralism undergirding our democratic society. Effective fund-raising management, students are urged to remember, goes beyond raising dollars.