Nonprofit Essentials

Major Gifts

Julia I. Walker

• Publisher: Wiley
• Year: 2012
• Print ISBN: 9780471738374
• eBook ISBN: 9781118428986
• Edition: 1
• Topic: Business
• Subtopic: Nonprofit Organizations & Charities
• Index: Business

"Major gifts are at the heart of any coordinated, successful fundraising effort. Julie Walker shows you how to do it all-- find the prospects, staff the program, and ask for the money. The sidebar stories and real-world examples sprinkled throughout the book are entertaining, yet still make a point. I would buy it for the advice and keep it for the anecdotes."
--Duris Holmes, Chairman of the Board Benjamin Franklin High School New Orleans, Louisiana Part of the AFP/Wiley Fund Development Series, Nonprofit Essentials: Major Gifts is a professional guide to major gift fundraising, concisely presented in a format that is accessible, lively, and easy-to-read. With in-depth advice from experienced fundraiser Julia Walker, this book takes the reader from the early stages of establishing a program through the core elements of all major gift programs: identifying and rating prospects; preparing the case; training volunteers; cultivating donors; making the ask; and providing recognition and stewardship for the gift. Its nuts-and-bolts presentation focuses on how to create a prospect-centered program that develops the capacity to engage and solicit donors, effectively based on their unique interests and needs.

CHAPTER 1

Introduction to Major Gifts

After reading this chapter you will be able to:

• Define a major gift for your organization
• Build a prospect-centered program
• Determine your readiness for a major gifts program

What Is a Major Gift?

Major gifts are an essential component of successful nonprofit fundraising programs today. Effective major gift programs raise more money at less cost for an organization’s identified needs than any other fundraising programs. Without major gifts, organizations are forced to depend on the lower and less efficient returns of annual fund, direct mail, telemarketing, special events, and online fundraising efforts. It is easy to understand why organizations desire major gifts. But what exactly is a major gift, why do donors make large gifts, and how can an organization prepare to launch a major gifts program?

Some major gifts are instantly recognizable. When a nonprofit announces that a long-term supporter has contributed $1 million to build a new facility, even a casual observer would call that a major gift. A gift of $500,000 to establish an endowment to support a pressing need, such as a community health program, would also be easy to define as a major gift. But what about the donor who raises her annual contribution from $500 to $1,000? Or the company that makes a one-time grant of $10,000 to underwrite an event? In order for your organization to create an effective, ongoing program to attract major gifts, you must first define what gifts you will be seeking.

Defining Major Gifts by Size

Probably the simplest way to define a major gift is by size of the gift. It is useful to look at the historical dollar levels of annual gifts made to your organization when setting the entry dollar level for your major gift program. Most organizations count on a large number of small annual gifts, paid within a fiscal year by cash, check, or credit card, to keep their programs running. Study the pattern of these small, regular annual gifts in order to determine the highest level typically given within a normal year by your top group of annual donors. Ignore any unique, large, one-time gifts or grants that skew the regular gift pattern. Then set the entry level for your major gifts program at a dollar level from 5 to 10 times above this “normal” giving cap.

What your organization defines as a major gift needs to fit the circumstances, needs, and historical fundraising performance of your institution. There are organizations that will struggle to find donors who can contribute $1,000; for them, setting a major gift entry level of $25,000 is not a realistic option. Some sophisticated nonprofits, including hospitals and universities that have had major gift programs for years, identify various tiers for their major gift donors, beginning at five-figure levels and going all the way up to seven- and eight-figure gifts (see Exhibit 1.1).

Defining Major Gifts by Purpose

Many major gifts are given for a specific purpose, further distinguishing them from the annual gift, which is usually unrestricted for current operations. Major gifts are likely to be given in a restricted manner to accomplish a specific purpose valued by the donor. Gifts can be solicited for specific purposes, based on both the organization’s needs and the donor’s stated preferences. Most major gifts are given in order to further the stated mission and goals of the nonprofit, but it is up to the nonprofit’s leadership to determine if a specific gift is appropriate for the organization’s needs and future goals.

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EXHIBIT 1.1: Defining the Base Level Major Gift

Set the entry-level major gift 5 to 10 times larger than the highest annual gift typically received by your organization.

If Your Highest Level of Annual Gift Is:	Set Your Entry Level for a Major Gift at:
$500	$2,500 to $5,000
$1,000	$5,000 to $10,000
$2,500	$10,000 to $25,000
$5,000	$25,000 to $50,000
$10,000	$50,000 to $100,000
$25,000	$100,000 to $250,000
$100,000	$500,000 to $1,000,000

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A major gift can be made for any of these purposes:

• Unrestricted gifts
• Restricted gifts
• Capital gifts
• Programmatic gifts
• Gifts for endowment

Unrestricted Gifts

Unrestricted gifts can be used within the current fiscal year to meet the needs of current operations, such as salaries, ongoing programs, overhead, utilities, maintenance, facility upkeep, and the like, as identified within the organization’s budget process.

Restricted Gifts

A restricted gift is a gift where the donor places a restriction on the use of the funds, such as when, where, and how the money can be spent. An organization is legally required to see that the funds are used as the donor requests. It is incumbent on the organization to not accept a restricted gift if the leadership feels that it cannot, or will not, use the funds as restricted by the donor.

Capital Gifts

Capital gifts are restricted by the donor for use in a specific capital project, usually in response to the stated need of the organization, such as construction of a new facility, renovating a facility, buying land, or other one-time capital outlay.

Programmatic Gifts

Programmatic gifts are restricted by the donor to initiate or support ongoing programs that serve the mission of the organization, such as educational outreach, or to provide specific services, such as delivery of food to the homeless.

Gifts for Endowment

Endowment gifts are those wherein the principal gift amount is invested and preserved, and only the interest income is spent on a purpose identified by the donor. Endowed gifts may be unrestricted or restricted in purpose, depending on the donor’s stated desires.

Note: It is the donor, not the nonprofit, who determines the use of a gift.

Nonprofits are not required to accept gifts for a purpose they do not intend to honor, and in practice most major gifts are negotiated agreements between the donor and the nonprofit’s executive or board leadership. An organization can work with the donor to specify the use that it desires for major gifts, or it can solicit major gifts for a specific purpose. For instance, a nonprofit board might decide that it wishes to start a new program to underwrite a community initiative that requires programmatic funds, and it can solicit major gifts that are restricted in support of this program. These restrictions, or the terms of the donation, are best worked out with the donor in advance of the contribution and preserved in writing to prevent future misunderstandings.

Types of Major Gifts

Your organization also will need to define gift policy for acceptance of certain types of larger gifts. Although some major gifts come in the form of a check for all the money at one time, it is much more common to have donors pledge large gifts over a period of time. Many major gift donors also consider some type of planned giving arrangement either to preserve a tax advantage or to meet an estate planning goal when giving away large sums of money or other assets. It is useful for the organization to review and define its policies in these areas when starting a major gift program.

Outright Gifts

Cash or checks that cover the gift amount in full are the easiest form for a nonprofit to accept a major gift, but these outright gifts don’t always meet the donor’s needs.

Pledges

The most common way in which donors pay off a major gift is through pledges. Most organizations set a time limit on pledges of from three to five years, depending on their financial situation and the cash flow needs of the project being supported by the pledge. Pledges of 10 years and longer are sometimes offered, however, so your organization needs to decide whether this is an acceptable way for you to receive the funds.

Remember to get any pledge agreement and timetable in writing and keep it in your files to avoid future misunderstandings. Often the people who originally negotiated a gift have left the organization by the time a 5- or 10-year pledge is fully paid out.

Gifts of Stock or Other Negotiable Securities

Due to the tax benefits of making a gift of appreciated stock, many donors of major gifts find this a useful way to fulfill their contribution or pledge. Make sure your organization can handle the timely transfer of privately owned stock or other securities and that the financial staff and the advancement staff communicate with each other when these gifts are received and booked.

Planned Gifts

The connection between planned giving and major gifts is an important one that will be discussed more fully in Chapter 8. For now, however, consider whether your organization needs to set policies concerning the acceptance and counting of major gifts that are also planned gifts.

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Live & Learn

You’re Giving to What?

A wealthy alumnus who had long supported the school’s athletic program through annual gifts was being courted for a big gift to the campaign for the athletic facility renovation. After several meetings with the athletic director, he agreed to a $500,000 pledge. The school was thrilled—for a week. He called back to explain sheepishly that when his wife found out, she told him they would only support academic programs. “You know,” he said, “our foundation is funded from her side of the family.”

Moral of the story: Find out who makes the decisions, and include them in the process.

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Many organizations receive their largest major gifts through bequests. It is not uncommon for a donor who might have supported a nonprofit for years with smaller gifts to make a larger gift in her will or estate plan. There are many ways you can encourage this kind of long-term giving relationship, especially through the positive stewardship of the donor’s gifts over many years.

Recognition of Major Gifts

Most organizations announce and recognize major gifts at the time that they are promised in writing, even if the gift involves a pledge over a period of time. (Bequests and other deferred giving arrangements are an exception to this rule; see “Tips & Techniques.”) Many organizations are eager to announce large gifts as soon as they are closed, in order to show progress toward major goals, keep the rank-and-file donors motivated, and raise the sights for other potential major gift donors.

Public recognition is the currency of major gift giving in most American nonprofits today. Recognition involves ma...

Table of contents

• Cover
• Contents
• Title
• Copyright
• Dedication
• Acknowledgments
• AbouttheAuthor
• Introduction
• Chapter 1: Introduction to Major Gifts
• Chapter 2: Building a Major Gifts Program
• Chapter 3: Board Leadership
• Chapter 4: Making the Case for a Major Gift
• Chapter 5: Cultivation of Major Gift Prospects
• Chapter 6: Soliciting Major Gifts
• Chapter 7: Motivating Donors: Recognition and Stewardship
• Chapter 8: Special Opportunities in Major Gifts
• Appendix
• Index