Redefining What Counts in Your Annual Fund

Posted on 06/01/2021

With anything in life, you can’t achieve what you don’t measure. If you’re trying to lose a few pounds, it helps to track your weight. Or, if you want to be a better piano player, then you should stick to your practice schedule. The same can be said for your annual fund: if you want to grow, you need to make sure that you are tracking the right things. To do this, it’s critical for your organization to have a clear definition of what constitutes your annual fund – one that everyone within and outside of your annual giving team understands.

Several years go, when Boston University was preparing to launch its seven-year, $1 billion comprehensive fundraising campaign, the advancement leadership team made it very clear that, regardless of how much money was raised, the campaign would not be considered a success unless it elevated alumni engagement and increased alumni participation through the annual fund. With this in mind, one of the first things the annual giving team did was ask: What constitutes an annual fund gift?

While this might appear to be a straightforward question, it didn’t always yield the same answer. When asked, some of BU’s advancement staff thought annual gifts were determined by their size (e.g., gifts under $25,000) or by the method through which they were solicited (e.g., phonathon, direct mail). Others assumed that the annual fund included only gifts to a single, central unrestricted fund at the university.

While different stakeholders may have had their own interpretations, the true definition of the BU annual fund was actually based on gift designation. Each year, the annual fund revenue total was a reflection of gifts to more than three dozen unit-based discretionary funds and to the central university priority funds, which include scholarships, libraries, student services, and the areas of greatest need. While gifts to these funds may have been restricted to certain areas or programs, they were also considered unrestricted in that the money could be spent at the discretion of the respective administrators. Gifts to funds outside of this criteria, regardless of their size, were not considered annual fund gifts.

One of the inherent challenges found in this definition had to do with stewardship. For example, BU’s annual fund leadership giving society recognized all donors who made a gift of $1,000 or more to the annual fund. If a donor made a leadership-level gift to a current-use restricted fund that was not one of the BU annual fund designations (e.g., history department fund, a club sport fund, a student activity fund), then the donor would not qualify as a member of the annual fund leadership society and would not be eligible for its benefits.

Recognizing the shortcoming in the existing definition as it related to the campaign goals, BU’s annual giving staff worked closely with advancement leadership to lobby for a broader definition of the annual fund that would better align with a donor’s notion of annual giving. This process took over a year and included discussions with deans, the provost, the president, the alumni association board and the board of trustees. Staff compiled data on the past trends and shared future projections under the current and proposed definitions. They also provided benchmarking data to show how annual fund revenue was tracked at a peer institution.

These conversations and accompanying research concluded with a proposal to broaden the definition of BU’s annual fund to include all gifts made to any of the thousands of current-use restricted funds at the university. The team also proposed that for gifts exceeding $100,000, only the first $100,000 would be counted in the annual fund revenue totals. While these donors would still be recognized for their full gift amount, setting a “cap” for reporting purposes would allow for better projections and make sure that outliers would not skew results from one year to the next.

The proposal was unanimously accepted by university leadership, allowing the staff to move forward with the broader definition of annual giving during the remainder of the campaign. This change supported appeal efforts targeted to donor interests, something that was particularly important among younger alumni, who are more inclined to support specific programs than the general needs of the institution. The expanded definition also helped drive a significant increase in annual fund revenue and donors, allowing the advancement team achieve one of the key priorities of the campaign.

Setting goals is critical, but when there’s not consensus about what defines your annual fund – or if your current definition is not well-suited for growth – it’s likely time to reevaluate. Take the lead, do the research, engage with stakeholders, and craft a proposal designed to position your annual fund for success. Once you’ve established the definition, make sure that you align your messaging and reporting to support your strategy going forward. You’ll likely find that after redefining what counts, you can better work toward achieving those goals.

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