Why Community Foundations Need an Annual Fund Program

Jean Christensen lived at the Skyview Mobile Home Park. On the surface, she didn’t appear to be a wealthy person.  She was not on anyone’s high-net-worth radar screen and to my knowledge gave only small amounts to charity during her lifetime.  Like many widows her age, she was most concerned about outliving her resources and not having enough money.  Only her financial advisor, attorney and accountant knew how much money she actually had.

I never met Mrs. Christensen, or any of her advisors for that matter, so when I received the letter from her lawyer telling us we were going to receive $2.3 million dollars from her estate I was stunned.  My first reaction was to check our donor files to see if her name appeared.  Sure enough, she had been an “Associate” or annual fund donor for 12 years. She had never given more than $100 dollars at a time, but never missed a year. From her record, I knew only that her husband had died seven years earlier and that she made a memorial contribution in his name.  There was no other pertinent information.  She was simply one of the 500 people in the community who were our Associates.

Mrs. Christensen’s gift came early in my career at the Santa Barbara Foundation and was both memorable and illustrative.  Above all, it taught me that high-net-worth individuals came in all shapes and sizes. Yes, they are often in the social pages of the local newspaper or members of prestigious clubs.  Yes, many are highly visible donors and their names appear on gift recognition walls and in annual reports.  But they also live quietly in neighborhoods throughout the community, keeping a low profile or seeking complete anonymity.  In the case of Jean Christensen, she once owned a home in an upscale neighborhood, but when her husband died she sold it and opted for a simpler life.  I later discovered that she had no children, but had amassed a considerable estate and ultimately bequeathed it to the Santa Barbara Foundation.

The question is why did Jean Christensen give her money to the foundation and what can community foundations do to find these hidden high net worth individuals? To me, part of the answer lies in the creation of an annual fund program.  Call it the Friends of the Foundation, the Associates or the Affiliates.  Whatever its name, it should be an integral part of every development effort at every community foundation.

In December of 2008, I retired from the Santa Barbara Foundation after 18 years as its President and CEO.  During my tenure our assets grew from $30 million to more than $300 million.  Like most community foundations we had an excellent development program with all of the requisite fundraising arrows in our quiver – including the Associates Program

When I started at the Foundation we had 2.5 staff members.  One of them handled all of our restricted funds (donor advised funds, field of interest funds, etc.) as well as the Associates.  At the time, the fee to become an Associate was $25 and all of the money went into the foundation’s unrestricted endowment fund.  The message to the community was that 99 cents of every dollar we received went to work supporting our local nonprofit sector – for good, forever.  We could say this because our operating budget hovered at or slightly below 1% of the total value of our portfolio. It was a powerful message.

When I entered the community foundation field I thought everyone had an Associates Program.  Prior to joining the foundation I worked in the development offices at three universities and a museum.  I knew all about century clubs and end-of-the-year fundraising campaigns and the rationale for having them.  As I began attending the annual fall conference for community foundations, however, I found that very few community foundations had such a program.  The question was why?

The answers, I found, were invariably the same.  They fell into two basic categories – perception and cost/benefit.  Those who said it was a matter of perception claimed that their local nonprofit sector would view the program as competition.  To them, annual funds were the domain of nonprofits.  Community foundations didn’t compete in this arena.  And those who said it was a cost/benefit matter, claimed it was too expensive.  Annual fund programs did not generate enough money to make them either viable or valuable.  They required at least some portion of a staff member’s time to handle the gift acceptance and acknowledgement processes, not to mention the accounting.  In short, the annual fund model was not something that worked for community foundations.

While I understood each argument, my experience suggested otherwise. Let’s take the matter of perception.  I inherited our Associates Program, so one might conclude that I missed the initial outcry from the community.  In my case, however, I was the director of development at a local museum and was actively involved in the local AFP chapter when the foundation launched its program.  Believe me, there was no outcry.  Perhaps the scale and focus of the program was just not that threatening. Remember, the cost to join was $25 and the only thing one received was a listing in the Foundation’s annual report.  There were no gift clubs, so no one knew how much anyone actually gave. In this respect it was not a classic annual fund model.  It was never designed to move people up a giving ladder into ever higher categories.  It focused on the one thing that separates all community foundations from their competition – it was used to educate and to build endowment.  One might say it was a more egalitarian version of an annual fund with no public or private pressure to give more than one’s neighbor or golfing buddy. It was simply an expression of support for what the foundation was trying to accomplish – which was to support local nonprofits both now and in the future.

In addition to no public objections, the Associates Program also enabled people of modest economic means to feel they were part of the Foundation’s work -- including people of color.  It could be argued that if the entry point of donor engagement is the creation of a $5,000 or $10,000 advised fund, one is working in a rather rarified economic atmosphere.  Community foundations pride themselves on being inclusive and diverse, so shouldn’t their diversity extend to the donor community as well?  Under the Associates banner, donors are seen as both sources of money and emissaries of information and enthusiasm.  I would argue that the education component is even more important than the fundraising one.  The role of a community foundation is to inform people about the critical issues facing their community and to inspire them to act – in both large and small ways.  In Jean Christensen’s case, she had 12 years of contact with the Santa Barbara Foundation during which time she clearly educated and inspired herself to act.  Initially, her financial support was modest, but the Associates made her feel part of a greater whole – and without the giving level pressure she was truly an equal partner.

As the program grew, it eventually became important to be listed as an Associate in the foundation’s annual report.  The end-of-the-year appeal, for example, was tailored for both new and renewing donors.  For those who had not yet renewed their membership it was the last time to be sure that their name appeared in the annual report.  For those who had renewed earlier in the year it was another opportunity to support the foundation’s important work.  There was also a letter sent to those who were not yet Associates but were names we had gathered throughout the year and placed on our “Friends” list.  While the wording was slightly different in each case, the over-arching message was invariably the same.  The introductory paragraph asked everyone to support their favorite charities– not just the foundation.  They were encouraged to give generously and as broadly as possible.  This may be another reason why the local nonprofit sector did not object to the program.  Our “ask” was rather subtle and came near the end of the letter.  It went something like this: “We know that you can’t give to all of the worthy organizations throughout the community, so as you make your final gifts for the year we hope you will include one to the foundation, knowing that our grant making helps such a broad range organizations and causes.”  By focusing on the greater community good, we positioned ourselves as promoting philanthropy in general, not just foundation.

Once people had renewed or joined, there was also the matter of stewardship.  When someone reached the five year mark or exhibited other signs of growing interest, I would often write a PS at the bottom of the thank you letter acknowledging their continuing support.  As most annual fund people know, there are a whole series of triggers that warrant additional action (a phone call, a lunch meeting, or a special letter).  For a classic annual fund it can be a personal note encouraging them to give at a higher level or to reach a specific goal.  In ours, it was simply a more personalized thank you that recognized their loyalty and continuing support.

When I left the foundation we had more than 1000 Associates, each of whom knew who we were, what we did and, perhaps most important of all, wrote us a check each year.  Whenever I think of the Associates I am reminded of the Native American proverb that should be the anthem for all donor engagement programs: “Tell me and I will forget, show me and I may remember, involve me and I will understand.”  The writing of that check is involvement.  It makes the foundation a part of the donor’s charitable psyche.  Yes, annual fund programs are a long-term investment and carry a cost of administration, but they eventually pay handsome dividends in the form of renewed gifts, periodic bequests, and more charitable dollars going back into the community.  In my mind’s eye I can visualize the conversation Jean Christensen might have had with her estate planning attorney.  When asked “Do you have any favorite charities?” her answer undoubtedly included the Santa Barbara Foundation.  At this point, we became a potential beneficiary.  In addition, if we educated her attorney about the various gifting options available through the foundation, we are even closer to receiving that gift.  If Jean had multiple charitable interests, a designated fund would work.  If her interests were in the broad areas of education or health, a field-of-interest fund might be the answer.  In her case it was a combination of the two, with a large portion unrestricted.  The options are many, but the conversation began with an understanding of what the Foundation does.

Clearly, the annual fund model I have described is an entry point.  But, if all significant gifts begin with awareness, then the magic formula must include both advisor awareness and donor awareness.  Segmented marketing and public awareness programs can help, but if they do not include the action step of writing a check they are not going to be as effective.  Check writing trumps PR.  Furthermore, every insert or annual report the foundation placed in the local press included an Associates appeal.  It was the action step often missing in many marketing efforts. Each time we ran a piece, we added new Associates to our list and came very close to raising enough money to pay for the cost of the insert -- not to mention the subsequent renewal gifts and new emissaries for the foundation.

Finally, during my tenure with the foundation most of the major gifts we received were from Associates.  Like Jean Christensen, the vast majority of them were people who were not part of the visible high net worth group.  One was a retired librarian, another was a tennis coach, and many were retired businessmen and women. Most of them had no children and their largest asset was often their home.  Sometimes we received a portion of their estate.  Sometimes we were given all of it.  And in almost every case, we never knew the gifts were coming.