Fall 2018 - Teaching at UM-Dearborn. See "Running Commentary" in "More" for details
After a few years away from the classroom, I will be teaching again this fall.
I’ve joined the adjunct faculty of the Department of Health and Human Services at the University of Michigan Dearborn. My class, however, remains substantially the same – fundraising and grants seeking. There will, however, be more emphasis placed on grant seeking than previously because of the importance of grants in supporting the work of health and human services organizations.
The class number is HHS-407. It will meet Monday and Wednesday from 2:00 to 3:15pm starting September 5th.
Use the button below for access to the course listing.
Michigan’s fundraising climate is stable, but fundraisers are beginning to worry.
--That is the key finding of the 2018 Michigan Fundraising Climate Survey.
Other highlights from the 2018 Michigan Fundraising Climate Survey include:
Michigan nonprofit organization leaders fear the Higher Standard Deduction enacted in late 2017; 66.66% of our respondents expected the higher Standard Deduction will have a negative impact on giving to their organizations.
36.47% did not meet their 2017 fundraising goals. Over the past three years, the percentage of respondents reporting their group did not meet its fundraising goal rose from 33% to more than 36%.
There has been a sharp decrease in the proportion expecting Michigan’s statewide fundraising conditions to improve -- from 70% in 2016, to 47% in 2017, and 27% in 2018. Respondents, however, were more upbeat about local fundraising conditions in their home communities with 6% rating local conditions as “Excellent” and 60% as “Good.”
The trend has been for fewer to report raising more money than in the prior year. On this year’s survey, 53% reported raising more money which is down from 2016 when 57% reported having done so (but up from 2017 when 47% reported doing so).
Nearly 84%, however, said that their organizations had raised at least as much money in 2017 as in 2016. The percentage reporting raising “about the same” amount of money as in the immediate prior year, however, is rising while the proportion raising more money is shrinking.
Michigan fundraising is currently stable but the nonprofit leaders we surveyed are becoming nervous. Many did not meet their fundraising goals last year. Fewer reported having raised more money than in the year before. They are also less optimistic about Michigan’s statewide climate for successful fundraising.
Most importantly, they are concerned that the higher Standard Deduction enacted late last year as a part of tax reform will negatively affect giving to their organizations.
While few people give because of the charitable gift deduction, it is likely that many itemizers give more because the gift deduction has allowed them to recoup an average of 20% of the cost of their gifts in recent years. Personally, I don’t expect to see a huge drop in individual giving as a result of the higher Standard Deduction but a decrease of 5% or maybe a little more seems highly likely.
We recently used National Center for Charitable Statistics data for 10,594 Michigan public charities filing “990” forms with the Internal Revenue Service in 2013 (the most recent year for which data was available) to take a quick look at the relative dependence on fundraising of some broad classes of Michigan
When we did that, it quickly became clear that some classes of nonprofit organizations are very dependent on fundraising to support their work while others seem to have monetized their work and so are now supported primarily (in some cases overwhelmingly) with earned income.This is more than a “fun fact” to include in casual conversation. Rather, it speaks to three things:
For this analysis we combined a number of NCCS revenue categories in order to focus more cleanly on three principal revenue streams: Philanthropy, Investment Income, and Earned Income Investment income (where endowment earnings would roll-up) is only a very small part of the overall revenue picture. It provides a high of 5.00% of total revenue to "Public and Societal Benefit" organizations down to a low of 0.80% of total revenue for groups falling into the "Religion, Not Congregations" group.
Michigan’s public charities seem to fall into three categories. Some are highly-dependent on fundraising, others are moderately dependent on fundraising while fundraising appears to have very little relevance at all to others. For example, Hospitals derive barely more than 1.0% of their total revenue from fundraising.
Highly-dependent, 60% or more of total revenue from fundraising).
Organizations falling into the “Highly-dependent” category relied on fundraising to produce between 2/3rds and 3/4ths of their total revenue. These organizations need to achieve significant fundraising success just to keep their doors open. These are also the organizations that must fundraise continuously despite the risk of donor fatigue. At this level of dependency, few organizations can easily weather a large or long downturn in giving or devote much donor capacity to meeting longer term needs.
Dependent (20% to 59% of total revenue from fundraising).
In the middle category, organizations have generally been able to monetize their work to a significant degree. While they are clearly still dependent on fundraising to adequately fund their work, it is a little easier to see how they might be able to continue that work in the face of fundraising shortfalls or afford to devote a portion of their total fundraising capacity to funding longer term needs.
Organizations in this middle group are often able to structure fundraising appeals in terms of more attractive
giving opportunities or direct a portion of their total giving to meeting longer term needs. In the middle category, however, the capacity to do these things is still relatively limited for most organizations as they are (collectively at least) are still pretty dependent on fundraising as a source of support for their ongoing operations.
Somewhat dependent (1% to 19% of total revenue from fundraising).
In this final category, organizations have, on average, relatively little dependence
or almost no dependence on fundraising. As a result, many organizations falling in these last three classes of organizations are free to direct donors at all levels toward purposes that many are likely to find appealing like scholarships, new programs and new or expanded
A final note... Remember that the figures used in this report are for broad classes of Michigan public charities. The smallest category, Public Safety & Disaster Relief, includes 33 separate organizations while the largest, Human Services, includes 3,928 different nonprofits. As a result, the situation at any single organization might be significantly different than implied by these figures. Still, absent specific reason to believe that a particular organization is different than its peers, these figures do provide some general benchmarks with which to get a sense of whether an organization might be less (or more) dependent on fundraising than its peers.
Michael J. Montgomery, Owner/Principal at Montgomery Consulting
Phooey on the Traditional Feasibility Study! After seeing some recent posts in fundraising discussion groups asserting that organizations contemplating major new fundraising efforts must always conduct feasibility studies, I just couldn’t keep quiet any longer.
While many consultants earn a nice living doing them, I generally advise against the traditional interview-based feasibility study favored by many consultants.
Instead, I urge many, though not all, my clients to prepare an abbreviated case statement which they then use to test the reasonableness of their fundraising ambitions by making actual gift requests for a few of the “must do” items they would certainly include in any new campaign. I call this approach to feasibility analysis “First Asks” (OK, so I’m not great at coming up with clever names!)
Aside for wasting the time of your best prospects with a theoretical discussion about what they might be willing to do, there is nothing that you can learn or do with a traditional feasibility study that you can’t learn or do at least as well (and much more cheaply!) using the First Asks approach.
Clarification of Plans -- Because a case statement must first be created under either method, both force an organization to clarify its plans and preliminary fundraising ambitions.
Consensus Building -- If you develop your case using a participatory process, both methods build internal consensus.
Board Member Commitment -- If you include Board members in the development of your case and they are among those receiving the First Asks, you learn what your Board members will do whereas the traditional feasibility study only tells you what they might do.
Input for Positioning -- Either method can provide valuable feedback with which to better position your organization for fundraising success.
Develop and Test Messaging -- Both methods allow you to test and refine fundraising messaging.
Identify and Recruit Volunteers -- Either method permits you to size up potential volunteers and, when appropriate, ask them to join your campaign team.
Estimate Near Term Giving-- Because you request actual gifts, First Asks provides more accurate information as to what specific people and organizations are actually willing to do for your organization.
Reduce Expenditures on Consultants -- First Asks minimizes your expenditures on consultants by focusing their efforts where fresh eyes and a well-informed external perspective are most beneficial.
Conditions needed for using the “First Asks” Method
First Asks presupposes that your consultant knows your geographic or functional territory. It also assumes they come to your project with a significant understanding of the fundraising conditions, competition and philanthropic culture in which you must operate. First Asks presumes your consultant arrives on the scene and can more-or-less immediately give you pretty good guidance as to the basic reasonableness of your fundraising ambitions and how (broadly speaking) you might go about pursuing those ambitions. Under this approach, the purpose of the First Asks contacts themselves is to test (and provide data with which to adjust when needed) the fundraising case, messaging and approach you developed in conjunction with your consultant.
Limitations of the “First Asks” Method
First Asks is NOT appropriate for every situation. Because of its large information requirements, consultants can really only employ the First Asks method successfully in markets that they know reasonably well. Nor are groups with weak fundraising infrastructure generally in a position to implement the method successfully.
Some foundations strongly encourage their prospective grantees to conduct traditional feasibility studies. When that is the case, you might be well-advised to follow “the golden rule of fundraising” and do a traditional feasibility study.*
Some people are also less inclined to be frank about grievances or concerns when contacted for actual gifts than when contacted for a traditional consultant conducted feasibility interview. Such a lack of frankness could be problematic for organizations with troubled histories. Finally, some organization leaders simply lack the intestinal fortitude to go straight to asking prospects what they will do without first having some 3 party go discretely ask those same people what they might do.
As result of the factors noted above, First Asks is clearly NOT for everyone. But, when the right combination of client and consultant comes together, First Asks can be a simple and quick way for many organizations to gather the information needed to determine whether (and, if so, how) to scale up their fundraising efforts.
*For those new to the field, the “golden rule of fundraising” is this: The person with the gold makes the rules!
Michael J. Montgomery is a fundraising consultant with his own firm, Montgomery Consulting of Huntington Woods, MI. He successfully employs the “First Asks” method in and near his home market. His recent projects include the Save the Willow Run Bomber Plant Campaign -- a successful campaign that a traditional feasibility study would most likely have concluded was hopelessly infeasible.
One of the most famous quotes from author F. Scott Fitzgerald comes from his 1926 short story The Rich Boy, “Let me tell you about the very rich. They are different from you and me…” That quote gave rise to a story, possibly apocryphal, about a conversation between Fitzgerald and Ernest Hemingway in which the latter retorted, “Yes, they have more money.”
Let's compare giving by the rich to giving by all donors to see if Fitzgerald or Hemingway was right. To do that, we will use data about High Net Worth households from 2014 US Trust Study of High Net Worth Philanthropy and data on giving by all donors from Giving USA 2014 . /1.
It is important to note, however, that the two studies are not entirey equivalent. US Trust includes only High Net Worth (HNW) households, defined as having $1 million of more in assets, excluding their primary home, or an annual household income of $200,000 or more. In contrast, Giving USA includes all types of donors: Corporations, Foundations and Individual Donors at all income levels. Nor do all categories of recipient organizations line up. Still, the two studies do provide a reasonable basis for comparing giving by HNW households to the broader pool of American donors. We will, however, still limit our look to a few types of recipient organizations where the categories used in the two studies appear to be most equivalent. /2.
Arts – The broader donor group was marginally more supportive of the arts than were the HNW households. Giving USA reported that 5% of total US giving went to the arts while the US Trust study reports that HNW households devoted 4% of their total giving to the arts. This near equivalence is interesting because it contrasts sharply with the longstanding notion of Arts as an elite cause.
Education – High net worth donors, however, were substantially more generous to Education than was the broader group of donors. The US Trust study reported that HNW households devoted 27% of their total giving to Education in comparison to the 16% reported in Giving USA. This finding comes as no surprise as education has long been considered to be a cause that is especially appealing to the affluent.
Environment and Animals – High net worth donors were also more supportive of these causes than was the broader group of donors. The US Trust study reported that HNW households devoted 5% their total giving to the Environment and 1% to Animals (6% total) in comparison to the 4% devoted to Animals and Environment by the broader group of donors.
Health – The broader group of donors, however, was more generous to Health causes than were the HNW households. Giving USA reported that 10% of total US giving went to Health causes while the US Trust study reports that HNW households devoted 3% of their total giving to Health causes. This is perhaps not surprising given the amounts raised through broad-based efforts by the national charities focused on particular diseases.
International – International causes were also more appealing to the broader group of donors than to the HNW households. Giving USA reported that 3% of total US giving went to International causes while the US Trust study reports that HNW households devoted 1% of their total giving to International causes. This is no surprise given the large amount of funds raised by mass-market international relief and development charities.
Religion – The broader group of donors was clearly more generous to religious causes than were the HNW households. Giving USA reported that 31% of total US giving went to religious causes while the US Trust study reports that HNW households devoted only 12% of their total giving to religious causes. With corporations and foundations providing very little money to religious causes, this may actually give an “apples to apples” look at how HNM households differ in their giving from the broader population of individual donors.
So, who is right, Fitzgerald or Hemingway?
In the six areas examined, the HNW households and the broader donor group demonstrated different preferences in the causes they supported. In three areas; Education, Health and Religion, those differences were large. In the others, differences, though smaller, were still noticeable. So, at least in terms of the causes to which they give, Fitzgerald appears to have been right -- the rich really are different from the rest of us in ways that go beyond simply having more money.