Podcast: Transforming Fund Management: Key Insights on Accountability and Impact Reporting

Season 4, Episode 5

In this comprehensive episode, Andrea Kihlstedt and Chelsea Lamego dive deep into the critical aspects of managing and reporting on donor funds. Chelsea, co-founder and CEO of FundMiner, shares her expertise on overcoming the complexities of fund management, particularly in large institutions and small nonprofits alike. The discussion highlights common challenges such as tracking funds, managing restricted gifts, and creating effective impact reports.

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Andrea Kihlstedt:
I know you’re raising money for a capital campaign, but can you manage the money you’ve raised? Are you sure you’re spending it the way you’re going to spend it and can you report on the impact that it’s having?

Hi there. Today we’re going to talk about that. We’re going to talk about managing the money you raise and being able to report to your donors about impact. I have a fantastic guest with me here today who is the perfect person to talk to you about that.

Joining me today is Chelsea Lamego. Chelsea is the co-founder and CEO of FundMiner. Now I have to say, Amy, my partner, is not with me today. She’ll be back on next week’s podcast. But as I’m sure you know, Amy and I are entrepreneurs, and we love entrepreneurs. We particularly love young women entrepreneurs, and that’s what Chelsea is. She and her partner have created a brand new company that is doing really well.

The idea of this company was born out of her work when she was the assistant vice president for Advancement Operations at the University of Texas at El Paso. Now that’s a mouthful. Hey, Chelsea. Welcome.

Chelsea Lamego:
Thank you, Andrea. I’m excited to be here and chat with you today.

Meet Chelsea Lamego

Andrea Kihlstedt:
Now tell us what this job of yours was at the University of Texas.

Chelsea Lamego:
Oh, gosh. Well, the thing about doing good work is you get a lot more work. So I think when I started working at UTEP, I was overseeing gift processing, our compliance work, and budget and HR. Over time, that grew and grew and grew, and I was then overseeing all of our information systems units, our research and prospect management, and more and more and more.

And so, really it was all of the operational components. We had our frontline fundraising team and development team, we had our alumni engagement team and events team, and our operations area under me was the catch-all for everything else.

Andrea Kihlstedt:
Yeah. So you were in a crisis always. The catch-all departments are always-

Chelsea Lamego:
Well, yes, crisis, but I would say it was really … We were going through a lot of growth and change during my time there. And so, it was a lot of solving the challenges that had existed for a long time.

Donor-Endowed Funds

Andrea Kihlstedt:
Right. When we first spoke, Chelsea, you totally rocked me back by telling me that at big institutions like the University of Texas, and many big institutions of higher ed, that have a lot of funds, of endowed funds, donor-endowed funds, that a ton of those funds end up not getting spent every year because people can’t keep track of them. Now what was the number you told me?

Chelsea Lamego:
That’s right, Andrea. We talk to higher ed institutions on a daily basis, and what we find is that, on average, these institutions are not fully utilizing between 20 and 40% of the funds that they have available. This really isn’t because anyone is doing anything wrong or they’re making huge mistakes. But if you think about these natural nature of these organizations, they’re just so dispersed.

Of course, you have your fundraising team who is raising the money and you have your operations team within your fundraising office that is helping to process the money, but you really rely on all of your campus partners to actually deploy the capital and spend it correctly and on the right things at the right time. It’s really important, of course, that you actually spend donor money so that you can share impact.

This is certainly true of large organizations, but it’s also true of medium-size and small organizations. It really has to do with the fact that there’s this natural dispersed nature of the people who are spending the money. You have folks in different units, programs, colleges. You have a scholarship office, you have an athletics department, you’ve got programs everywhere, they’re all reporting up under different structures. When you have dozens, hundreds, thousands or tens of thousands unique funds over time, some of which exist in perpetuity, it’s just extremely complex and challenging.

To make that even more difficult, the information on funds tends to live in multiple different siloed systems. We see between five and seven being the average number, but if you think about that, you have donor data and gift records in your CRM system, and oftentimes that’s also where organizations are storing the purpose or criteria and restrictions on funds. Although sometimes it’s also just in a spreadsheet or not tracked at all, or just in the agreement.

You have your balances, your expense information, transactions in an accounting system. You have recipient data in an awarding system. You have documents in a document management portfolio or maybe paper copies. Then there’s also endowment information which may be coming from a third party or in spreadsheets.

Sometimes organizations have multiple CRM systems or multiple accounting systems, or there’s a separate foundation supporting the institution. So all of this extra complexity just makes it even more challenging to manage donor funding. Of course, it’s critically important that if we’re raising money from donors for the great need that exists, the drastic need that exists that we actually use the funding as we promised.

Complex Gifts

Andrea Kihlstedt:
Yeah. I mean that’s so interesting to think about. We at Capital Campaign Pro think so much about helping organizations raise the money, and we don’t really think as much, though clearly we should, about advising them in how to manage the spending of the money, the capturing of the information, the making sure that everything is spent and managed the way it should be.

For example, if somebody has a capital campaign to build a new building, it seems perfectly obvious that they need a separate account for that money. Now not every small nonprofit organization actually does that or manages their money in that way.

So even at a very small level, the ideas that you’re talking about of being able to manage the money and have it and know where it’s come from and where it’s going and who is looking out for it and who is making sure it’s getting spent on the appropriate thing at the appropriate time.

Just one more thing. For a small campaign, a small organization, the other complexity is that often they have donors who are pledging their gifts over time, maybe three years, maybe five years. Maybe they have donors who are giving money in cash, in pledges, in stocks, and plan gifts out of longer-term bequests or bequest intentions.

These are complex gifts, and who even in these small and mid-sized organizations are looking at these and making sure that all of that is tracked in the right way, and that when it comes in, it is spent for what the donor thought it was going to be spent for? So talking to you has just opened my eyes to how important all of this is.

Chelsea Lamego:
I love to hear that, Andrea. It’s so interesting because when you think about fundraising and the work that we do, this topic is so fundamental and foundational to the work that we do.

There’s a great statistic that was released in 2023 by Independent Sector. The statistic was that:

8 out of 10 donors today want to see proof of impact in exchange for their continued support.

So 80% of your donors, before they give again, want to know that the gift that they made made that impact or change that they intended to make when they made that gift.

So in order to set yourself up for future success, you’ve got to make sure that you are tracking the funds, using the funds, and sharing that information with donors in order to be able to receive more funding from them in the future.

You bring up an interesting point with multi-year pledges, because we see this in the news all of the time where donors will get upset mid-pledge commitment and they’ll stop giving and they won’t complete their pledges. And so, that’s another important factor to think about there.

Tracking Impact and Reporting Back to Donors

Andrea Kihlstedt:
I think your business, Chelsea, has made you an expert on impact reports. How do we track and how do we report to donors about the impact of their gifts? What have you learned about that and what do you recommend about that?

Chelsea Lamego:
Good question, Andrea. I think that I like to encourage organizations to start somewhere and develop and grow their programs over time. There’s different types of impact reporting. At a, I think, baseline, as especially a smaller organization, you want to make sure you’re at least preparing an organizational impact report, sharing the activities that occurred in the prior year. How many recipients did you support? How many events took place?

Whatever your mission is, and you are, for lack of better word, selling to donors when you are raising funding, how are you going to tell them at the end of the year that you did that very thing and that you did it really well and that you’re going to be able to do more of it in the future.

As you grow and your organization becomes more complex, and particularly when you have multiple or several restricted funds, that’s when we really start to encourage for fund impact reporting. So if you have named funds where donors have given funds for specific purposes, then you want to report to those donors on that specific purpose.

This really … I mean if you even think of a grant example, if you’ve got a grant for a specific purpose, you’re reporting back to that grantor about the activities of that grant for that particular project or activity. It’s really the same notion when it comes to restricted funds. If somebody is giving funds to support a scholarship, tell them you awarded the scholarship and what the impact of that scholarship was.

If someone is supporting a specific type of medical research, explain the progress that occurred on that type of research in the prior year. When the donors feel like their gifts are making a difference, they are much more likely to continue giving for those initiatives and for other initiatives as well.

Andrea Kihlstedt:
Yeah. It’s interesting that … I think there are many organizations that are community-based organizations, that actually they were quite complex, but they don’t think about themselves that way. They think about themselves as small community organizations. And yet when you look at all the things they do, and they have donors who are …

The donors may not make restricted gifts in one area of a program or another, but they may know that some donors are particularly interested in cats, for example, as opposed to dogs if you look at a humane organization, an animal shelter of some sort. So you may want to have an impact statement that leans in on what they do with cats, what they do with feral cats, if they know donors are interested in that, even though the donor hasn’t made a restricted gift there.

Chelsea Lamego:
Right. I think you really hit the nail on the head there, Andrea, and it’s thinking about what is your mission, what are you raising funding for, and putting yourself in the shoes of those donors and what they care about. How do you pull on that heart string for them and how do you share that specific impact with them?

A Real-World Example

Andrea Kihlstedt:
Yeah, it’s interesting. A number of years ago, I did some work for a settlement house here in New York. Now settlement houses, by their nature, do multiple things. They started out helping immigrants into this country in the 1920s. Remember, Hull … Is it Jane Hull? Jane Adams? Anyway, I’ve got the name wrong.

But, anyway, there are many settlement houses in Chicago and New York. These organizations do multiple things. They often have daycare. They have English as a second language. They have elder care. They have meals on wheels. They may have a dozen different programs. They have job training. They have … And often they don’t find out what their donors are interested in. They don’t actually take the time or use opportunities to survey their donors.

But if you start to think from an impact report point of view, it would push you to say, “All right, every time we’re in touch with our donors, why don’t we give them an opportunity to tell them what they like best?” or to have them tell us what they like best to —

Chelsea Lamego:
What do they … Getting at what they care about. I mean the donors will tell you, it just really takes the conversation. Now the hard part for the organization is operationalizing this.

So in the example that you gave, it’s, well, how do we now think about what are these buckets of services or programs or types of initiatives that we are offering and what is going to be our plan for how we report on each of these? And thinking about breaking out your donors into these different populations and sharing different types of impact reports for them.

Going back to where we first started talking about how you go about impact reporting and starting somewhere and improving over time, maybe your first version is an overall … The first year you’re doing some of this work, you’re reporting on all activities. Maybe the next year, you’re breaking out some reporting on the different programs. Maybe the next year, it’s a custom impact report for the different donors who’ve identified which programs they care about and sharing that specific type of impact back with them.

I do see organizations who will break out the different types of programs or initiatives and craft different types of reports for them. Even going back to the higher ed example, if it is a fund that is supporting research or faculty initiatives or programs, it’s going to look really different from a scholarship fund.

When it’s a scholarship fund, we’re going to ask for narratives and stories of impact from students, scholarship and fellowship recipients who’ve actually received the funding. When it’s a fund or type of initiative that is supporting the organization, we’re going to ask the faculty members or leaders of those programs to write narratives and impact reports.

So it’s really breaking out those different populations to share that specific type of impact back with the donor.

Who Does the Work of Tracking and Reporting Impact?

Andrea Kihlstedt:
Chelsea, what you talk about is wonderful and raises in my mind the question of whose job is it to do this work? It’s a tremendous amount of work to make all of this happen and to be on top of this.

• Is this the communications department?
• Is it the program people that do it?
• Is it the development director?
• Is it a low-level development manager?

Where do you position this impact reporting in an organization?

Chelsea Lamego:
Of course it will really depend on the size of the organization. With really small nonprofits, for example, you typically have an executive director who’s doing just about everything. Maybe they have some marketing support to help with some design work.

I think it’s worth engaging a board even. This is such important work that pulling whatever team and resources together and putting your heads together to produce something really impactful is important.

So of course it’s going to really depend on the size of organization, the size of the team, and the resources. As you scale as an organization, that changes. So I imagine a mid-size organization, it might be somebody in charge of programs and initiatives, and they’re always going to be working with someone in marketing and communications on the design part of it.

As organizations grow, they typically have a donor relations area who owns impact reporting specifically. Sometimes there’s whole teams that do this. As you grow, it can be a job that can take months of time to produce these reports.

So it’s really a job that scales with … The work scales with the size of organization that you are. But I think it’s commonly overlooked and critically important and really sets up the organization of any size for future success.

I have to say I am on the board of a small nonprofit, and this is something we don’t do well. It’s because we are so resource-strapped and so resource-constrained, and we have such a small team that this tends to be pushed on the back burner. But I truly believe if we were to invest the time and attention, it would have helped us meet our fundraising goals and grow as an organization over time. So I think it’s something that’s easy to overlook or easy to push to the side, but it’s probably actually that magic key to your future success.

Andrea Kihlstedt:
Yeah, it’s sort of a catch-22, isn’t it? Right?

Chelsea Lamego:
Yes. Yeah.

Andrea Kihlstedt:
The donors don’t want to give to you. If they think they’re just giving to the annual fund, then the organization is still in business.

Chelsea Lamego:
Well —

Andrea Kihlstedt:
That’s not a good impact report. We’re still in business.

Chelsea’s Personal Epiphany

Chelsea Lamego:
It’s interesting because I’ve been doing this work now for about seven or eight years, and I’ve been very focused in on this. Very recently, I had a personal epiphany and I realized when I give, I mainly give to two organizations, and that happens to be my alma mater where I went to school twice and graduated from, and I happened to also work there. The other organization, I’ve been involved with and also previously worked there. I’ve been on the board for about 10 years. And so, I have given, of course, to other organizations, but not recurring and not in a big way like these other organizations that I’m involved in.

And so, I started to think about that and I realized the key there or the difference really was that with these two organizations, I’m so involved that I know the exact impact that my dollars are making. That’s just because I happened to work there and I happened to be so involved, but these other organizations where I gave one-off gifts to and never gave again, the reason I never gave again is because I gave the gift and I never heard anything back.

These were large, national or global organizations that everybody has heard of. My money felt like it went nowhere and did nothing. Had they told me, “Your gift did X, Y, Z,” I probably would have considered giving again. With the two organizations I’m consistently and constantly contributing to, it’s because I fully understand the impact and how critical my funding is to them.

Andrea Kihlstedt:
Yeah, it’s so interesting. I tend to give to smaller organizations where I’m involved. So I have the same feeling you do. And I give to one organization. I give to Doctors Without Borders. The only reason I continue to give to them is because about every couple of months, they actually send me an impact statement. They really do. It’s interesting enough so that I look at it. It’s like a magazine that says:

“Here’s what we’ve done. Here’s what we’ve done with your money. Here’s the impact we’re making around the world. Here’s what’s going on. Here’s what you made possible.”

I mean it really is. It really does keep me giving.

Chelsea Lamego:
It makes all the difference. And so, in that example that I just gave, my personal example, what I like to challenge other people to think about is how do you recreate that feeling?

Obviously all of your donors are not going to have previously worked at your organization and understand on that type of level, but how do you recreate that feeling that they know how critical and how important their continued support is? The way to do that is through these impact reports and through sharing stories of impact and narratives of impact and constantly communicating, like the example that you just gave.

Andrea Kihlstedt:
Yeah. So interesting. It’s such a great topic and it’s so important, and we don’t do half enough to push it.

Learning More About FundMiner

So before we move forward, Chelsea, I want you to tell everybody where they could reach you and where they could look up information about your company.

Chelsea Lamego:
Thank you, Andrea. So of course on our website. It’s www.fundminer.com. We’re also very active on LinkedIn. So you can find me personally, you can find our company or any members of our team on LinkedIn. We’re on all of the other standard social media sites like Twitter and Instagram as well. We also produce a great bi-weekly newsletter where we share industry news, we share FundMiner platform updates, and we really … We publish articles on relevant topics.

So I would encourage folks to visit our website to sign up for our newsletter, and then to connect directly with us on LinkedIn. They can always email me directly, too. The email address inquiry@fundminer.com goes directly to me. So would love to connect with anyone and everyone. I love having conversations like this as well.

Andrea Kihlstedt:
Great. Just to be clear, it’s FundMiner, F-U-N-D M-I-N-E-R, like you’re mining ore, only you’re …

Chelsea Lamego:
That’s exactly right. There’s actually a little bit of a Easter egg story there, because the institution where I went to school was the UTEP Miners. And so, I also ended up working there, and that’s where FundMiner was born. I was inspired to build the tool while working there in higher ed advancement. And so, when I was thinking of a name for the company, I went through this long process and had about 300 different names I was considering.

Honestly, naturally, FundMiner was the top best choice. I even did voting with family and friends. And so, it was just a natural best fit that happened. I loved the notion that we were mining for additional new funding in the future.

Andrea Kihlstedt:
Right. That’s great.

3 Practical Things You Can Do to Track and Report

Listen, before we end, Chelsea, I want you to give our listeners three really practical things that you think they can do to do a better job of either tracking their money and spending it properly or reporting on impact.

Chelsea Lamego:
Thanks, Andrea. So one seed I want to plant before I jump into the three things is when you are doing all of the work to raise money for a campaign, it’s a really great opportunity to have new long-term recurring donors. The last thing that you want is for all of that work and effort to be a one-time show and for those donors to give once and never come back.

More recently, I’ve been talking to some leadership at some large organizations who they’re telling me:

“Oh, we just raised a $500 million campaign and we exceeded our goal. And so, we’re going to increase it.”

My question back to them was … I mean, of course, congratulations. That’s incredible. But my question back was:

“What is your plan to make good on all of those promises? How are you going to make sure that you deliver on that $500 million or $600 million or $1 billion that you just raised?”

Just about every single time, their face goes completely blank, because oftentimes, as we just discussed, folks are really thinking about and focused on raising the money and not thinking about how they’re going to actually deliver on the promises that they just made to those donors and how they’re going to share the impact.

1. Prioritize the Operational Component of Fundraising

So I want to encourage all of the listeners to put the operational component of fundraising just at the top of the list, just as important as the fundraising is, because I think that that’s really the key to long-term success and sustainability. Really part of your fundraising plan and part of your campaign plan should be the post-campaign and post-fundraising plan.

So that’s one key point that I wanted to bring up. With that, the three things that I would really encourage folks to think about is accountability. So making sure that you, again, are accountable to your donors and transparent and delivering on everything that you say you’re going to do and promise. Whether you say you’re going to do it or not, there is an expectation that you’re going to. You have to realize and own that expectation and be accountable and hold yourself accountable to it.

2. Make Sure You Are Reporting on Impact

Second is impact and making sure that you are, on some level, reporting on impact. There’s a big difference between acknowledgement and impact reporting. Sending a receipt or a thank you is not impact reporting. That is a method of saying thanks for the initial gift. It’s a receipt. It’s a tax receipt. How are you going to, at the end of the initiative or program or year, actually tell the donor:

“Hey, the money that you gave, the donation, the gift that you gave made a critical difference, and we really need you and rely on you again to do this again in the future.”

3. Just Start and Grow Over Time

Then, lastly, I think the notion of starting somewhere and growing over time. Of course, as a leader of a company, we think about this with our metrics. You just have to start somewhere, and you can improve over time. Sometimes I find that organizations are overwhelmed by the idea of starting somewhere, and I think that just giving yourself the grace to not tackle everything at once, but start with what you can and improve it over time is really important.

Andrea Kihlstedt:
Chelsea, what a treat to talk to you and to see your lovely person having had the courage to build this business on such an important subject. You have pushed me. I’m an old whale in this firm, in this business, and I’ve been doing it a long time, and I don’t think half enough about the things that you really focus your attention on.

So thank you for pushing me. Thank you for letting me share your ideas with our listeners. Those of you listening, you know that if you want to get a hold of Amy or me, you can reach us at Capital Campaign Pro, either Amy Capital Campaign Pro or me, Andrea, at Capital Campaign Pro. We’re always happy to talk to you and talk to you about your campaign.

You know now how to get a hold of Chelsea, which is inquiry. Is that right? Inquiry@fundminer.com.

Chelsea Lamego:
Yes.

Andrea Kihlstedt:
Chelsea, thanks so much. It’s really been a pleasure.