Podcast: What Counts Toward Your Capital Campaign Goal? Policies, Pitfalls and Practical Advice

Season 4, Episode 52

In this episode, Amy Eisenstein and Andrea Kihlstedt unpack a deceptively simple question: what counts toward your campaign goal? They walk you through some of the most common questions organizations face when deciding what to count.

The episode also covers how to handle situations where accounting and fundraising standards don’t align. You might need two sets of reports: one for your auditors and one for your campaign committee. That tension is normal, but it needs to be addressed openly with your team—especially your finance colleagues.

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Andrea Kihlstedt:
Do you know what you’re going to count towards your campaign goal? That may sound like a silly question, but believe me, it’s not. And today, we’re going to cover a lot of aspects of that.

What Should Count Towards Your Capital Campaign Goal?

Amy Eisenstein:
Hi, I am Amy Eisenstein. I’m here with my colleague and co-founder, Andrea Kihlstedt. And today, we are going to be talking about what counts towards your campaign goal. And this may seem like a simple thing to do, but it’s complicated. Andrea, why is counting money so complicated?

Andrea Kihlstedt:
Amy, one of the reasons that it’s complicated is because if it’s not clear upfront, then it’s all too easy to feel like you’re cheating when you make decisions about what to count as your campaign proceeds.

So, if you have a campaign goal, let’s say your campaign goal is $10 million, you have to know what it is you’re going to count, what’s going to count towards that $10 million. And you need to decide that upfront. You can’t sort of gerrymander. You can’t just pick and choose, and all of a sudden count something that you hadn’t thought to count. Otherwise, it doesn’t… the count campaign loses its credibility.

So, one of the things that you do in a campaign planning process is to develop a set of campaign policies, in which there should be great clarity about what is going to count in your campaign and what’s not going to count in your campaign.

Amy Eisenstein:
Right. So, for listeners who maybe can’t imagine what we’re talking about yet, let’s give some examples, some concrete examples about what counts or doesn’t count.

Counting Your Annual Fund Towards Your Campaign Goal

I mean, one of the first things that comes to my mind that organizations wrestle with is whether they’re going to count annual fund towards their campaign goal. Does every dollar into the organization during the time period of a campaign count? And sometimes it does and sometimes it doesn’t, but it’s a decision that your organization needs to make.

So, let’s talk about some of the pros and cons of counting annual fund. And the truth is there’s no right or wrong answer to some of the things that we’re going to talk about. Sometimes there is a right or wrong answer, but sometimes the answer is it depends. So, let’s talk about when you like to count annual fund and when you don’t like to count annual fund.

Andrea Kihlstedt:
Yeah. So, campaigns that include annual fund are called comprehensive campaigns. And with a comprehensive campaign, you increase the goal of your campaign to include the years of annual fund. That is the extent of your campaign. So, if your campaign is scheduled to go on for five years or three years, you would include three years of annual fund or five years of annual fund, which is going to increase your campaign goal.

So, your annual fund is not being credited as a way of paying for your building, if you have a building campaign. It is being acknowledged that your campaign includes your annual operating as well. And if that’s what you’re choosing to do, and there are reasons to and reasons not to do that. But what’s important here is that you understand the distinction. And that if you decide to include annual fund on one side, to include it you also increased your goal by the commensurate amount of the years of your campaign. And that you do that with a clear decision upfront.

Amy Eisenstein:
I often think of including annual fund as sort of cheating a little bit and arbitrarily… maybe arbitrarily is the wrong word, but inflating the goal. It’s nice because there’s donor recognition. Every dollar that donors recognize counts towards the campaign… or give, counts towards the campaign. But I think some of the concrete and tangible cons are that donors don’t acknowledge and recognize in a clear way the difference, an important difference between annual fund and what they’re funding for capital.

When you separate them and when annual fund doesn’t count, then it’s an opportunity for organizational leaders to explain to donors the importance of annual fund, and how that maintains ongoing programs, and services, and makes a clear distinction that capital needs are one-time special gift over and above the annual fund. I think that’s an important conversation to have with donors, so I think I lean slightly towards not counting annual fund. But it’s a decision that every organization needs to make.

Andrea Kihlstedt:
So, if your board, for example, has some people on it who have been heavily involved in their college or university campaigns, they are probably very familiar with comprehensive campaigns, with including annual fund. And because it’s what they’ve known, it’s what they’re going to advocate for. They’re going to assume that that’s what you’re going to do.

If you are not a college or a university, and then you might make another choice about that. I mean, my own preference is not to include it, as with Amy’s, because I think it’s simpler when you keep the goal very clear. Where for this campaign we’re building a new building, we’re starting a new program, we’re adding to our endowment, but we are not including the annual fund gift that you’re going to give anyway. That said, there’s no right or wrong about this particular thing. Typically, bigger institutions do comprehensive campaigns and smaller institutions that don’t have alumni classes, for example, don’t. What’s the next issue, Amy?

Counting Planned Gifts Towards Your Campaign Goal

Amy Eisenstein:
All right. Let’s talk about planned gifts, which can be super complicated in terms of deciding when to count, and especially when they’re either revocable or deferred, as they often are. So, how should organizations think about including or counting planned gifts that either may not come for years or perhaps more than a decade, or potentially can be changed, revoked by a donor?

Andrea Kihlstedt:
Again, what’s important is that you have a serious discussion about this issue and you make decisions upfront about it, about what your organization is going to do about planned gifts, how you are going to count them. And some organizations make decisions about counting them regarding the age of the donor. If you have a donor who’s 86, you might count a higher percentage of the amount that is being given as a planned gift. Then if you have a donor who has made a bequest, but they’re only 45, so you might do it that way. You might decide that you’re not going to count dollars for bequests or for planned gifts. You’re going to count the number of gifts.

So, one of the things you could do in your campaign is to say, the goal of our campaign is to get 20 people to indicate that they’re putting our organization in their will. And then what you’re counting is the number of people that have done that, not the dollar amounts that they’re going to be worth. It’s very hard to calibrate the dollar amounts that any planned gift is worth. Sometimes donors spend through all their money before they die. Sometimes there’s much more money than you ever imagined. Sometimes gifts come in, surprising gifts come in 40 years after the campaign is over.

It’s very complicated. But again, what matters is that you have a real conversation about how you’re going to handle these things right before as you’re in your campaign planning phase.

Amy Eisenstein:
And counting gifts and dollars towards the campaign is also different than donor recognition. So, you can recognize donors who join your legacy society in meaningful and important ways, even with plaques on the wall. Even if you don’t count a specific dollar amount towards your campaign goal, as Andrea said, you could count number of planned gift intentions whether they’re revocable or not. I mean, you may have a 45-year-old who makes an irrevocable gift, but you may not get that many gift for decades, even if they can’t change their mind. So, there’s all sorts of variables and complications with counting planned gifts.

Donor Recognition Can Complicate Things

Andrea Kihlstedt:
Great story about that, Amy. That really kind of shows all sides of it. Years ago, I worked on a campaign that it was a successful campaign, but a variety of things happened with the prices of the project, that the prices went way up. And I can’t remember what other problems there were, but the organization ended up in the hole, even though the campaign had been quite successful, had reached its goal. The organization ended up with a couple million-dollar deficit. Big problem for this organization. Much to everyone’s astonishment, the executive director went to get the mail one day while they were in the middle of this crisis, only to find that there were two checks in the mail. One for something like $750,000 and the other for something like a million dollars.

I mean, you can imagine everybody’s eyes bugged out of their heads, because there’s money there out of nowhere. Well, it turns out that literally 70 years earlier, someone had put this organization in a planned gift, that after the estate had gone through a couple of generations of people who benefited from the corpus, this organization would get the remainder. That when everybody died, who was going to benefit from the income from the estate, the amount that was left was going to go to this organization. And that’s what those checks were. They were from decades earlier.

Now, it turned out that when this organization had done their campaign planning, they had said in their campaign policies that any planned gift that matured, any planned gift where the dollars of that gift actually came in during the campaign, would automatically be counted towards the campaign.

Amy Eisenstein:
Yes. That’s a good campaign policy for you, right?

Andrea Kihlstedt:
And behold, their deficit was wiped out. Their campaign was more successful than they ever imagined, all because of a planned gift made 70 years earlier that no one knew about.

Amy Eisenstein:
Planting seeds.

Andrea Kihlstedt:
Isn’t that a great story?

Amy Eisenstein:
Yeah, that is a great story. So, listen, you’re going to be planting seeds as part of this campaign. I mean, there’s many things you’re going to be doing as part of this campaign. So, whether or not you count some of these gifts or how you count some of these gifts, you are really benefiting the organization for years and decades to come by including planned gifts somehow in your campaign.

Handling Planned Gifts Made Earlier On

Andrea Kihlstedt:
Let me just take a little sidetrack here, Amy, about this question of what an organization should do with money that comes in as a result of planned gifts that were made earlier.

Amy Eisenstein:
Yes.

Andrea Kihlstedt:
Right. Many organizations unfortunately simply take that money, put it in their bank account, and spend it.

Amy Eisenstein:
It’s such a mistake.

Andrea Kihlstedt:
And it’s such a mistake. It’s such a mistake, that really organizations should have policies about what to do with that money that is not just spending it. It is special money. It’s special money that comes with a history. It shouldn’t just flow. Among other things, when you just take that money and put it in your bank account, it totally jiggles your accounts for that year. All of a sudden somebody will say:

“Well, how come your budget was so much higher this year and then went down the next year?”

Well, the reason is because a gift came in that had nothing to do with anything current, and you just went through and spent it. So, organizations need to have some policies about how they are going to handle money that comes in as a result of the quests that are made in the past. And my advice is to put that money into some kind of a quasi-endowment fund, so that it’s essentially money for a rainy day, that the board can tap into if needed. But otherwise, what’s being spent is the amount that’s being earned on that money.

Amy Eisenstein:
Right. The interest.

Andrea Kihlstedt:
And just as my last story said, when you are in a campaign mode, you can say, for the purposes of this campaign, for the five years or three years of this campaign, if we get money that comes in as a result of matured bequests, we will count those bequests towards the campaign. So, you can have a policy about that.

Amy Eisenstein:
Right. That either goes into a board designated or quasi-endowment and, or gets spent on a building, which is a one-time long-term need. It’s not part of your annual fund, which is a key distinguisher.

Counting In-Kind Gifts Towards Your Campaign Goal

All right, great. Let’s talk about in-kind gifts and how we might think about counting them. We’re talking about counting things towards a campaign. And so, what if, I think frequently comes up, construction company wants to donate the plaster or the bricks, or the concrete, or whatever, or computers, a school bus? It can be anything. Are we counting that? How are we counting that?

Andrea Kihlstedt:
Yeah. These gifts are sometimes complicated. The simplest way, of course, is that the organization makes a gift. I mean, that’s the simplest way.

Amy Eisenstein:
The donor, you mean.

Andrea Kihlstedt:
I’m sorry. The donor makes a gift.

Amy Eisenstein:
A cash gift.

Andrea Kihlstedt:
A cash gift. And the cash gift is used to buy whatever the stuff is, right?

Amy Eisenstein:
Yes.

Andrea Kihlstedt:
But that’s often not what happens. And in the policies, campaign policies, it needs to specify that if a contractor, for example, wishes to give in-kind, that the value needs to be equivalent of what was budgeted in the project budget. And that’s what matters.

Amy Eisenstein:
Right. And just to distinguish and take this one step farther, in-kind things that are in your budget can be handled different than in-kind things that are not in your budget. And I don’t know if we’ll count them as in-kind, but an asset that might be given.

A Real-World Example

Andrea Kihlstedt:
I have a doozy for you.

Amy Eisenstein:
I’m ready.

Andrea Kihlstedt:
A doozy of a story, a real story. It’s a doozy. So, I once worked for a hospice, I think it was. Did a campaign for a hospice. And a donor came forward and said that he had this fantastic collection of figurines.

Amy Eisenstein:
Oh, figurines. Oh, my gosh, yes.

Andrea Kihlstedt:
Figurines. These were all metal figurines of some sort. I can’t remember. There were a lot of them and they were heavy. And they took up a lot of space. And this donor had collected them. And I suppose it was a real niche market for them. But then the donor, of course, totally overvalued what he thought they were worth, because they were his whole life.

Amy Eisenstein:
Of course.

Andrea Kihlstedt:
And the organization had to decide whether to accept them or not to accept them. For whatever reason, they decided to accept them. And what I remember is the poor development director had to spend untold hours figuring out, first of all, how to move them, how to transport them, how to pack them, where to store them, how to deal with them. Then she had to figure out where the market was that might buy them, if they were saleable.

Amy Eisenstein:
What a huge mistake accepting those things.

Andrea Kihlstedt:
What a huge mistake.

Amy Eisenstein:
Yeah. So, I think, to me, the policy for a lot of these things is simply anything that’s in-kind needs to be reviewed by whoever, a special subcommittee, the executive committee, whoever it is, before deciding whether to accept them. And that is the same whether you’re getting a Mona Lisa or a piece of jewelry, or a toxic waste dump.

Andrea Kihlstedt:
A piece of property.

Amy Eisenstein:
A piece of property, a gas station, an old gas station.

Andrea Kihlstedt:
An old gas station. The land looks perfectly pristine, only it turns out that 20 years ago it was a gas station and it is full of lead. The land is full of lead.

Amy Eisenstein:
Old gas tanks.

Andrea Kihlstedt:
And old gas tanks.

Amy Eisenstein:
And what happens is an organization is so excited that somebody is giving them a piece of property, they accept it without doing any due diligence. And then they find out that it’s unsellable without putting $200,000 worth of work into clear the old swamp gas, lead gas tanks, whatever it is.

So, I think that’s the policy on in-kind, is that there needs to be a committee that reviews before the organization blindly accepts and then figure out-

Andrea Kihlstedt:
It makes me laugh, actually. You and I sometimes have trouble coming up with stories. But today, we have piles of stories about these things, which reminds us of how important it is to have policies, because garbage happens, bad stuff happens when you don’t have policies that really cover the waterfront of what to count in your campaign.

In the Capital Campaign Pro Toolkit, we actually have sample policies that cover some of this. And of course, there are many other resources that you can go to for that. But it’s super important that you do this upfront before you get into asking for gifts, because you need to know answers to these questions. What will you count? How will you count them? What if someone offers you their figurines or their vastly overvalued portrait of Aunt Tilly.

Amy Eisenstein:
Yes. Right. Of course, yes. I’m glad you brought that up. In our Online Toolkit, we have sample policies and also questions for your committee and board to discuss in helping formulate your policies, because sometimes the answer isn’t black and white and it’s a decision that you get to make.

Getting Your Finance Office on the Same Page

All right. Let’s talk about another really important issue in terms of counting things towards your campaign. And that is a disparity between what counts for your campaign or what you’re counting towards your campaign, and what the finance office in your organization thinks or is counting. And there’s often a difference, because the finance office may or may not be counting all sorts of things that you might want to count towards the campaign. So, let’s think through some of those scenarios.

Andrea Kihlstedt:
Yeah. It’s so important. And if you’re not good buddies with your finance director, this is probably a good time to take him out to lunch or her out to lunch or out for a drink after work or something like that. You need to have a good relationship with this person, because you’re going to find yourself in complicated discussions with that person as you move into a campaign. Because from a philanthropic point of view, from a fundraising point of view, you are going to want to count things differently from the way your financial people not only want to count things, but are actually required to count things.

So, it’s not that they’re trying, that when they disagree with what you’re doing, they’re trying to be difficult. They’re actually operating by a regulated set of guidelines that they need to stick by.

And the way you’re going to want to count things in your campaign, it doesn’t bear very much resemblance to the policies or the guidelines that your financial people are going to have. Now, the answer to it all is that you’re going to have two sets of —

Amy Eisenstein:
Reports.

Andrea Kihlstedt:
… counting reports. And that they are not going to match. And you need to set that up in advance. You need to have everybody understand that they are serving different functions when it comes to the financial, to the audits and the finances, that the accountant is going to be in charge. When it comes to the campaign counting and reporting on what is in, it’s going to be up to you. And everyone needs to be willing to let these things be quite divergent.

So, for example, you might have, your largest donor may make a gift. They may say that it’s going to be pledged over a period of time and you want to count the whole thing up front, but your finance people aren’t going to want to do that. Big change.

I mean, you’re going to want to count $3 million and they’re going to want to count a million. All of a sudden, everything’s going to look askew. So, you need to be sure that everyone understands why you’re having two ways of doing this. And your board needs to understand, too. Your board chair needs to understand. Your executive director needs to understand. But mostly, you need to work with the finance people so that they realize you are honoring what they have to do, while at the same time creating campaign reports, which are different.

Amy Eisenstein:
Yeah. I think that’s so important. And there’s a lot of decisions to be made when it comes to campaigns, and some of them are complicated. And so, that’s one of the things that we as a team at Capital Campaign Pro work on with our clients every day, is navigating these discussions, these decisions, using our extensive experience with a multitude of other organizations to help guide the decisions, and be able to articulate the pros and cons.

So, if you’re thinking about a campaign, if you’re preparing for a campaign, we’d love to talk to you about how we might support your team through a campaign, because it’s what we do with organizations probably just like yours every single day.

So, I hope you’ll head over to the Capital Campaign Pro website and sign up to talk to us. Take a look at our services and schedule a time to discuss how we can support you, your committee, your board, your CEO through a capital campaign, and the complexities that come with them. All right, Andrea. I think this was a good topic today.

Andrea Kihlstedt:
I know we’re not in the weeds so often, but I typically don’t like it, but this was fun.

Amy Eisenstein:
All right. Thanks for listening and we’ll see you next time.