Funding Your Capital Campaign’s Shortfall: An Ethical Conundrum
Imagine this:
You’ve been working on a capital campaign to raise $5,000,000 for two and a half years. The campaign has gone pretty well. In fact, you’ve gotten some gifts that were bigger than you anticipated.
To date, you’ve raised $3,750,000 in gifts and pledges. You’ve already kicked off your campaign and announced the $5,000,000 goal. But now, you’re worried.
You’ve put pencil to paper to take a good look at where the rest of the money might come from and the picture isn’t rosy.
So, You’re Facing a Capital Campaign Shortfall…
Here’s what you plan to do to finish your campaign, but the numbers don’t line up.
| Sources of funds | High Estimate | Low Estimate |
|---|---|---|
| Lead donor solicitations not yet done | $250,000 | $100,000 |
| Mid-level solicitations not yet done | $75,000 | $50,000 |
| Resolicit initial lead donors | $150,000 | $100,000 |
| Foundations still outstanding | $500,000 | $300,000 |
| Broad base public phase solicitation | $200,000 | $100,000 |
| Estimates of what might still be raised | $1,175,000 | $650,000 |
| Needed to complete the campaign | $75,000 | $600,000 |
As you can see, in the best-case scenario, you’ll still need $75,000 to close the gap to goal. And in the worst case, you’ll need a whopping $600,000 to get to your campaign goal.
With a sinking feeling in your stomach, you meet with your campaign core committee which includes the ED, campaign chair and board chair and you show them what you believe will be a shortfall.
Should Your Cash Reserves Cover the Campaign’s Shortfall?
At the core committee meeting, your board chair suggests that they take the amount that’s outstanding at the end of the campaign and cover it by transferring funds from the organization’s cash reserves and then announce that the campaign has reached its goal.
The Executive Director Has a Different Idea
She recently heard from an attorney that a donor has left the organization money in her will and the estate has just been settled. So, the organization will soon receive a check from the estate for approximately $1,000,000. Perhaps they can designate that to close the campaign gap even though the donor passed away the year prior to the campaign.
While you’re happy to have some workarounds, you’re worried that these approaches are not ethical.
- The first one adds money to the campaign that isn’t from philanthropic sources.
- And the second one, while the result of a planned gift, didn’t result from the campaign.
Not only that, your organization has a policy that bequests go to your endowment fund — not the campaign.
What Do You Think?
With respect to this situation, honestly ask yourself:
- Are either of these alternatives acceptable?
- Are they ethical?
- How would you approach this situation?
Those are the kinds of questions you should be considering when you write your campaign policies in the Planning Phase of your campaign.
Spell it Out in Your Campaign Policies
Every campaign should have a statement of Campaign Policies as part of the planning documents for the campaign. These policies cover topics like Gift Acceptance, Campaign Counting, and Gift Valuation among other important topics.
Common language in campaign policies might include something like this:
“Cash, marketable securities and written pledges will be counted toward the campaign goal if they are made with the intention of being used for the campaign objectives or if they are assigned to the campaign by the Board of Directors.”
A statement of that sort would provide the opportunity to ask the board of directors to assign the bequest to the purposes of the campaign. And with that official assignment, it would be appropriate to include the bequest in the campaign.
What About Transferring Funds from the Cash Reserve?
Transferring funds from the cash reserve to complete the campaign seems to us to be more difficult.
While the organization can certainly use cash reserves to complete the funding for the project, to include it in the campaign as a way of indicating that the campaign reached it goal would, in our opinion, not be appropriate — unless it was approved by the board and then clearly communicated in campaign reports as a special board-approved contribution from the organization.
Board Approval and Transparency Win the Day
Quandaries of this sort require clear thinking, board approval, and transparency in reporting.
With a clear set of campaign policies and a commitment to informing the board and getting board approval for any changes, you will be able to sleep well at night even if you must complete your campaign by using funds that you hadn’t anticipate using.
If your campaign is falling short of its goal, check out this post for suggestions on how to address it.
Your new branding is refreshing and as always the information is relatable and professional. Kudos!
I don’t feel either of the 2 ideas are ethical and would be appalled as a donor or board member if a campaign MGR asked me to consider either. The results will be the results. Be proud of what you did accomplish and announce the success you did have. Getting within 2-12% of your goal is quite a remarkable success, faking your way diminishes that success.
Let me explain:
1. the funds in Cash reserve are for savings and if the board planned on putting them towards campaign, it should have been requested at the beginning, or planned for addition to the original goal or announced that we will make up the shortfall. Campaign dollars are usually for expenditures so you are now moving saving into spending which is not noted in the campaign.
2. as a donor, and more specifically a bequestor, I would have had many and deep meaningful discussions with board and planned giving folks where my $1 Million was to go. If it was earmarked for anything or endowment (meaning it should last) my family would be upset if my wishes weren’t adhered to and I feel it undermines ANY future ask of your entire organization. It tells the story that you don’t live up to your promises and would irreparably damage planned giving for the org.
The only alternative I could see here is to take the $1mm and put in foundation as promised with a note showing that the income would be used to fund the shortfall,(given the importance of a $5MM campaign lasting 2-3 years), and then once fully funded, more those foundation/endowment income dollars to a new and importance use.
This earns the respect of donors, colleagues and board members, and tells a story of the kind of organization you would want to be proud to be a part of. in fact if you announce that you fell short by only $75000 (BCS) someone might just fill the gap! If you were farther away and announced you would use only the endowment income to cover, you may still find other to come over the top and help reduce the time required.
just my 2 cents.
Thanks very much for your thoughtful comment, Dan. I think it’s very important that we have conversations like this that give us a chance to think through these thorny problems in advance. Situations like this are more common than one might imagine and do require some careful thinking about the importance of acting ethically even when it’s tempting to be less than transparent.
With appreciation.
The topic made me stop in my tracks because our capital campaign is completely stalled, not even half way to goal and with little support in my corner to complete the execution of this campaign. The senior director who launched it with the ED’s (and, I imagine, board’s) approval, resigned in Sept due to health issues. It appears the whole project was not approached properly – no idea if there was a feasability study, no campaign committee, most major donors had never been approached personally prior to being asked to support the CC, poor selection of consultants, poor timing (in addition to the the pandemic) and very little support internally to launch the public phase. Nothing resembled what was described in your podcasts. But I wasn’t hired until the beginning of the quiet phase so had no hand in the planning. While the CC is not directly my “charge,” I have been a key player as the major gifts/donor relations manager : the staff liaison to the public phase committee, conducted most of the outreach, meetings, asking, tours. Now it’s just fizzled. The ED says let’s focus on raising unrestricted funds which we can use toward the balance of the capital campaign goal. How can I select one of the ethical dilemmas as being worse? We clearly have not handled our own campaign well.
Whew… I don’t envy your situation. Unfortunately, it probably indicates an even broader set of underlying problems. When I was a girl, my mother worked for a man who acted unethically. I remember my father telling her (and this was his phrase) “Patti, if you play with pigs you will get dirty!” After a while my mother did leave that job because she felt ethically compromised.
Hoping that you find a good way through this challenging situation.