Understanding Endowment and Capital Campaigns

May 31, 2018

Charity organizations do not generate revenue by conventional methods as they usually do not generate marketable products or services. Here the revenue is generated by putting out ads and marketing for donations to the said organization and by applying for revenue fro the government. For a charity organization the majority of revenue comes usually from donations. Hence it is important to understand how donations work and what sort of campaigns can be undertaken to generate funds for organization. There are mainly two types of fundraising campaigns. Charity organizations and NGOs raise funds for their operational and administrative expenses through what are known as capital campaigns and endowment campaigns.

 

 

 

Capital Campaigns

 

A capital campaign raises money to cover the cost of capital assets that cannot and should not be part of a non-profit organization’s annual operating budget. This is a campaign designed to raise funds for a very urgent cause on behalf of the organization. This may be meet an immediate need such as repairs for the building in which the organization is run, or upgrades to the existing office space to meet new building guidelines. It may also be used to upgrade equipment within an organization which is seen as essential for the organization to deliver consistent quality of services. Most of the time capital campaigns are designed to meet tangible needs of a charity organization which can be measured clearly in terms of cost and implications of investing in the same.

 

A capital campaign is most effective when associated with an endowment campaign leading to a back and forth funding dynamics feeding each other. The goal of a capital campaign is not just the capital expense but also the potential that can be raised with respect to the fund.

Such a campaign will have fixed payment schedule and waypoints for cash-in hand required to be made against a capita asset that is being acquired. Construction of a building is a prime example for this.

In cases where the capital asset is acquired prior to projected completion date, the prospects are not informed of the completion, should they think that their money is any less needed at this point.

For such funds, even though it is not advisable to seek deferred gifts actively, it is wise to accept them as they come, so that they can be added to associated endowment campaigns. The income generated in the future by such gits may be sufficient to cover operating expenses for future capital asset acquisitions.

It is essential to credit donors with market value credits so that the donors feel their contributions are highly valued.

 

 

 

 

Endowment campaign

 

These campaigns are also a type of capital campaign but are of a less urgent nature. These can be thought of as savings accounts in banks where the money is present and stored for future use, but is not in immediate need by the organization. Endowment campaigns can be planned elaborately due to the higher availability of time as compared to capital campaigns.

 

The main purpose of an endowment campaign is to generate revenue for investments in assets that have a potential to generate income. These campaigns are best suited for Non-Profit organizations where fund raising is done with the future in mind. Such funds generated from endowment campaigns are channelled into daily operations and expenses which overrun everyday budgets in the organizations.

 

Suitability for Endowment Campaigns

An endowment campaign is only suitable for certain kind of organizations. When an institution or organization has been established since quite some time, since in only in this case will there exist a list of steady donors who see promise in the future of the organization and are willing to invest accordingly and without prompting. Hence this campaign is good for organizations with proven financial stability.

 

Such campaigns are taken up only when the case is made regarding the potential for further revenue generation by investments eked out by the endowment campaign. This means endowments campaigns are undertaken only when there is sufficient data to show that the campaign will generate more revenue in the future via current investments into revenue generating assets and there is no set guarantee against the schedule of payments.

 

 

Disadvantages and Strategies for Endowment Campaigns

 

One disadvantage of this campaign is that once the investment is made, it is difficult to measure the success of the campaign in terms of revenue generation as income rates in the future can only be projected but cannot be measured with great accuracy. This makes it a necessity to ensure that, endowment campaigns have realistic goals set for revenue generation, and have a serious chance of success.

 

One of the successful strategies for generating endowment funds is to solicit ad eve encourage deferred investments and gifts from suitable donor prospects. This will give donors who are willing too donate but need time to do so, a chance to contribute.

 

Such campaigns are easily disturbed by production and marketing difficulties such as when print literature regarding the campaign is hampered, or when word of mouth is not sufficient.

 

Gift opportunities in endowment campaigns should be commemorative in nature or symbolic in nature to ensure the smooth flow of donations from prospects at the appropriate leadership level from third party organizations

 

The Difference between Endowment Campaigns and Capital Campaigns

 

Capital Campaigns are need of the hour type of campaigns where money is raised for tangible and current needs such as physical infrastructure and staffing. Building construction and maintenance, expansion of a branch, building maintenance etc. are what capital funds are meant for. These are suitable for new organizations which require immediate cash flow for tasks at hand.

 

Endowment campaigns are long term campaigns that are meant to raise funds for acquisition of income generating assets. The returns on such assets cannot be calculated with great accuracy since they will just be projections of return growth. These funds are suitable for organizations with proven track record of stable financials.

 

Endowment campaigns raise money to invest rather than spend, and the income from those investments is used in many ways. Capital campaigns raise money that is spent to acquire or improve a physical asset.

 

While all organizations of all sizes can arrange capital campaigns, only larger and established organizations can carry out endowment campaigns.

 

 

How a Fund-Raising Campaign works

 

The general plan of a fund raising effort is designed to identify the set of resources that an organization will acquire. It will need to pin point the sources of maximized income. Once this is done, the information from the plan will need to be communicated to volunteers, organizational staff and supporters. Following this, specific fund raising campaigns are then planned and executed according to the general development plan. The paid head of the organization, the board chairperson, key staff members, trustees, volunteers and advisory group members prioritize financial needs and agree to common fund-raising goals. Within the context of the general development plan, they create an environment for achieving those goals and for planning, initiating, and producing annual, endowment, capital, sponsorship, and underwriting campaigns. Each type of campaign has key issues and components that an organization must understand when it considers installing any one of them as a contributed income program.

 

Annual Fund Campaigns (Endowment)

These are campaigns organized once a year to meet operational expenses of a Non-Profit organization throughout the year. It will also aid in paying for ongoing expenses. It should be an organization’s primary source of contributed income.

 

This is an opportunity for donors of all levels to participate in charitable giving in all forms, from cash and credit to deferred and time delayed gifts which greatly add to the company coffers. Such events also pose as a great PR opportunity for the organization, giving much needed publicity and organizational acceptance in the public.

 

This process helps in building a base of knowledgeable and committed volunteers and along with that a consistent and reliable network of support and also a pool of established donors who have the ability to make major contributions and give large gifts.

 

This is also the type of campaign wherein lesser individual donors make their very first donations to the said organization. And such Annual campaigns usually attract a large number of individual donors.

Such annual campaign efforts must never be put off considering the importance of the whole affair as it is central to the fund generating machine of any Non-Profit Organization.

 

Annual campaigns take precedence over other campaigns especially if the organization in question does not have required resources to take on other campaign efforts throughout the year. These are broad-based appeals for funds directed at a large number of prospective donors.

 

It is a good practice at such fund raising events to have set benchmarks or divisions of contributions set forth for the donors, so that the donors find it easy to contribute larger amounts and find that their contribution will be recognized accordingly. It is suggested that solicitations be made for predetermined specific asking amounts. Such campaigns Seeks to increase a donor’s contribution each year to meet the organization’s increasing expenses.

 

 

 

 

Also these campaigns feature donor memberships, clubs, and societies at various giving levels offering donor benefits, privileges and/or explicit examples of what the donation “buys” for the organization and for the users of its programs and services.

 

Last but not the least, annual fund raising campaigns allow non-profit organizations of all sizes to network with each other and raise mutual awareness and support systems and marketing strategies that interlace with each other. And since these are high priority events for such organizations, the budget restraints can be lifted for the expenses of the said event since, post donations all the expenses can be offset anyway. Thus such annual fund campaigns will be the biggest fund raising efforts that a company will set up to raise money for its operations and investments.

 

 

 

Conclusion

 

Both endowment and capital campaigns are completely essential for the smooth working of a charity organization such as a Non-Profit organization or an NGO.  While both are useful, in the short term Capital campaigns take priority and in the long term it is the endowment campaigns that gain precedence. The most important way to launch both these campaigns is to organize the annual fund raising campaign where donors and prospects of all levels agglomerate to contribute to the organization. But there is also, specific need, and task related or program or project related campaigns that are organized as and when needed to raise funded for targeted needs of the organization.

Since this is one of the most important ways to raise money for a non-profit organization apart from government funding and grant money, charity organization benefits a great deal from both capital and endowment campaigns. It is advisable for the organization to design and execute detailed fund raising plans as discussed to generate maximum revenue for its activities.

 

 

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