(taken from the Sept/Oct 2006 issue of On Balance magazine)

Mega-Donors Get

Nonproftis' Attention

By Donna Pinsoneault, the WICPA

Leslie Wininger never composed an aria, but when the Skylight Opera commissions a new work she is one of the first persons consulted. Wininger is the development director for Skylight Opera Theatre. Her responsibilities include soliciting contributions from major donors: folks who gift the Skylight $10,000 or more to get major initiatives like new works, educational programs, endowments or capital projects off the ground.

Although nonprofits welcome contributions in all amounts, most rely on large donors to help them carry out special initiatives. Minimum amounts qualifying as major donations vary from $500 to more than $25,000. In some organizations, major gifts make up as much as 60 percent of an organization’s total contributions annually.

"Every organization is different," said Karen Spahn, senior vice president of development at the Milwaukee Public Museum. "A mega-donor might be capable of making a lead gift of $1 million or more. Major donors giving $1,000 or more are equally important."

Nonprofit needs are increasing in Wisconsin. Attracting major donors is discussed often in management meetings. The Green Bay Cerebral Palsy (CP) Center outpatient rehab facility and adult day services program requires up-to-date equipment for transporting clients.

"As government faces cutbacks, we are not getting the rate of support that we used to," said Karen Rottier, CPA, controller at the CP Center. "The rest has to come through our donors. In our annual planning process, we discuss how to increase donations to make up for the shortfalls."

Involving CPAs from the get-go is one of the best ways to ensure that big pledges are actually delivered. Although no one strategy fits across the board, accounting policies must be addressed because large donations typically are designated for a specific purpose—the general fund, temporarily restricted funds or permanently restricted funds.

CPAs play a critical role in ensuring that funds are allocated properly. CPAs also have to ensure that donors get the proper acknowledgement to support their donation.

"In an institution that’s raising money, you have to work in partnership with financial folks for large and small gifts," Spahn said. "I’m in our finance department asking questions five times a day. It’s critical that we share information with them and that they keep us informed of any policies or financial issues we need to know."

Think ahead

CPAs may also be involved in annual planning, working with development staff to determine needs, determining the number of donors who must be approached, and strategies for increasing, acknowledging and stewarding gifts.

"There’s a whole series of conversations that take place internally before we ever approach a donor," Wininger said. "We identify not only what the need is but how much it will cost and how it will advance the organization. We talk about how the need connects to things a donor finds of interest and which individuals might want to help us meet that need. Then we would make sure the right person is making the request."

CPAs help development professionals think through all possible scenarios and prepare a report for a prospect that clearly describes the need, what their gift would do, how it would be structured and how it advances the organization.

Before donors are approached at the Skylight, Finance Director Margaret Niederman, CPA helps determine whether the need is immediate and how best to handle the project from a financial standpoint.

"It is very important to assure donors of endowment gifts that their donations are strictly segregated from operating funds and that the endowment is safeguarded from principal erosion," Niederman said.

Development professionals invest considerable time in strengthening relationships with major donors. Because large donors make a significant commitment to an organization, working with them requires frequent, in-depth communication that includes clear, comprehensive, up-to-date financial information.

"Large donors look at their gifts as investments in the institution and they like to see the result," Spahn said. "We have more meetings with major donors and more scrutiny. Many are well-schooled in finance, so to look at a balance sheet or at our budget is critical."

Stewardship keeps donors engaged and interested. "We need CPAs to answer donors’ questions and to make sure that the donations are structured the way the donor wants them structured," Spahn said.

All major gifts must be documented and include the exact amount of the pledge, its purpose and how much of the pledge will be paid each year. With deferred gifts, donors receive a letter of intent indicating the amount they will leave and clearly indicating that they have included the organization in their estate plans. Donors sign the letter of intent and return it to the organization.

When a large donor doesn’t deliver—something that has occurred only a handful of times locally—accountants talk with development and executive directors to determine the best person to follow up.

"Generally the relationship did not come through me but through the development office or someone on our Board of Directors," Rottier said. "I initiate the

follow-up by sending a reminder letter. If that doesn’t work, we generally have the person who got them involved contact the donor."

Most often when a commitment can’t be kept, the donor initiates the follow-up conversation.

"People’s circumstances change. The health of a spouse deteriorates, retirement needs change, a family business is sold," Wininger said. "More often than not it’s the donor who asks to revisit the terms of the pledge."

Development professionals agree that interaction between the development and financial offices of an organization is key to ensuring that mega-donors keep their commitments.

"Development and accounting professionals often look at things differently in terms of how numbers are reflected and recorded, so it is really important for the health of the organization that the people in the accounting office have open and direct lines of communication with the development office," Wininger said. "No one wants to be in the situation of having a gift that is managed poorly, especially a major gift."

"Most important from an accounting standpoint is to be very conscious of the relationships with major donors," Rottier said. "Before I make any contact, I find out who would be the most appropriate person to do so. And I am careful how I talk with the donors. I don’t want to do anything to jeopardize the relationship."

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