Putting It All Together

Success of a campaign often depends on having the right mix in the budget

A campaign budget can make or break a fund-raising drive. Yet for many charities,

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the budget is a puzzle made up of pieces that rarely fit together easily.

Creating a workable spending plan requires some tough judgment calls, and the wrong choices can lead to disaster: Charities that allocate too little for research to find new donors risk falling short of the campaign goal. Those that spend too much on campaign publications shortchange other categories, such as travel. Those that make the budget too rigid lose the flexibility needed to take advantage of unexpected fund-raising opportunities.

Finding the right mix takes experience — and a lot of time. At the Indiana University Foundation, fund raisers work on campaign budgets for two or three years leading up to a major drive. They plot out their spending in detail, right down to how many prospective donors they are likely to contact and how many times they will have to call or visit each one, says Curt Simic, foundation president.

“The first thing is to make sure you include everything you plan to do in the campaign and then assign specific costs to each of those tasks,” he says.

Because capital and endowment campaigns can last several years, it is virtually impossible to create a budget that will be followed precisely, say experts. To make matters worse, most organizations approve campaign budgets for one year at a time, leaving little flexibility to deal with unexpected problems — or to take advantage of sudden opportunities.

If fund raisers with single-year budgets want to shift some of their campaign expenses from one year to another, they have to get approval. And if they don’t spend everything they plan to in a given year, they lose it; the surplus is seldom carried over to the following year.

A much better plan, says Rick Nahm, director of development at the Colonial Williamsburg Foundation, in Virginia, is a multiple-year budget that stretches over the entire drive, allowing charities to alter campaign budgets on the spot — even if it means using money they had planned to spend in a different year. With multiple-year budgets, he says, charities can more easily meet their campaign needs — and even save money.

Mr. Nahm learned the value of multiple-year budgets in 1986, when he was a fund raiser at the University of Pennsylvania. After Congress approved a sweeping measure to overhaul the tax code that fall, the university wanted to quickly let its alumni know that it was financially savvy to make their gifts before year’s end. But the university had no money in its budget for a special mailing, and getting approval would have taken several months.

“The law changed in September, and we didn’t have a chance to get approval for the budget change before it was too late,” Mr. Nahm says. “We know we lost money because every institution that did a special mailing produced substantially increased results during the calendar year, and we didn’t,” he says.

Charity financial officers usually object to a multiple-year budget, says Mr. Nahm. “The finance areas tend to want to see the fund-raising budget compartmentalized into these neat fiscal years.”

Even so, Mr. Nahm says, he has persuaded several charities to make the switch to multiple-year budgets by describing his experience to them.

“There are times when you really want to take advantage of something — like momentum from some unexpected publicity,” he says. “Or you want to do a mailing before a postal-rate increase, but you can’t do it because you can’t overspend your budget.

“Or in another year, when a couple of people leave the staff and you don’t have to rush to fill those positions, the money you’ve saved disappears at the end of the year if you’re on an annual budget.”

A multiple-year budget takes care of those problems, he says.

Even with a flexible budget, some institutions still come up short of what they need to reach their campaign goals.

One reason is pressure from board members and donors alike to keep fund-raising costs down.

“These days, you have a lot of corporate executives on boards who are used to trimming budgets,” says Bruce Flessner of Bentz Whaley Flessner, a Minneapolis fund-raising consulting company. “They are increasingly asking tougher questions and not just accepting the idea that it takes money to raise money.”

Although large capital campaigns often cost 10 per cent of the overall goal, or even more, many charities try to spend considerably less.

“Certain charities have got this macho attitude that they will blow the national averages,” says Mr. Flessner.

Among the campaign expenses for which charities often do not budget enough:

Research. When campaign money is in short supply, one of the first budget items to suffer is research to find new donors, says Mr. Flessner. But charities that skimp on research seldom realize what they are missing, he adds.

“They never say, ‘We didn’t budget enough for prospect research.’ They say, ‘We don’t have enough prospects to finish,’ ” he says.

“It’s always cheaper to go to the prospects you already know,” he says. But in the end, he adds, finding new donors pays off, not only for the current campaign but for future ones.

During the Missouri Historical Society’s $20-million capital campaign to expand and renovate its museum, the organization recruited a part-time researcher to comb through newspapers and visit the local library to help determine which people were likely to become donors and how much they might be willing to give. Over those three years, the St. Louis organization spent $35,000 on research, which helped bring in $2.5-million from those donors.

Many of those donors might have been asked to give anyway, says Marcia Kerz, director of development. “But we couldn’t have accomplished the same without that person,” she says. “We wouldn’t have pursued some of those donors as aggressively or in the same way as we did.”

Get-togethers with donors. Despite the importance of building relationships with potential donors, charities often underbudget in key areas that can ultimately bring in more dollars: travel to visit potential donors and small events to win them over.

Failing to budget for a $3,000 plane fare can mean skipping a visit to a wealthy donor and thus losing a big gift. Skimping on gatherings at trustees’ homes can lead to some awkward moments.

“My experience has been that you budget well for the big kick- off event and some kind of final celebration, but you often miss the smaller kinds of cultivation events, the small dinners for a group for 10 or 13,” says Carol Gard, director of development at the Chicago Botanic Garden. “I think there’s often optimism on the part of the charity that board members will pick up the tab.”

But that is not always the case. During a $40-million drive at Lake Forest College, in Illinois, where Ms. Gard previously worked, volunteers played host at more events than the charity had planned for, and the college often ended up footing unexpected bills.

“It’s a messy gray area,” she says. Broaching the subject early on is a good idea, she adds, and budgeting generously for such events will pay off in the end.

Contingencies. Every campaign has unanticipated expenses, and budgets should include provisions for such contingencies, says James E. Connell, president of a Lebanon, Pa., fund-raising consulting firm that bears his name.

The contingency category is calculated last, after all of the other expenses are tallied, says Mr. Connell. Fund raisers should add 5 to 10 per cent of the total expenses, or maybe even 15 per cent, to cover contingencies. The money may be used little by little to cover extra expenses, such as use of an outside copying service during a crunch or to hire someone temporarily to key in campaign data.

During a $10-million capital campaign for First Health of the Carolinas, a network of health-care groups in Pinehurst, N.C., extra money was needed to cover audiovisual equipment, events in volunteers’ homes, and thank-you notes for donors. In all, the charity set aside about 10 per cent of its budget and used up more than half of that for unexpected expenses.

It is sometimes possible to make room in a budget for important items by cutting some of the fat elsewhere, says Sue Washburn, of Washburn & McGoldrick, a fund-raising firm in Latham, N.Y.

Publications, for example, often get a higher priority in budgets than they should, she says. These days, as large gifts from individuals form the centerpiece of more and more campaigns, expensive publications that lay out a case for the campaign take on less significance, she says.

“Many campaigns end up with lots of glossy materials going into landfills,” she says. “People are starting to realize that the more important thing is personal contact.”

The Chicago Botanic Garden, now in the midst of a $10-million endowment campaign, usually creates expensive publications to explain the reasons for the campaign. But the publication for the group’s current endowment drive was produced at a photocopying store and distributed in spiral-bound notebooks, says Ms. Gard, the director of development.

The publication, which has a colored cover and is printed on good-quality paper, cost about $6 per copy — far less than the $30 that the institution spent for each copy of a more elegant publication in its previous capital campaign, Ms. Gard notes.

Simpler publications may not always be appropriate, but they are something to consider, she says.

“It’s a tough decision,” she says. “You certainly want to make the right impression and you need a case for support, but I’m inclined to think you can use more personalized venues through proposals and letters and be just as successful.”