Fundamentals of Development

Presented byJack Butler, Vice President, Keystone Conservation

TrustVollie Melson, Director of Major Gifts, Chesapeake Bay

FoundationNancy Stansbery, Chief Development Officer,

Wildlands Conservancy

                                  

                                            

Giving USA 2008

Recipients:Religion – 33%

Education – 12%

Human Services – 9.7%

Health – 7.6%

Arts & Humanities – 4.5%

International – 4.3%

Environment & Animals – 2.3%

Sources of Funding 2008

81%

14%5%

Individuals

Foundations

Corportations

Fundraising Fundamentals

• Organization with defined mission and realistic goals – ideally a strategic plan – that leads to a clear, compelling case for support

• 100% Board Participation• Know your audience & what motivates them,

segment and personalize• People give to people who ask them.• Thank donors and report on how donations used

Basic Techniques

–Ongoing:

• Annual Fund/Membership – unrestricted and every year. Identifies donors, establishes a habit of giving

• Multi-year grants or annual grants you can count every year

Basic Techniques

• Episodic

–Special Events

–Restricted gifts or grants

–Special Gifts/Planned Gifts

Basic Techniques

• Other – for long-term viability of organization– Capital vs. Comprehensive Campaigns– Endowment Campaigns– Planned Giving

Moving your small and/or less established development

program forward

• Benchmark where you are

• Do SWOT Analysis

• Rate return on investment

• Make a plan with clear and realistic goals

Comprehensive Program

• Annual/Membership• Special Events• Communications and Marketing• Major Donors/Planned Giving• Cultivation and Stewardship• Corporate Program• Database• Foundation & Grants

Remember the Three Basic Types of GiftsRemember the Three Basic Types of Gifts

• The Annual Gift----Habitual

• The Special Gift—Significant, Episodic, Tied to an Opportunity

• The Ultimate Gift---Your organization is elevated to “family status”

Escaping the Annual Gerbil Wheel RaceEscaping the Annual Gerbil Wheel Race

• Investing in a planning and visioning process

• Envisioning the potential of your organization, your donor base, and your development program

• Building capacity (internally and externally) to achieve the vision

• What’s Needed: Honest Assessment about the Time and Resources to Make the Jump

CAPITAL CAMPAIGNCAPITAL CAMPAIGN

• One time efforts such as new programs, buildings, endowment, etc.

• Benefactors are frequently asked to make a commitment to a capital campaign in addition to their ongoing annual support.

• Membership and annual gifts for operations are not included in either the campaign ask or recognition.

COMPREHENSIVE CAMPAIGNCOMPREHENSIVE CAMPAIGNStrategic goals are clear and focused on aligning all resources toward sustainable operating support and long-term financial stability for a specific and well defined goal.

All gifts and commitments, restricted and unrestricted, during the campaign period are counted toward the revenue goal.

Membership•Establishing long-term affinity and lifetime commitment to the cause

•Predictable source of funding

•A pipeline for major gifts

Major Donors•Develop an affinity for the organization through personal contact and a shared vision

•Provide significant and sustained support for the institution

•Identified and acquired through research, discovery calls, and upgrades from the membership base

ACTIONSACTIONSPrivate PhasePrivate Phase

• Conduct feasibility study

• Develop campaign publications and case statement

• Develop campaign management reports

• Recruit leadership and campaign volunteers

• Secure leadership commitments

• On-going major gift solicitation

• Are you ready to move forward---60% rule

Keystone Conservation Trust

May, 2009

Millions of dollars in gifts are achievable

• Due Diligence–Determine if you will hold (conservation value or other

reasons)

–Description of Property (deed)

–Boundary Survey

–Title Search (determine outstanding liens)

–Home inspections

–Phase 1 Environmental review

–Appraisal

–Develop Exit strategy if not holding long term

–Determine carrying Costs

–Work to meet Seller’s financial needs

• Sale prior to Gift–Gift of sale proceeds (no due diligence)–Income tax deduction only on cash value of

sale proceeds - net of sale costs and taxes–No avoidance of capital gains tax (can deduct

sales expense from capital gain)–Transaction handled by Donor–Easy for Non Profit but not the best tax

strategy for Donor

• Outright Gift–Gift of entire property (Due Diligence)–Income tax deduction for appraised fair market

value–Avoidance of capital gains tax–High transaction cost for Non Profit –

appraisal, title, insurance, property inspection, and closing costs

–Non Profit must decide whether to hold or sell

• Undivided Interest–Donor gives a percentage of ownership to Non Profit

(Due Diligence)–Shared ownership with Donor as Tenants in Common–Donor and NP own an undivided interest in the whole

property–Each party can only sell their percent interest– Income tax deduction on percentage of fair market

value donated–Capital gains tax decrease proportional to gift–Potential problem – reaching agreement on property

management and use

• Charitable Remainder Trust–Establish a Trust funded with Real Estate–Two basic types: Unitrust (CRUT) and Annuity Trust (CRAT)–Each pays annual income to beneficiary: Unitrust - variable

income

Annuity Trust - fixed income– Income tax deduction for appraised fair market value – IRS tables

apply–Capital gains tax avoidance–Complicated instrument – Wealth Advisor Expertise recommended

• Bargain Sale–Part gift and part sale to Non Profit–Same due diligence as an outright gift–Non Profit pays less than fair market value–Gift amount is the difference between fair market

value and amount paid to Seller –Charitable income tax deduction on gift–Capital gains tax avoidance on the gift amount–Non Profit must have money to pay Seller

discounted purchase price in lump sum or payments

• At the time a property is sold,

there is an opportunity to

create a gift– Modified Bargain Sale

• Gifts can be created at no expense to the Seller (basic transaction) or gifts can be enhanced

• Reduced income taxes and savings on capital gains taxes produce the gifts

• Basic transactions yield gifts of 3-5% of sales price

• Board member / major donor

created single large gift from

sale of summer home (second

home)

• Charitable couple created gifts to

multiple conservation

organizations from sale

of primary residence

• IRS modified bargain sale technique–Donation of property to KCT (Due Diligence) at appraised

value with a promissory note from KCT at reduced value; the difference creates the gift

–KCT sells the property at appraised value

– Income tax benefit on gift amount

–Reduced capital gains tax

• No charge to Non Profit or donor– KCT retains 2% of sale price when property is sold to a third party

• Two tracks: Examples–Basic transaction (‘no cost’) yielding 3 – 5% of price

–Philanthropic transaction (donative intent)

• Donation split among KCT, Non Profit, and other charities of the donor’s choice

• Basic (No cost) Gift: –50-50 split Non Profit & KCT (KCT retains minimum

2% of sales price)

• Larger gift: –2% to KCT–Balance to Non Profit and other charities of the donor’s

choosing

• Proactively communicate the opportunity

• Identify potential prospects

• Test for interest, then

hand off to KCT for

trust building,

education, and analysis

• KCT handles logistics,

and keeps Non Profit informed

• Run customized scenarios–Four inputs: fair market value, basis, mortgage

amount and income tax bracket

• Review by supporter and their advisors

• Donation agreement–Before signing with buyer!

• Donation, resale, and gifts

• Piggyback on Non Profit existing development activities

• Profile of best prospects–Transition, transaction and trust

–Downsizing (less need for all

cash from transaction)

–High tax bracket

–Small or no mortgage on home (equity build up)

–Higher value properties or properties other than primary residence (second homes)

• Drawing attention to the opportunity:

“Drip” marketing–Goal: build awareness, acceptance (and funds!)–On-line on KCT and Non Profit websites–Print media – brochure, newsletter, targeted

letter to owners of conservation easements–Discussions with Non Profit Board, staff, donors,

realtors, financial advisors, attorneys

• Follow up with more information, as needed

Keystone Conservation Trust

336 King of Prussia Road

Radnor, PA 19087

Jack Butler

Vice President

484-678-2291

jbutler@keystoneconservation.org

www.keystoneconservation.org