Case Studies and Articles

Tune Up Your School Foundation – Vaughn Henry & Associates

Tune Up Your School Foundation – Vaughn Henry & Associates

Time to Tune-up the School Foundation

Vaughn W. Henry © 1999

Most school superintendents admit to a love – hate relationship with their foundations. They recognize the need to have one, but don’t have the time or energy to battle with one more group of civilians to support projects the superintendent sees as mission critical. The time to re-energize the foundation approach has come, brought to the forefront by demographic and economic changes over the last 15 years. Why? Schools that create a viable means of support outside of tax generated revenues will find themselves in a position to respond more quickly to changing community needs. Without a viable foundation and endowment, the school system may find itself without the necessary financial strength to continue operating as it should. For small towns, the loss of the local school is often a symptom of a dying community. Too few young people stay, too few jobs or services remain and a once thriving town becomes a wide spot in the road. Healthy schools mean that small towns have a chance to survive in today’s technologically driven economy.

While the Illinois Association of School Boards (IASB) reports that 50% of the school districts have a foundation designed to support the district’s financial and development needs, the majority are inactive or ineffective. At the last three IASB/IASA annual conferences and at a recent INSPRA meeting, a quick poll showed that existing foundations did not use planned giving or gift development programs consistently, if at all. Instead, these home grown and operated nonprofit organizations generally relied on special events like pancake breakfasts, chili suppers, car washes, sales of athletic wear and concessions at sporting events to meet their growing needs. That understandable, but limited approach results in too few dollars raised; of course people start programs based on what they’ve been exposed to, and events have been around for a long time. Unfortunately, the funds raised through special events often have a fairly high cost in terms of employee and member time commitments, with little net gain. One foundation reported raising $70,000 at a local golf outing, but admitted to spending almost $62,000 to raise it. Those are dismal results at best, given the huge effort required by volunteers and frustration generated by spending so much of the revenue in what could be only described as a public relations exercise. Contrast that with a recent bequest to the Lincoln, Illinois High School Foundation of nearly $500,000. Of particular importance is the fact that fewer than 10.8% of donors (Seven Faces of Philanthropy, Prince et al, 1994) are motivated to aid an organization via special events, so a different strategy is needed if new significant support is going to occur.

The American Association of Fund Raising Counsel reports that of the $174.52 billion raised for U.S. charities in 1998, only 13.5% went to education with almost all of it destined for higher education. Yet the typical student spends 12 years in the primary and secondary school system gaining a basic foundation for a four-year college degree. While 75% of the educational effort is made at the local level, why don’t graduates support their basic school system in the same way as their collegiate institutions? Generally, it’s because they’re not asked. A fundraising precept (almost carved in stone) is, if you don’t ask, you don’t get. Superintendents often say they’re uncomfortable asking for financial support for what’s commonly perceived as a tax supported institution, but the state and land grant universities have developed healthy endowments and development programs, why should the tax assisted school districts be any different? While administrators need to be sensitive to communities that have recently rejected unpopular bond issues, the school foundation is an entirely different entity and it needs to be presented that way. The reality is that foundations and corporate grants, popular resources for bureaucrats, only provide about 15% of the charitable support for nonprofit organizations. The bulk of the financial support comes from bequests and individual gifts that are largely ignored by local school foundations.

Estate Tax Influences

The ongoing inter-generational transfer of wealth presents a significant opportunity, as assets destined for unnecessary taxes can be redirected back to local tax-exempt purposes. Unfortunately, few people realize that they have choices about where those dollars wind up. While large group social special events are relatively simple to design and promote by amateur supporters, the major dollars are more efficiently generated elsewhere. Major funding could result from proactive estate and wealth conservation planning, but most foundation members and school administrators lack experience with sophisticated financial and estate planning tools and avoid using these tools because of perceived complexity.

What to do?

  1. Understand that planned giving in particular is a complicated field, subject to changes almost daily. While general practice attorneys, financial planners, accountants and trust officers may have rudimentary background; they aren’t experts. Seek specialists to coach your professional advisors so the committee has better focus and understands when charitable planning opportunities exist.
  2. School administrators, often ex-officio members of the foundation’s board, don’t have the tax and legal background needed to competently discuss the financial and estate planning tools. Since most board members don’t possess the skills either, find professional advisors willing to serve as resources and develop a network capable of addressing donor needs. Properly done, that integrated approach will also provide ongoing support for your district’s needs.
  3. Focus on the priorities of the school district and the students’ needs outside of day to day educational requirements. The foundation should be seen in the same light as a savings account, while the school district’s annual budget commitments operate from the checking account. They have different purposes, different needs
  4. Implement a business plan; create a planned giving committee separate from the foundation board. Be careful about conflicts of interest, and be up front with professional advisors that there’s not an exclusive right to solicit donors for products and services when discussing foundation needs. A good policy manual, available from several commercial providers, should be very clear about what acceptable gifts and solicitation tools the foundation will utilize. This approach offers several advantages:
  • Setting board policy isn’t a factor with this committee but creating strategy and planning partnerships are, so there should be no compliance problems with the new §4958 regulations already adding to administrative burdens for public charities.
  • Learn how to showcase the facility and present the school district in a way that makes it seem more like the heart of the community instead of a money pit soaking up tax dollars. Provide continuing educational programs that help remind donors and advisors that the foundation is a willing partner in implementing community gifts.
  • Get away from the “poor me” mindset. Donors want to give to successful programs and there needs to be suitable motivation to support the cause.
  • Learn how to appeal to the donor’s sense of heroism and immortality and if you can do it in a tax efficient manner, donors will be more likely to refer peers and repeat gifts.
  • Although there are risks, create funds that give donors a sense of control. Don’t pursue the too common mindset, “we’re the charity and we know best” found in many nonprofit organizations; that nearly arrogant sense of moral superiority doesn’t create the motivation needed to encourage business owners and people who have accumulated wealth. These donors tend to be very control oriented, and the trick is to provide them with the sense of ownership without giving up the charity’s integrity and compromising its tax-exempt purpose.
  • Identify the mission of the foundation in such a way that it creates a vision of future accomplishments and becomes easier to ask for and receive ongoing support.

With a coordinated strategy, not only will annual giving prosper, but future planned gifts will more easily fall into place. In order to make this occur, delegate someone to implement the planning processes now. Spend some time training the board and supporting committees on tools available, not with the goal of making them experts, but focus on recognizing when tools may be beneficial and call in technical support to implement the gift. If possible, find advisors willing to be coached and supported in this new field long enough that they can become competent. Although it’s time consuming, this approach will allow the foundation and community to prosper.

Vaughn W. Henry is a planned giving specialist based in Springfield, Illinois. His web site,, has numerous articles, case studies and professional resources suitable for foundations and administrators seeking more background to improve their development activities.