The Annual Fund - Foundation of All Fundraising By Zahida Noorani, CFRE

Every NGO, desirous of having a sound and stable fundraising program, must consider establishing and sustaining an annual giving program, popularly known as the Annual Fund.

As the title suggests, this involves soliciting donors and prospective donors annually for a charitable contribution. It creates in the donors the habit of giving at least one gift a year. When NGOs give donors due respect and recognition, report to them how gifts were used to benefit people, and educate them on how much more could be done to help those in need, donors become more and more committed to the NGO. They will become regular donors, and then move on to make more than one gift per year for different purposes. More importantly, some of them will increase the amount of their contribution through a process called upgrading of gifts. This happens when donors are convinced that the NGO is doing a good job of helping people, shows accountability and transparency in its operation and therefore, is worthy of support.

The Annual Fund is a good way to raise money for general operating expenses. Most NGOs are hard pressed to meet the cost of items such as rent, electricity, telephone, cleaning services, office supplies and salaries of administrative staff. The grants they get are generally restricted for special projects. Proceeds from the Annual Fund can be used at the discretion of the NGO, to pay for operating expenses or for support of special programs.

The importance of the Annual Fund is well illustrated by the "Donor Pyramid" Chart in Figure 1. At the base of the Pyramid are the Annual Fund Donors. They will always form the highest percentage of donors in every NGO. They give small amounts, may be anywhere from one rupee to two hundred rupees. They are acquired through direct mail and other letter appeals, door-to-door solicitations, and contributions made at open houses and other special events. A first gift is often an "impulse" gift - donors may be moved by the appeal or the person asking for the contribution is hard to refuse. The purpose of the first solicitation is not to raise funds but to acquire new donors. Fundraising begins when the first gift is received. The NGO sends a warm and welcoming letter of thanks and maintains communication with these donors to keep them informed of its work. The goal is to convert these donors of impulse gifts to habitual donors by soliciting them for renewal of support in successive years and build a long-time relationship with them.

The next segment of the Donor Pyramid is Special Donors. They are ones who give higher amounts than the Annual Fund donors - may be anywhere from Rs.250 to Rs. 5,000. Many of them will be former Annual Fund donors who are feeling more committed to the NGO and have a higher giving capacity so they increase the amount of their gift by the process of upgrading. They felt good about the smaller gifts they had made. The NGO made them feel appreciated and maintained good communication with them. The donors felt convinced about the quality of the NGO's work and developed sufficient confidence and trust to give larger contributions.

At this stage it is advisable for NGOs to draw donors closer to the organization so that they can see first hand how the NGOs operate and how they benefit people. Providing opportunities for volunteer service is one of the ways to build donors' interest, loyalty and commitment to the cause. Inviting them to special briefing meetings, and keeping them informed through letters and newsletters are other effective ways of retaining donors' awareness of the NGO and interest in its work. In addition to a letter of thanks for their gifts, special donors deserve a thank you telephone call. This begins a more personal relationship necessary for sustaining and increasing donors' commitment. Communication with Annual Fund Donors is largely through the written word, supplemented by telephone calls to those who contribute very regularly. However, with Special Donors, there has to be personal communication through telephone calls and face-to-face contacts individually and in groups.

The next segment of donors is Major Gifts Donors. They contribute substantial amounts - Rs. 5,000 upwards. They are usually ones who have made lower gifts for several years, have been closely involved with the NGOs as direct service volunteers, members of committees and/or board of trustees, believe strongly in the NGO's mission and are deeply committed to it. It takes a great deal of time, attention and thoughtfulness on the part of the NGO to develop prospects for major gifts but it is well worth the effort. Please note that the rupee amounts given for each segment of donors is purely for illustrative purposes. In actuality, the amounts will vary from NGO to NGO depending on the scope and maturity of their fundraising program. For some, a gift of Rs5,000 may be a major gift and for others, nothing less than Rs.100,000 would qualify as a major gift.

The next two segments are Capital Campaign Donors and Legacy/Bequest Donors. The latter are often known as "Deferred Gifts Donors because the funds come to the NGOs after the death of the donors. Again they will be ones with an exceptionally strong belief in the cause, long history of supporting it, and deep interest in securing its long-term financial viability.

The Donor Pyramid shows the progression of donor support from very small to the largest gift a donor can make. The donors shrink in numbers as they go up the pyramid because not every annual fund donor will have the financial resources or the emotional commitment to the cause. The few who make it to the top three become the backbone of an NGO's fundraising program, contributing as much as 70 to90% of total fundraising revenues. As donors move up the pyramid, the extent of personal contact between NGO personnel/volunteers and donors also increases.

The large base of Annual Fund Donors in the Donors Pyramid contribute a very small percentage of fundraising revenues because of the small size of their gifts. It does not mean, however, that they are unimportant or we neglect them. They deserve respect and appreciation for their contributions. Their sheer numbers demonstrate the strong community support that an NGO has. It is from these donors that we are able to identify those capable of moving up the pyramid to become major gift donors. However, strategically, we need to put more time and energy in cultivating those with higher financial capacity to make the fundraising efforts more fruitful.

Hopefully the discussion so far has convinced you of the values of an Annual Fund. Planning is the key to its success. To implement it, following are some of steps to be taken:

• Setting the rupee goal - amount to be raised in the year based on an evaluation of your fundraising proceeds the previous year and what percentage increase is realistic. All donations that have the potential of being repeated each year can be included. For instance, if an NGO has an annual fundraising event and a direct mail program, the proceeds from both can be included but grants funds cannot be part of the Annual Fund because there is no certainty of repeatability.
• Determining how the funds will be used - for general operating expenses or for special programs. You will need to justify the need in your fundraising appeal by presenting the "case for support.
• Deciding how you will do the solicitation: by letter, telephone, personal contact or whatever combination.
• Assigning responsibilities among staff, trustees, and other volunteers.
• Deciding who will write the fundraising appeal and what will be included in the "case for support".
• Preparing a list of prospects to be solicited, starting from trustees, staff, volunteers, past and current donors, businesses in the area, consumers of services and their families if possible, community residents, and corporations and charity trusts that are likely to give.
• Dividing the prospect list in segments. Your appeal has to be individualized for each group. For instance, trustees will be solicited differently from community residents.
• Determining at the outset the policy for acknowledging gifts and recognizing donors: thank you letters, telephone calls, naming donors in newsletters etc.
• Preparing a timetable for completion of major steps to be taken and monitoring progress.
• At the end of the year, evaluating what worked well, what did not and why. Planning accordingly for the next year.
  

The Annual Fund is a well-established, tried and tested fundraising technique. It is the least expensive fundraising initiative to implement and every NGO, big and small, can incorporate it as an integral part of its fundraising program .

Zahida Noorani is a fundraising trainer and consultant. She can be contacted by e-mail at zahida2000@indiatimes.com.