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Counting Cash Has Its Virtues



My August 4th GivingTake post addressedThe Little Engine That Could” highlighting a recent $250 million gift received by Centre College in Danville KY from the A. Eugene Brockman Charitable Trust, representing the largest outright gift ever to a liberal arts college.

As you likely have heard, the pledge fell through because a financial deal that funded the gift collapsed. I feel badly for the College, because the Brockman Trust certainly made the pledge in good faith, and has already made $50 million in gifts previously to the College.

The matter calls into question, however, the wisdom behind going public with the pledge, especially because it was based on a complicated market-based transaction that, apparently, had a high risk profile. And it collapsed less than two months after the public announcement. WHAT WAS THE RUSH?

It is increasing clear over the years that it is becoming harder to collect pledges than to secure them in the first place. From before the great recession in 2008, I have been advocating to my clients to change the method by which fundraising is reported to boards and volunteers, and how gift officers and advancement offices are evaluated.

By counting cash only, as I recommend, rather than out right cash gifts andpledges, you set up an environment that places great importance on donor stewardship. It is human nature by gift officers to move on to the next person in their portfolio after securing a pledge. But, if the gift officer is being measured on the cash generated from the donor rather than the pledge itself, much more attention will be given to a structured stewardship program for all pledge makers.

Pledges can, of course, be counted for gift booking purposes, but for reports, they should be below the line with the cash generated by the pledges over time being above the line. As you accumulate pledges, you can predict your cash income for the coming years far more accurately, and this will make your CFO very happy indeed.

This is not to say that Centre College should not have announced the magnificent $250 million pledge, but it most certainly should have waited until it was sure, and the Trust was sure it would materialize into cold hard cash for student scholarships.

Your Takes:

1. Control your excitement and your zeal in talking about and announcing big pledges.

2. Be sure you understand the underlying assets involved in big pledges so you can measure your exposure when committing to spending the money.

3. Construct a rigorous stewardship program for your donors, and especially your pledge donors, so paying the pledge is a joy to the donor.

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