By: Barbara Marrou, Associate

Why is it necessary to prepare a budget? Isn’t that the thing that takes an enormous amount of time and effort to make, and then is just forgotten until next year? If this is how you feel, then you are not using your budget to its advantage.

A nonprofit’s impact is determined by its ability to make good on its promise to deliver services to its clients. A budget highlights what is important to the organization. It provides guidelines for securing revenue and managing spending to support sustainable operations. A well-planned budget, based on and in support of your strategic and operational goals, will help you fund your organization’s mission and deliver on its promise.

• Why is it important for organizations to have an operating budget that is understood by staff, board, and funders?

Staff – Having a budget that the staff understands – and has helped create – encourages staff to be thoughtful in their actions and requests. Understanding that the budget reflects the major goals of the organization guides spending decisions that will keep staff focused on achieving their department’s goals.

Board – Conveying the budget to the board of directors – and revisiting it often – gives the board a better understanding of the operational needs of the organization. Maintaining constant awareness of the relationship between goals and budget allows board members to be better equipped to address those needs and uphold their fiduciary responsibility.

Funders – A clear budget process conveys your needs to funders while providing assurance that their funding supports the mission of your organization. When funders are presented with a new program idea – supported by a strong budget – they can feel confident that their funding will be well-managed.

• Why is it important to create a “zero-based budget” periodically?

A “zero-based budget” is exactly that: You start at zero expenses and put in your actual needs to operate. Rather than including expenses because “we’ve always done that,” this process supports analyzing and justifying each and every cost. Difficult? Absolutely! But it can be very eye-opening to find things that are not really necessary. You don’t look at previous budgets or last year’s expenses, you ask, “what do we need?” This is not a process to be used every year but certainly every few years to keep out those pesky expenses that sneak in and are overlooked.

• Why is it important to create individual budgets for each program?

Having a firm understanding of program costs, including costs per participant, will strengthen your organization’s position when seeking grants or other types of funding. Developing a budget for each program becomes key to achieving that understanding. One of the best exercises to determine program costs is to develop a “logic model.” A logic model is the process of identifying inputs, resources, outcomes, and impact, and based on the information you gather, it can help determine costs and the revenue needed to support program success. This exercise can help organizations to strengthen their existing programs and successfully create new ones.

Program-based financial information is useful for planning, management, and communications if it is comprehensive, accurate, and used consistently.

• Why is it important to have a structured budgeting process that involves key staff and the board finance committee?

Preparation of a budget is initially a staff project, but it is the board that will set a timetable for budget preparation. After the initial preparation by the executive director and her/his staff, the budget should be reviewed by the finance committee and eventually approved by the board of directors.

Effective budgeting practices are systematically implemented over a specific timeline, and the process of making a budget should be undertaken during the same time period annually. The process can seem to be an overwhelming task initially, but eventually it will become routine and comfort levels will increase. A budget is not set in stone but should be reviewed often and corrections and modifications made to accommodate extenuating circumstances – such as we’re living through now!

The budget is a key communication tool for the board and it serves as the cornerstone for creating accurate and complete financial statements. It is essential that CEOs and executive directors develop master-level understanding of financial management practices – including budgeting – and that they develop the ability to explain ratios and variances. These skills will empower them to lead their organizations through proper fiscal and budgetary planning with fiscal integrity.

If your organization needs help with developing a budgeting structure and process, please call us.

Resource for developing a logic model:

https://www.thecompassforsbc.org/how-to-guides/how-develop-logic-model-0

By: Marion Lee, CFRE

Kenneth Burnett in his book, Relationship Fundraising, said, “Fundraisers are members of a profession that is one of the world’s most powerful catalysts for change.”  Good fundraisers raise money, great fundraisers make caring service possible by developing processes through the lens of relationship or donor-centered fundraising.  They raise life-long friends for an organization.  That friendship begins with an annual fund process-the cornerstone of an organization’s fundraising strategy.

Primarily considered unrestricted funds, the annual fund is a recurring fundraising strategy designed to sustain operations, expand programs and services and/or fill the gap between funding from government sources, foundations and operation costs.  Usually smaller gifts, annual funds build a cadre of donors who grow-up with the organization, investing annually at increasing levels (hopefully) and who eventually become the close friends or investors for capital investments, planned giving gifts or emergency funding in times of crisis.

Annual fundraising builds a base of friends who are interested and compassionate about the organization’s mission.  These individuals can expand their relationship for a lifetime.  In addition, these friends can add to your volunteer corps, bring other funders to the organization and over time provide security for the future. Annual fund donors make decisions quickly, rarely include spouse or partner in the decision, require some but not a lot of cultivation and will remain with the organization a minimum of five years if communicated with appropriately.

Step into almost any fundraising department and one will find two separate schools of thought on donor relations and annual fund strategies.  Old school proponents rely heavily on direct mail appeals (snail mail), extensive planning, use of committees who meet in-person and personal contact with donors (phone or in-person).  This method is more time consuming and costly. The new wave camp relies on email, social media, building plans in-flight and meetings on the go in a virtual setting with little personal contact.  The new method is less time consuming and less costly.

In reality, a strong annual fund is a combination of old school and new wave that is tailored to the culture of the organization and community donors.  Studies presented by the Nonprofit Research Collaborative demonstrate that 77 percent of organizations with a structured annual fund process meet total fundraising goals. This holds true across large and small organizations.  The Individual Donor Benchmark Report conducted by Heather Yandow, presented in the Stanford SOCIAL INNOVATION Review and Philanthropy Journal, supports the need for creating a replicable annual strategy utilizing email, social media and direct mail appeals that have well-defined metrics combined with personal connections through phone calls and visits.

What Works Well

1. The creation of a consistent replicable strategy that combines online, direct mail, allocation of some small foundation gifts (usually under $25,000), personal appeals, and events
2. Thoughtful well- written, email and text appeals directed to individual donors and small businesses
3. Personalized communications: using donors names and addresses
4. A gift acknowledgment plan that responds quickly to gifts, with communications that are personal, sincere and include a one-on-one component
5. Several small events versus depending on one large luncheon or gala
6. Board member participation by chairing the annual fund and taking the lead (board gifts, signatures, visits, phone calls)
7. Setting a financial goal for Board annual gifts to kick off the annual fund- FIRST!
8. Hand signed letters or very, very good electronic signatures
9. Personalized note on letters or electronic communications
10. Manageable giving levels that encourage raising levels of giving annually
11. Setting realistic goals
12. Tracking gifts and measuring success

Less effective are blanket appeals of any kind that are not personalized (address or signature).  Gifts from blanket appeals net a gift of 1/3 less than a personal appeal and a response rate of .05 percent, while personalized appeals and in-person appeals have a 50 percent donation rate. Additionally, once a donor has made their annual gift, they should be placed on the cultivation list and removed from active solicitation until the next year unless a need or project arises that might have a special appeal to the donor.

In Chapter 17 of Donor Centered Fundraising, Penelope Burke relates a story about a campaign leader who always, regardless of what else was happening, walked donors, volunteers- friends to the elevators and stands there until the doors closed.  It was a long walk, but much was accomplished in building friendships.  Every day, we are caught up in presenting our organization to our donors.  We are driven to make goal, prove value, help our organization realize its vision and serve people – faster, better, with the least cost.  With a strong annual fund, you will have a dedicated group of friends to actively participate in helping you fulfill the organization’s mission but don’t forget – walk your donor to the elevator even metaphorically and wait for the door to close.

By: Hunter Atherton, Lee+ Associates College Intern

In a previous article, I discussed the opportunities that New Markets Tax Credits can bring for investors and how they leverage those investments to their own success. As I mentioned, there is little to no information on the success or failure rates of these projects funded by NMTCs, but I want to outline what NMTCs could look like for you and your nonprofit organization should you  want to consider the opportunity.

The Community Renewal Tax Relief Act was passed in 2000 allowing investors to receive federal income tax credits as compensation for their investment into Qualified Active Low-Income Community Businesses (QALICBs) for a variety of project types through the Community Development Financial Institutions Fund (CDFI) and Community Development Entities (CDEs).

So how does it work from the organization’s point of view?

The CDFI gives CDEs tax credits that they can dole out to private investors like national banks and venture capital funds in exchange for an investment of cash. The CDEs then allocate the investments to QALICBs that have requested funding through NMTCs. Important to note here that though the title of the invested includes the word ‘business’, the inclusion of nonprofit and tax-exempt organizations is approved in seeking funding through NMTCs. Along with their role as the invested, nonprofits can also take on roles as CDEs, leverage lenders, or developers.

NMTCs allow projects to be funded if they are struggling to get financed traditionally. They accept non-traditional collateral which is a strong positive for nonprofits, and the program has many options for payment and end-of-term exiting such as the option to purchase the interest on the loan for a negligible amount. The arrangement is contracted for  seven years during which the investor is paid back by the QALICB through interest payments on the principal at a rate that is at or below 50% of the fair market value. The QALICB is required to continue the arrangement throughout all seven years. During this time, the QALICB will be monitoring and reporting for compliance through the NMTC program.

While this sounds like a great opportunity (and depending on circumstances actually may be), there are some weighty negatives that should be considered alongside the positives. The constant compliance monitoring comes with expensive fees that should be researched before entering an agreement. The NMTC program requires repayment to the investor; there is no option other than to pay even in crisis. Indemnities must be provided to the investor from the QALICB meaning the “nonprofit unconditionally agrees to pay, reimburse, exonerate, indemnify, and hold the investor harmless against any loss, damage, liability, cost or claim incurred by the investor as a result of the loss, recapture, disallowance, or inability to claim the tax credits ” in case anything violates the program’s agreement. Also, if the investor chooses not to  release the investment at a “put” rate below fair market value to the QALICB after the seven year period, then they will be forced to assume it at a “call” rate equivalent to fair market value, resulting in a significantly larger purchase price.

Michael I. Sanders, a partner in Blank Rome LLP’s tax department and an author on NMTCs, lists other possible “snares.” He mentions that  an unforeseen shift in project focus from the original conception and investment that could change the NMTC eligibility for the investor leading to alterations in the arrangement terms for the QALICB. Also, in order to qualify for NMTCs, an investor can not formally agree to forgive a loan at the end of the seven year period for any QALICB, so if the investor retracts that informal agreement, the project can be left in a very bad spot with huge and unexpected payments to make.  Sanders notes that each CDE  involved  in any single project will also charge its own fee for the allocation and oversight of the tax credits and investments, which can rack up a big bill for an organization.

The Nonprofit Timeswrote that a nonprofit “should consult with its advisor to weigh the financial benefits against the related costs and burdens” when considering funding through New Markets Tax Credits, and I agree wholeheartedly. The NMTC program is a unique opportunity that nonprofits should investigate if their projects require funding. They offer significant financial opportunities in ways that can benefit many. But in your organization’s research into NMTCs and how they could apply to you, bear in mind that they are incredibly complex and require extensive knowledge of the program and its limits for an organization.

I would also urge you to remember that all reports given for compliance are internal; there are no articles or data on success and failure rates of NMTC program projects because that information is not available to the public making it harder to understand just how they work. New Markets Tax Credits can offer you everything in terms of funding, but make sure to protect your organization with ample research into the program and those involved just in case something doesn’t go as planned.

By: Hunter Atherton and Aubrey Parke

Lee+ Associates College Interns

In 2000, the Community Renewal Tax Relief Act was enacted beginning the New Markets Tax Credit program. This allowed investors to “receive a credit against federal income taxes for making Qualified Equity Investments (QEIs) in qualified Community Development Entities (CDEs)” as defined by the IRS. In turn, those investments would be used to enhance the quality of life for those living and working in low-income communities by funding projects led by Qualified Active Low-Income Community Businesses (QALICB).

According to the Tax Policy Center, the most often funded project types by NMTCs are retail, manufacturing, mixed use, health care, office building, and school projects. In return for the QEI, investors collect 39% on the investment over seven years in tax credits as compensation. After its establishment, the Community Development Financial Institutions Fund (CDFI) has given out  more than $23 billion in tax credits funding  more than 4,800 projects in all 50 states. However, with the program’s growth, there is increasing complexity and decreasing transparency because of a lack of reporting and records through CDEs and investors. This leads to a lack of data available to the public about success and failure rates though records do exist of what is being funded by NMTCs, but the amounts are not freely accessible.

Oklahoma Senator Tom Coburn wrote a report entitled “Banking on the Poor” in which he critiques the uses of NMTCs for projects other than enhancing low-income community life. With very little guidance or regulation from the CDFI on the types of projects that can be invested in, there are a lot of uncharacteristic projects. He mentions reports of NMTCs funding aquariums and bakeries in prosperous areas as well as car museums and movie theaters. He holds this as one of the largest problems with NMTCs: almost any area of the United States can be considered low-income by the standards of the program which could allow funding anywhere.

Coburn also takes issue with how investors are utilizing it for their own gains. The primary investors of the NMTC program are big banks who find ways to work the financial system to receive greater benefits such as larger tax breaks through a process called “twinning” which combine all possible avenues of tax credit from one project for the investor. Coburn writes “it is still difficult to measure if these tax exemptions are truly helping those seeking a hand up or simply subsidizing banks, corporations, and others who are already succeeding.”

We  find it important to note that most of the articles done on this subject cover how good of an opportunity this is for investors, and the articles often come from the investors themselves. Very few discuss the benefits for the invested, though this could be due to an unreported high failure rate. And with projects such as an ice-skating rink and a private island,  we’re not sure that  we necessarily trust the low-income community focus of the NMTCs program. We recognize  this program is not promising “free money”  to these projects. Investors pitch  this program in the hope of receiving tax credits, which is fair. However, making contributions to receive tax breaks for yourself in a program that has no defined success record in actual low-income communities concerns  us, as there is little record of the investment going to QALICB.

In March 2019, legislation was introduced to the U.S. House of Representatives that would extend the New Markets Tax Credit program indefinitely. There is debate about the legislation and many support changes to be made to the existing program in order to have increased transparency and regulation after a report from the U.S. Government Accountability Office  brought attention to the lack of records. We would encourage anyone considering funding their projects through the NMTCs program to be careful in choosing  the institutions that stand behind them.

In summary, this program offers a unique opportunity for low-income areas to gain investors to enhance their communities while offering substantial compensation, but the program currently has several pitfalls for projects that are not well-set financially prior to and well-acquainted with New Markets Tax Credits and those that invest in them. Next month we will discuss the opportunities that New Markets Tax Credit programs offer.

Sources:

Coburn, Tom. Banking on the Poor. 2007,

http://coburn.library.okstate.edu/pdf/NMTC%20Report%20(8.11.14)(2)af16.pdf

 “New Markets Tax Credit 1 | Internal Revenue Service.” Internal Revenue Service, 2010,

www.irs.gov/businesses/new-markets-tax-credit-1.

McTigue, James R. “New Markets Tax Credit: Better Controls and Data Are Needed to Ensure

Effectiveness.” U.S. Government Accountability Office (U.S. GAO), U.S. Government

Accountability Office, 11 Aug. 2014, www.gao.gov/products/GAO-14-500.

Sewell, Teri. “New Markets Tax Credit Extension Act of 2019 (H.R. 1680).” GovTrack, Civic

Impulse, LLC, 12 Mar. 2019, www.govtrack.us/congress/bills/116/hr1680.

“What Is the New Markets Tax Credit, and How Does It Work?” Tax Policy Center, Urban

Institute & Brookings Center, 2016, www.taxpolicycenter.org/briefing-book/what-new-

markets-tax-credit-and-how-does-it-work.

By Priscilla Guajardo Cortez

I recently attended a nonprofit panel discussion titled Better Boards presented by NXTBoard.  An Austin-based company, NXTBoard provides technology-based solutions to help governing boards achieve success.  The first question posed immediately following the presentation was “How big should my nonprofit board be?”

The response of the expert panel:  “Well, it depends.”

According to BoardSource’s “Leading with Intent:  2017 National Index of Nonprofit Board Practices,” board size has steadily declined over the past 20 years, with the average board size currently at 15 individual members.  Board Source believes, while there is no “right” size for a board, it is possible for a board to be either too small or too large.

One size does not fit all

Nonprofit organizations in Texas must adhere to the Texas Business Organizations Code, which requires that an organization have at least three directors.  Beyond that, nonprofits have discretion when it comes to composition, ultimate size, and diversity.

When determining the size of your board, nonprofits should consider several factors, including diversity of perspectives and expertise, ease of decision-making, types of issues facing the organization, and opportunities for deeper and meaningful engagement.

Your nonprofit board may be too small if:

• the expertise needed to make decisions and plan for the future does not exist;
• access to networks that can help expand the organization’s reach and awareness in the community so it can secure the funding and visibility it needs to do its work is lacking; and/or
• it does not operate independently or demonstrate leadership in way that would provide the appropriate level of oversight and balance to the Executive Director.

On the other hand, your nonprofit board may be too big if:

• not all board  members are meaningfully engaged in planning or decision-making discussions;
• board members feel disengaged, disconnected, or not needed; and/or
• the Executive Director is overwhelmed with meeting board member expectations.

There is no magic number to achieve when determining the size of your nonprofit board of directors.  Each nonprofit must decide for itself what the right size is, evaluating the advantages and limitations of large versus small, so it can best accomplish its distinct mission.

By Alexis De Sela

Much has been written and discussed about the critical roles of, and relationship between, the Board of Directors and Executive Director of a nonprofit, and I don’t want to fall into redundancy with this article. However, as we’ve worked closely with organizations in their capacity building efforts, we have seen examples of how this critical co-leadership relationship can strengthen or harm a nonprofit. In this article I would like to clarify Executive Director and Board roles and provide you with my observations of positive and harmful behaviors to help you reflect on and improve the health of your Board/ED relationship.

Understanding roles: It has been long established as best practice by Board relations experts that the main responsibilities of the Board are to:

• Fulfill its legal and fiduciary duties to the organization: duty of care, duty of loyalty, and duty of obedience
• Establish the long-term vision and strategy
• Hire, establish goals, evaluate the performance of, and support the Executive Director
• Provide expertise through active involvement in committees
• Meaningfully contribute to and help raise funds
• Establish and uphold a Conflict of Interest policy

The main responsibilities of the Executive Director are to:

• Lead and manage the day-to-day operations of the nonprofit and ensure implementation of strategy and regulatory compliance
• Ensure the organization’s staff is adequately led, evaluated, compensated, and that all productivity and performance standards are met
• Support the board and provide regular and realistic updates on the state of the organization’s operational health
• Be the face of the organization in the community and maintain positive and mutually beneficial relationships with stakeholders
• Be the chief fundraiser and help develop the board to fulfill its fundraising responsibility

Having established the main responsibilities for each party, healthy Board/ED relationships are complimentary to each other, each fulfilling an important role to achieve optimum organizational health. The most successful nonprofits understand these roles well and maintain interconnectedness and counterbalance. That balance is achieved when the Executive Director is given clear performance goals and strategies and latitude to execute them, and when the Board fulfills its oversight and other duties and provides counsel as industry experts without delving into the day-to-day business of the organization. Co-leading effectively requires a healthy dose of communication, respect, and trust.

If the Board is receiving information, studying updates, and asking questions during Board or committee meetings there should be plenty of opportunity to address emerging issues with the Executive Director openly and professionally. If the Executive Director is performing well, the Board should reinforce the behaviors and continue to build the relationship. If performance is lacking, the Board must address it professionally, respectfully, and formally, if needed, but always allow the Executive to correct performance and fully execute his/her operational responsibilities, unless there has been a serious breach of ethics or compliance, which should be addressed differently.

When the Board Chair or individual Board members don’t understand their roles or choose to ignore them and begin to impose their view of what they believe is best for the organization, or to second guess every move the Executive Director makes, breakdown of trust occurs, and triangulation and unhealthy alliances begin to emerge. Everyone involved begins to calculate and measure their interaction with each other causing the Executive Director’s professional, and by extension, the organization’s operational effectiveness to suffer.

Other unhealthy behaviors include the existence of individual Board member conflicts of interest and refusal to recuse when necessary. Sitting on the Board to gain personal or professional advantage or merely to pad a résumé and holding a belief of personal omniscience is clearly a breach of responsibility.

Unhealthy behaviors on the Executive Director’s part include not sharing important or material information with the Board, not providing adequate support to the Board to help it fundraise and engage in productive committee work and becoming defensive when the Board has legitimate questions. Other non-productive behavior from an Executive Director is sharing too much of the day-to-day information and asking for input and decisions the Board shouldn’t make. Once that door is opened, it is difficult to close it.

Effective communication and trust are at the core of every successful ED and Board relationship. Trust is established when there is absolute clarity around roles and responsibilities and realistic mutual expectations for fulfilling them. Think about your organization and the current state of this critical relationship. What needs to be strengthened? What needs to change? What is your plan for addressing issues to ensure a successful and effective mission-centered relationship?

If you need guidance in having this conversation, we are here to help.

By Karen Kegg

I had a business professor in college who would refer to us fun-loving, extremely extroverted marketing majors as “Do you want fries with that?”  Nice! Granted, he was a finance and business policy guy and I respected him very much, but at the time his attitude didn’t help our confidence as business majors.  Who did he think had the right interpersonal skills to successfully build relationships with clients and prospective clients in order to get a business off the ground? I felt he did not value a marketing person’s desire to be out from behind a desk and get in front of buyers/investors to convince them to buy whatever the business was selling!

Unfortunately, that same perception of the marketing major of my college days may exist about today’s fundraising professional.  After speaking to Development Officers and other development professionals and hearing stories of how Board members and staff question their expertise, I think that there is a perception that all development folks do is plan parties and send out letters asking for money.  They think, “How hard could it be?”

Well, we all know that’s not the case!  Managing a gala and crafting a successful appeal letter take skills that are vitally important, and so are these traits that successful development professionals possess:

• Being current on industry best practices;
• Understanding ever-changing (and often confusing) tax laws;
• Managing people (donors, staff members, executive directors, and board members, to name a few) and their expectations, and
• Knowing and practicing ethical fundraising.

There are many facets to the development professional’s job, and continuing to be knowledgeable about the business side of things is crucial to success.

What other skills are needed to be a valuable development professional?  The following thoughts come from my colleagues at Lee+ Associates:

• Empathy – the ability to put yourself in the donor’s shoes is a must
• Patience – it’s called “development” for a reason; it takes time and patience to build relationships on behalf of your nonprofit
• Perseverance – whether it’s spending time listening and relating to donors or waiting for the Executive Director and the Board to approve your fundraising appeal, a good development professional needs to focus on the end goals
• Energy – Development Officers work long hours motivating donors, staff and volunteers
• Passion for the cause – even with all of the above skills and traits, belief in one’s cause and the people it serves is essential for a Development professional to truly be successful and to inspire others to support it.

Clearly, the development professional’s job requires an array of skills and characteristics in order to advance in one’s career and in order to advance the cause he or she serves.

Michael D. “Mike” Davis, veteran fundraiser and nonprofit “legend” in San Antonio, will retire at the end of February after serving 47 years in various development roles for several area nonprofits.

Davis began his career at University of the Incarnate Word when it was still an all-women college, as an admissions counselor and “road runner” representing the school to enrolling high school students.  He then took over development responsibilities and served at UIW for 10 years.  He moved from there to Oblate School of Theology where he was Vice President of Advancement.

He then travelled north to San Marcos to what was then Southwest Texas State University before returning to San Antonio to work for Cancer Therapy and Research Center (CTRC).  Davis then moved to Alexandria, Louisiana to head the Foundation of the Christus St. Frances Cabrini Medical Center.

He and his late wife, Joan, returned to San Antonio when they learned she had cancer and Davis was hired into his final development role at Assumption Seminary from where he will retire on February 28 after six years there.

Members of the Association of Fundraising Professionals honored Davis with its first ever “Outstanding Fundraising Executive” Award in 1997, recognizing his commitment to the fundraising profession, his willingness to mentor new development officers, and for his leadership to the San Antonio Chapter as President in 1992 and 1993.

What does Davis think of his nearly 50-year career in nonprofit fundraising? “One interesting thing about working in nonprofits, whether it’s for a university or a cancer center or a hospital, is the impact a development program has on an institution.  When you land a $5 million gift it changes the institution, not only financially, but it changes the people who work there.  It tells them that they’re important, that the work they do is significant.”

Davis said that development professionals have a responsibility to help teach their administrators and boards about philanthropy and the importance of donor cultivation.  “We have to teach them that two phone calls don’t close a deal.  It takes time and effort.”  And, he says, seeing one’s work come to fruition is gratifying when one sees that making a significant gift “helps change the donor, too.”

Davis plans to be present at the birth of his 14^thgrandchild in New York City in early March.  “Other than that, I have no big plans in retirement,” he says.

To mark his retirement, several colleagues commented on his impact on their careers:

Michael Bacon, CFRE, Vice-President, Alumni Relations & Development, Trinity University

I remember going to meet Mike Davis when I was a senior in college.  He was at the Oblate School of Technology.  He very kindly listened to all my dreams about a future career and encouraged me to consider fundraising as my career.  Throughout the years, Mike has been a mentor, a colleague and a friend.  His natural humor at many AFP events is legendary.  You won’t find a better emcee for an event than Mike Davis.

Marion Therese Lee, Chief Executive Officer, Lee+ Associates

Mike Davis will always be the man with the laughing eyes who always makes people feel safe and positive. Mike would answer my questions honestly, thoughtfully and with a joke or a laugh that relieved my concern of asking a dumb question.  I value his ability to put people at ease.

Dianne McAlister, former Director of Development, Daughters of Charity Services

Mike Davis has been a friend to many in the not-profit/fundraising community. I was introduced to Mike in the early 80’s through San Antonio Society of Fund Raising Executives. During those early years Mike was the “go to” guy for jobs in fund raising. Mike counselled many a seasoned professional and gave advise to those looking to start their careers. Mike was the one to call if you were moving to San Antonio or if you were hiring for your team. Mike practiced “the best way to influence is to listen.” And listen he did. It was an invaluable service in those early days. Mike always had a funny story to share and he loved being able to laugh with his friends and colleagues. Retirement is a wonderful reward for all your hard work, Mike. Enjoy your family and enjoy yourself!

Joyce Penland, Senior Associate, Lee+ Associates

Mike Davis was one of the first people I visited when I first came to San Antonio as a new development officer. He encouraged me to believe in myself and that ours was a noble profession.  Most of all, he made me laugh!  His quick wit, his affable nature, and his commitment to the profession have always made him a favorite among fundraisers in the area.  He remains a great friend to this day.

Marc Raney, former Vice President of Advancement, Trinity University and former Senior Vice President of Resource Development, Methodist Healthcare Ministries

If there were a “Dean of Fundraising Professionals” Mike would be appointed unanimously by his peer throughout our community.  He would find the title humorous (and he’d never wear the robe) but he’s earned it.  No one is respected more for his high ethical standards and ability to organize and encourage others to work for the common good…while keeping us laughing at ourselves along the way.  Without a doubt San Antonio is a better place because of Mike’s work in philanthropy for the last 47 years.

Barbara Anne Stephens, former Director of Development, Mission Road Developmental Center and former Senior Associate, Lee+ Associates

Mike has been a generous mentor and colleague to many fundraising professionals. He is appreciated for his quick wit and has served as a Master of Ceremonies for countless organizations. One of his unforgettable quips happened at an AFP conference. A development professional held the winning ticket for a door prize. Mike recognized her as she stood up and he said, “The winner is Mary and she is with Meals on Wheels. Roll on down here Mary and claim your prize!”  Mike’s kindness knows no bounds. He is an exemplary father and grandfather, a consummate professional and a treasured friend.

By Marion Lee, CFRE

James M. Greenfield is, for me, the father of modern fundraising processes.  In 1991, Greenfield published Fund Raising: Evaluating and Managing the Fund Development Process which is a must read for anyone entering nonprofit work.  Greenfield began his career in 1962 working mostly within university and hospital systems and managed to publish at least four books on nonprofit fundraising. Most of his work is timeless and even after our 30 + years in fundraising, we often refer to his basic good sense and detailed approach.  We urge you to buy them, read them, and keep them.

In his first book, Greenfield refers to a decision-making process that is guided by what he refers to as the “CRUP test” meaning credibility, relevance, urgency and pragmatism.  Without this process, Greenfield believes that an “organization cannot defend its fundamental arguments for constructing more buildings, expanding its services, improving its quality and financing its future.” According to Greenfield, critical to the success of a capital endeavor is the staff and board’s determination to first closely examine their capital project under the CRUP test instead of diving in looking for “a quick fix, a path to glory or a way to boost their own reputations for success.”

All too true.  Currently there are three traditional phases of a capital campaign which include:

• Feasibility Study: A Feasibility Study allows an organization to solicit input from a group of interested and potentially interested donors and community leaders.  During this phase, lead gifts, leadership and campaign strategy are identified.
• Quiet Phase: The Quiet or non “public” phase of a campaign concentrates on securing key leadership for the campaign. This usually consists of Honorary Chairs, Working Chairs and a substantive Campaign Committee capable of reaching a broad and influential group of potential donors.  The primary role of this phase is to obtain lead individual gifts for the campaign.
• Public Phase: The final phase of the Capital Campaign is designed to raise the organization’s profile further through the solicitation of a significant number of small gifts from the general community.

We contend that in keeping with Greenfield there is a hidden phase to a campaign that all too often is lost in the headlong rush into the Feasibility Study or Quiet Phase.  The Hidden Phase includes the basic tenents of a CRUP test and is inclusive of good business planning. And, we are finding, that to by-pass this phase will only be regretted later as the lack of groundwork becomes costly in time and lost funding.

The Hidden Phase

The Hidden Phase of a campaign involves intense institutional analysis and thought on the part of both the staff and board of directors. This phase may take 9-12 months to complete and, as you will see, builds a partnership with the between board and staff so that at no time in the more traditional phases can anyone say, “Well, I have no idea how we got here or even why we decided to do this.” As a former funder, you cannot image how disconcerting is it to have a board or staff member make this statement, particularly after the organization that they serve has just submitted a request or been granted funding. Here are some of the Hidden Phase steps that should be taken prior to committing to a campaign and entering into the Feasibility Study:

• Define a clear and concise statement of the problem using facts not feelings
• Present the problem to the Board of Directors to gain consensus, approval to seek a solution and request Board engagement in the process
• Assist the Board members in creating the appropriate process (committee, etc.) for them to lead and be engaged in the CRUP analysis
• If this is a building project, conduct a space needs assessment and determine the optimum location. This is also the time to decide whether to buy and build, or to buy an existing building and renovate
• Present the outcomes of the assessments to the Board and gain consensus and approval to move forward by engaging professionals to help find property and design or renovate a building
• Develop architectural renderings and cost estimates
• Present the outcomes to the Board and gain consensus and approval
• Analyze the organization’s financial status using the past five years so that you can create a business plan to address the potential rise in overhead at the new site and projections for increased revenue
• Present the Board with the financial information and request that they join in determining the following:
  • Organization’s debt tolerance which will then decide:
  • Campaign soft goal
  • When to begin construction (i.e. 70% of goal in gifts and pledges)

Define basic investment, gift and naming policies

Create the materials to illustrate the project and communicate a sense of need and urgency

Greenfield says, “Readiness is everything….and readiness is leadership.”  I would like to amend his statement just to say that readiness is shared leadership between board and staff.  This kind of deliberate, thoughtful, inclusive process will benefit the organization by building positive, productive board-staff relations, sound policy, positive self-awareness and eventually, successful capital projects.