In the last installment we described how wealth can become a burden for those who want to use their considerable means wisely for the betterment of the world. There are a substantial number of people thus “burdened” who want to use that wealth as effectively and creatively as they used the energy and intellect that they brought to the accumulation of wealth. It’s a rare individual who imagines that Congress can better spend their lifetime savings though Warren Buffett is purported to be such a rarity.  And yet even Warren Buffett turned to a younger man, Bill Gates, to shepherd his philanthropic commitment when he decided he couldn’t complete the job during his own lifetime.

Will You Use My Money Wisely?

There are innate human constraints of commitment, competency, and longevity. It’s these that give rise to challenge faced by people of means. For fundraisers that challenge translates into a need to convince wealthy individuals that your organization can be as chary with its finances and as skilled in producing societal value as the prospective donor was in achieving an excess of financial resources.

That’s a very tall challenge.

The donor wants to support something significant that is a worthy cause, secure in the knowledge that the use of the donated funds will be wise and responsible. The recipients of charitable funds need to steward their resources as carefully as the donors cared for their funds while accumulating them, and it needs to be clear they are doing so. Successful charities dare not be seen as feckless.

Fund Raising and Senior Living

But let’s take a closer look at that fundraising challenge and, particularly, how it might affect a foundation that is a companion organization for a senior housing enterprise. To begin with it’s wise for fundraisers to appreciate that giving is voluntary. As an employed fundraiser you may believe in your cause, but you have to persuade your prospective donor that your cause will be more effective than alternatives that the donor may consider. In the case of a related foundation you may believe that loyalty to the organization will motivate residents to be generous. Yet, it’s a competitive world, and there are many heartrending causes seeking those same senior donors. At the recent LeadingAge California Conference one donor held up a fistful of solicitation letters. She announced that these were the solicitation letters that she had received during the fifteen days since she had learned that she would be asked to speak at the Conference. At a glance it appeared that she might be holding as many as a thirty letters… many of them with multiple pages. Active donors receive many pitches and they become hardened toward all but the clearest, most succinct, most compelling appeals.

Sincere Appreciation

That same donor emphasized the importance of sincere appreciation. She was particularly put off by acknowledgement letters that diminish her sense of personhood either by addressing her as Mr. or by failing to spell her name right. It’s important that each donor feel that they are known individually and that their individuality is honored and appreciated. Some charities are even so crass as to ask for the next donation in the course of an ostensible thank you note.    

Creating Value

In the ideal a resident, who pays an entrance fee or a recurring fee, would recognize value received. The resident would perceive the enterprise as an organization committed to stewardship and good value for those it serves. But residents don’t always have this sense that they made a good bargain when they accepted a continuing care contract. If residents are skeptical of the value they receive as residents, they may fear that undesignated donations will be diverted toward ineffectiveness, executive compensation, or inefficiency. There was a time when serving the elderly required financial sacrifice, but many organizations today are able to give executives competitively determined, market based compensation. In such a situation, a matching fund supported by the executives can go a long way toward establishing that the executives themselves are willing to sacrifice commensurate with the sacrifice they ask of resident donors.

Responsible Relationships

There is an intimacy between foundation executives and the residents to whom they appeal and that calls for special caution. First, residents may be wary of the preferred access which the foundation executives have to them since other donation solicitors may be barred from the campus. Second, the integrity of foundation accountability affects not only the trust of residents concerning their gifts but also their trust in the provider organization itself. Lags in accounting for known donations; waffling in response to questions about how funds are being used; or failure to show respect for the wishes of contributing residents can damage the reputations both of the foundation and of the associated provider; it can take many years to undo the damage.

Many foundations market charitable gift annuities using the actuarial rates of the American Council on Gift Annuities. These rates are determined with the expectation that approximately 50% of the donation toward the annuity will ultimately accrue to the charitable purpose. Yet, some foundation executives may be tempted to sell the annuities as income more than as a giving opportunity. That can lead to troubling questions when other worthy causes offer more generous annuity income terms.

The foundation executive needs to be prepared to justify the difference lest the seemingly uncompetitive returns be taken as evidence that the provider affiliate is not committed to fair value for residents. That can affect the local market perception of the provider. The close relationship between residents and foundation executives invites special scrutiny of such affiliated foundations. Weaknesses may be reveal that might stay hidden from donors to more remote charitable causes. For instance, donors may be put off by donor appreciation trinkets that detract from their commitment to the cause.

Pens, coffee mugs, flashlights, and more recently, handheld battery powered fans, detract from the credibility of the cause in and of itself. Gold leaves and memorial bricks are popular among fundraisers and are a nice recognition though many donors choose anonymity and evidence of how a specific donation made a difference is a more fitting form of recognition. There must be a balance between superficial recognition tributes and substantial recognition. Within a close-knit residential community rumors of misused funds can also taint solicitations for undesignated general purpose donations.

Residents are more likely to respond positively to solicitations for specific worthy charitable objects. Word spreads rapidly in a residential community and a reputation for responsiveness and accountability is critical to foundation credibility. Inurement, too, can be a challenge and fundraising executives have to take care that donors don’t take tax credit for donations that principally benefit the donors themselves. There must be a detached charitable purpose in the donation.

As an aside, foundations affiliated with senior housing and selling charitable gift annuities might also benefit from a similar charitable long term care insurance program, which could be used to offset some of the resident friction and disillusionment as providers transition from full care inclusive (Type A) continuing care contracts toward fee-for-service.

Frank Minton, who is active in the charitable gift annuity area, has opposed that extension of the annuity program for fear that it might invite unfavorable tax or Congressional scrutiny, although the Congressional response to the Ozee vs. The American Council on Gift Annuities, Inc. case demonstrated that there is widespread public policy support for this form of charitable giving. Jack Cummings This is Part 2 of a 3 part series:  Next up  “Making It All Work”

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