Why Should You Have an Annual Fund?

Your annual fund will:

• Give your constituency the opportunity to participate regularly in giving.  An Annual Fund gift is often the first gift ever to a ministry
• Help you identify donor prospects and enlarge your database
• Tend to create gift support rather than the “nickel and dime” fund-raising mentality
• Provide you with a development vehicle to recognize donors
• Produce unrestricted dollars to enhance the overall experience

Some ministries use the Annual fund to supplement the operating budget; this is known as "plugging the gap".  Others use unrestricted Annual Fund gifts to fund major capital needs or to solve unplanned emergencies.  These are not good uses of an Annual Fund program.  Better ways to fix such things are exciting capital campaigns and utilization of cash reserves.

What Are the First Steps You Should Take?

Before you actually initiate your Annual Fund, it is important to:

1. Draft a philosophy statement for the program. This will be a guide to how you operate the Annual Fund and how gifts are distributed. A suggestion for the philosophy statement is in the next section.
2. Gain agreement and adoption of the philosophy statement – first by the administration, then the development committee of the Board of Directors and finally by the full Board.
3. Draft the tentative list of items or programs and then estimate the cost of each to be sure the total list is reasonable from a dollars to-be-raised standpoint.
4. Set internal goals for the Annual Fund – include dollars to-be-raised, the number of givers, number of first time givers, % of unrestricted gifts, and participation in “giving levels” (if you use giving levels.)
5. Develop the recommended list of targeted items or programs and gain the approval of the total Annual Fund program and your internal goals from the development committee and finally from the Board itself.
6. Implement the Annual Fund program using the calendar below

Draft of the Philosophy Statement for the Annual Fund Program

1. The Annual Fund program will be conducted with this philosophy as approved by the Board of Directors.
2. The Annual Fund program will be in keeping with and in support of the ministry’s mission.
3. Gifts to the Annual Fund will be used to enhance important extras that are not normally covered in the ministry’s operating budget.
4. Both unrestricted and restricted gifts will be accepted, however, the Annual Fund program will emphasize unrestricted giving.
5. Unrestricted gifts received during a fiscal year (July 1st – June 30th) will be applied during the next fiscal year.
6. The Board of Directors will approve the distribution of unrestricted gifts in general accord with these percentages (for example):
   
   - 25% - 50% to tutoring programs
   - 25% - 50% for staff enhancement
   - 5% - 10% to the institutional advancement of the ministry (for instance to pay for development software, ministry advertising, the costs of a ministry public relations event, etc.)
   
7. The Board of Directors has the authority to accept or to decline any gift to the Annual Fund program – restricted or unrestricted.

How Will You Measure the Annual Fund’s Effectiveness?

You can track and compare the:

• Number of first time givers
• Number of givers who gave last year and again this year
• Percent of unrestricted Annual Fund gifts: shoot for at least 50%
• Total dollars raised and the variance in gifts from year to year
• Average gift size; surprisingly this will tend to drop as your number of givers increases
• “Giving level” participation, e.g., "Desire Club" or  "Ministry Club"
• Percent of staff members who give; dollars are not important but a 100% participation by the staff speaks volumes for your ministry

What Is the Best Way to Announce Your Annual Fund?

The best way is personal mail (some call it direct mail)…

• The cover letter should be addressed to “Mr. and Mrs. X” and personalized by “Dear (first name) and (first name),” not Dear Donors or Dear Parents. The letter should be no longer than one page
• The cover letter must tell how your young people and staff will benefit from an Annual Fund gift.  Ask the recipients of the letter to consider making an Annual Fund gift and specify the amount
• Attach an Annual Fund brochure.  Give the upcoming year’s opportunities and show sample pictures of smiling students
• Include a mail-back envelope/card. It’s unnecessary to add return postage; this doesn’t increase giving and actually slows down the mail back to you
• Four separate mailings –October, November, February and March. Use a regular ministry envelope, no development markings
• Segment the constituency; vary the cover letter to fit the segment, i.e. “gave last year,” “new to your ministry,” “did not give last year,” and also by participation in the previous year’s “giving levels”

How Can You Involve Your Young people Effectively in Asking for Support?

A phonathon by youth works well!

• Young people are the absolute best phonathoners
• Make calls for 2 or 3 evenings in mid-April to selected prospects (who did not respond to the mailings.)  Mon., Tues. and Thurs. are good
• Actual calls should be made between 6:30 p.m. and 8:30 p.m.
• Use one large room equipped with phones, e.g., a brokerage office or bank lobby, or use loaned cellular phones in a large room on campus
• Arrange fun evenings – light dinner, snacks, soft drinks, bells, etc.
• Provide your young people with scripts and thank you cards to mail
• Have the young people ask for specific dollar amounts – the amount may vary from call to call depending on the constituent or “giving level”

Are Annual Fund “Giving Levels” Effective? They can be!

• Levels of giving, such as, the DSM Club and President’s Club, can be motivators by example.  When potential donors see the names of the “members” of the DSM Club, they may be encouraged to join in
• Giving levels are typically based on unrestricted gifts at specified levels. For instance, unrestricted gifts between $100 and $249 might qualify for the 1999-2000 Annual Fund DSM Club. Between $250 and $499 may qualify for the President’s Club
• Giving level club members tend “to move up” to the next level in future Annual Funds
• Another approach – an Associate giving level; it’s a level that is broader than giving.)  Participants make a 5-part commitment to ...

Pray for the ministry regularly,
Promote the ministry’s mission,
Provide the ministry with counsel in the giver’s area of expertise,
Give a minimum of $250 unrestricted and
Encourage others to become Associates

• A “no publicity” option is available for giver confidentiality

Should You Publicize the Annual Fund?

Yes; do so through ministry communications of all types:

• In newsletters to constituents
• At Board meetings, staff meetings and other events
• Yearbook, year-end report and letters from the President
• Mention the Annual Fund frequently – even in such things as public speaker announcements at home athletic events

What Are Some Ways to Thank and Recognize Donors and Volunteers?

The Annual Fund program provides an effective recognition vehicle:

• List members of the “DSM Club,” the “President’s Club” and/or and in other ministry publications
• Appoint Annual Fund Campaign Co-chairs each year
• Co-chairs primarily lend name, likeness and influence to an Annual Fund program.  Include their picture in the Annual Fund brochure along with quotes; have them sign Annual Fund solicitations
• Thank you letters, personal phone calls and special invitations to selected ministry events are well-received recognition tools for volunteers and donors

Annual Fund Calendar – What Do You Do Between Annual Funds?

Once you begin an Annual Fund program for your ministry, Annual Fund activity is on-going – year after year. You are never between Annual Funds:

• An Annual Fund lasts July 1 – June 30; then the next one starts
• Begin communicating how the past year’s gifts will be utilized
• Set next year’s Annual Fund targets and create the brochure in August
• Recognize all year

What Variable Costs Should You Expect For the Annual Fund?

An up and running Annual Fund should, by the 3rd year, cost 5% or less of the total dollars raised for that year. You should budget costs for:

• Photography – it’s worth professional photos to show off your youth
• Brochure graphic design and the preparation for printing
• Brochure copy writing (unless you take care of this yourself)
• Printing of the brochure and mail-back envelope/card
• Mail-out postage (and handling, if you use a volume mailing service)
• Mailing envelopes (use regular ministry envelopes)

Can an Annual Fund Program and a Capital Campaign Co-exist?

Yes!  Keep Annual Funds separate from capital campaigns; to have them run simultaneously is ok.

• A successful Annual Fund demonstrates a favorable giving climate
• Successful capital campaigns actually help annual giving
• Your constituency can differentiate between:
• an Annual Fund campaign that yearly provides gift support to enhance the ministry’s program in ways tuition cannot cover, and
• an occasional capital campaign that may fund major capital improvements in land, buildings, equipment and technology