1. The Business of Higher Education Fundraising : Understanding the Basics Tom Jennings, Vice President for University Advancement Florida State University James R. Bullock, Vice President for University Advancement Queens University of Charlotte

2. Effective financial management attracts philanthropic dollars

3. Clean audits Endowment performance and reporting Why is this important to donors? Operating budgets Surpluses Scholarships Tuition discounts Expenditure per student

4. Pledge periods: Changing value of money over time Debt expenditure on capital projects

5. Net-Present Value of $1,000,000 Gift Based on a 5% discount rate Year Pledge Completed Pledge PeriodPresent Value 20140 ($1M)$1,000,000 20151 ($1M/year) $952,381 20195 ($200K/year) $865,895 202410 ($100K/year) $772,173 Source: http://www.investopedia.com/calculator/netpresentvalue.aspxhttp://www.investopedia.com/calculator/netpresentvalue.aspx Accessed 2/3/2014

6. Scholarship Aid: Funded vs. Unfunded

7. Philanthropy’s impact on the budget

8. Growth in top line revenu e Not from cutting costs Unrestricted dollars vs. Budget reli ef vs. Budget-enhancing gifts

9. Types of Gifts and their Impact

10. ROI: Major Gifts Officer Total Salary, Benefits, Travel, etc. = $100K Total Raised Annually in New Gifts and Pledges = $1M GREAT RETURN ON INVESTMENT, RIGHT?

11. A Closer Look at the $1M: Pledged $250K Capital Project $250K New Endowment $250K Will Provision $200K Budget - Restricted $ 50K Unrestricted Paid $50K $250K - 0 - $50K Total Impact on Current Operating Budget = $62,500 ($50K actual + 5% annual return on $250K) GREAT RETURN FOR THE INSTITUTION???

12. Accepting start-up grants Things to include Unintended consequences

13. Example: Let’s Celebrate a $2M grant for a new academic program! Multi-year pledge (4) from a national foundation Program can bring regional and national attention to campus Faculty and academic administration thrilled with investment A director for the program is hired Foundation director is a hero

14. The Fine Print... Foundation is explicit that this is a start up grant and it will not provide further funding Gift agreement stipulates that university will continue program for a minimum of 10 years following funding Grant stipulates hiring of director and 4 fellows to support the program at a total annual cost of $250K OTHER “HIDDEN” TERMS AND CONSEQUENCES...

15. Inflationary costs of program operation Matching gifts, if required Program with narrow focus less likely to attract funding Risk of diverting $$$ from unrestricted or more viable project Others??? OTHER “HIDDEN” TERMS AND CONSEQUENCES...

16. Financing Campaigns Gift fees Institutional operating bud get Public vs. Private Gifts supporting campaign operations Draw from endowment

17. Pricing new facilities & renovations to make budget

18. Factors: Debt Expense Financing Terms Internal vs. External Timing of Construction Maintenance Reserve Fund

19. Policy Considerations Scope: What Can Be Named? Institutional History & Culture Toward Naming Pricing Models  Benchmark internal and external prices  Cost of construction/formula, e.g., 51% of cost of construction  Cost per square foot + fair market value  What the “Market” will bear

20. New Construction  Need outright gifts of readily marketable assets  Timing of lead gift vs. timing of construction  Escalation of construction costs  Donor involvement in design and construction  Financing strategies and irrevocable deferred gifts  Design changes  Maintenance endowment

21. Existing Construction  Outright or Deferred gifts  An “irrevocable” bequest  Strings attached, e.g., want name and professorship, too  Create an inventory of nameable spaces

22. Gift/Pledge Mechanics  Pledge period  Enforceable against donor’s estate for balance of unpaid pledge  Unrestricted Gifts and Bond Financing

23. The Individual Donor  Should bring honor on institution  Is there an existing relationship with the institution?  Researching Donors & Honorees  Current employee/passage of time requirement?  Class gifts  Handling emotional ties to the honoree  Who pays for the plaque/statue?

24. The Corporate Donor  Nature of the business and institutional culture  Potential mergers and acquisitions  Company name changes  Bad behavior (e.g., Enron)  Perspectives of business competitors  Consider only internal or athletic spaces  Consider limiting to a period of years

25. List of Terms Endowment Funds Endowed Funds Non-Endowed Funds Funds Held in Trust by others Total Endowment Long-term Investment Portfolio Fund Balance of Endowed Funds Spendable Cash Balance Total Net Assets Total Endowed Net Assets Unrestricted Temporarily Restricted Permanently Restricted Spending Policy Spending Rate Underwater Endowments Trailing returns Asset Classes: U.S. Equity Global ex-U.S. Equity Marketable Alternatives Private Equity Real Assets Global Fixed Income Cash & Equivalents

26. List of Terms Operations Funded Aid Unfunded Aid Budget Relief Budget Enhancement Top-Line Revenue Tuition Discounting Expenditure per Student Net-Present Value Revenues Expenditures Transfers Soft Money Sponsored Research Revenue-Driven Costs E&G Funds Cost per Dollar Raised Maintenance Reserve Funds

27. List of Terms Miscellaneous AUDITS: Unqualified Opinion Management Letter Deficiency in Internal Control Material Weakness Consumer Price Index (CPI) Higher Education Price Index (HEPI)

28. The Business of Higher Education Fundraising : Understanding the Basics Tom Jennings, Vice President for University Advancement Florida State University James R. Bullock, Vice President for University Advancement Queens University of Charlotte Nashville, Tennessee – February 15, 2016 CASE District III