The other day, a client asked if the major gifts she raises should count toward her annual fund goal. At first, I was confused by her question. But it reinforced one of the more common misconceptions about raising major gifts.
Common Misconceptions About Raising Major Gifts
It turns out that the woman who wondered whether major gifts should count toward her annual fund (along with the bookkeeper at her organization) was confusing restricted gifts and unrestricted gifts.
This isn’t as uncommon as you might think.
Similarly, many people believe major gifts are only raised during a capital campaign (which is untrue as well). That’s because many people mistakenly believe that major gifts are only raised when you ask for specific “things” or purposes (in other words, restricted gifts).
So, the answer to the original question was, yes! Both restricted and unrestricted gifts can (and should) count towards your annual fund.
And yes, you can raise major gifts for your annual fund, as well as for a capital campaign.
Restricted Gifts vs. Unrestricted Gifts
Restricted means that gifts are designated by the donor for a specific purpose.
Unrestricted funds can be used for any part of your budget… often needed as operating funds.
You are likely to raise both restricted and unrestricted for your annual fund. The more unrestricted money you can raise, the better. This means asking donors for gifts to support your organization wherever it’s most needed. Unrestricted money often goes to salaries, rent, utilities and other necessary functions to run your organization.
Your Annual Fund vs. Capital Campaign Money
The annual fund is whatever you raise over the course of the year, which goes towards your operations. For example, rent, utilities, salaries and ongoing program costs. Annul fund money is often raised through events, grant writing, direct mail, and major gifts.
Capital campaign money is used for long term needs. A capital campaign is necessary when your organization is ready to make a leap to the next level. It often involves a physical building — renovation or new construction. It can also involve an expansion of new programs or services, as well as endowment.
Either Way, You Should Be Raising Major Gifts
Whether you’re raising money for your annual campaign or a capital campaign, you should be raising major gifts.
These are fundraising basics, but it’s necessary to recognize that not everyone at your organization (including board members) may understand the difference between capital and annual, or restricted versus unrestricted.
Many people do think major gifts are only raised for capital campaigns. In reality, major gifts are the best way to boost your annual fund.
If you’re not raising major gifts yet, what’s holding you back? Let me know in the comments.
Thank you for the informative clarification. It’s very helpful. Everything is on point. Great job!
How do you make the case for unrestricted major gifts? How do you move someone who makes an annual unrestricted gift of $1,000 to make an unrestricted gift of $5,000, $10,000, $25,000 or more?
We used to run an annual auction which raised money for mostly college scholarships. However, it is a lot of work and we didn’t have enough volunteers to keep it up. Too few were doing too much of the work, so we quit. Now we have small programs where we charge enough to recover costs and some overhead, but need another source to raise more with less work. We need ideas!
It’s my understanding that events should not be looked at as money-making endeavors – they are more for prospecting – a tool to identify people who have an affinity with your organization and a willingness to give. The real fundraising takes place after the events – with nurturing relationships with those who participated. Identifying the high rollers who need one-on-one cultivation vs those who you could include in some annual appeals or more small direct mail solicitation. But essentially it’s all about relationship building and fostering these relationships through contacts.