Gift Opportunities for Libraries: from Immediate Impact to Last Legacy

Citation

Rochester Leighty, G. (2003), "Gift Opportunities for Libraries: from Immediate Impact to Last Legacy", The Bottom Line, Vol. 16 No. 3. https://doi.org/10.1108/bl.2003.17016cab.002

Gift Opportunities for Libraries: from Immediate Impact to Last Legacy

Edited by Gwendolen Rochester Leighty, Development Officer, Smithsonian Institution Libraries, Washington DC, USA

Gift Opportunities for Libraries: from Immediate Impact to Last Legacy

Keywords: Fund-raising, Development, Libraries, Philanthropy, Gifts

One of the top challenges any library administration faces is how to ensure that its priorities are funded at an adequate level. This requires maintaining relationships that ensure ongoing traditional sources of support, likely from your college or university allocations and, if your organization is government-supported, from annual appropriations from the state or other government agency. In this day and age, it also requires attention to attracting new sources of support, most likely from the private sector, and to enhancing your current private sector relationships to encourage ongoing giving to the library. Whether or not your library is in a fund-raising campaign, there are bound to be important annual needs for the library that only private sector support can provide, as well as a number of longer-term strategic goals that must be underwritten with private funds. Thus, it is in the library's interest to have a good sense of what private funds are needed to fulfill the library's goals, and to develop a set of gift opportunities that match the library's needs in a way attractive to potential donors.

Gift opportunities for libraries span a broad spectrum. The simplest gift is, of course, an unrestricted gift, one that can be spent on whatever the library administration chooses. Other gifts are also very straightforward: libraries always need funds to buy books, serials, and other library resources. Gifts to name a new library space, preserve a specific collection, or purchase equipment, for example new computers or imaging cameras, are also easy to explain, as are gifts to fund an outreach program, train students on using new technologies, or mount an exhibition of library materials. Still others may be more complex, such as a gift to establish a "center for new initiatives", or to support a multi-phase digitizing project. The one constant about library gift opportunities is that there is no set list of all possible gifts. While gifts to support acquisitions, preservation, technology, and programs are common to most libraries, each library will also have its own priorities that may be, if not unique, tailored specifically to that library's goals. For the Smithsonian, as a set of museum research libraries, funds for rare book exhibitions are probably a higher priority than they are for most college libraries, as one example.

In addition to devising a list of your library's gift opportunities, you will also need to know which giving methods can be used to make each type of gift. In most cases, libraries tend to focus first on seeking spendable (often called "current use" in advancement lingo) gifts –’those that are received and spent within a fairly short period of time. These gifts are the meat and potatoes of any development program, and sustain the library from year to year with additional operating funds.

Advantages of spendable gifts are obvious: they can be used right away, the donors can receive tax deductions for their gifts in the year in which they are made, and their full value counts towards any annual fund-raising goal you may have. For example, Mr Smith gives your Music Library a gift of $200 to buy books. You send him a thank you letter immediately with a receipt for $200, buy books worth $200, and put a bookplate in each one that says "gift of Mr Smith", and your fund-raising goal for the year is increased by $200. Your Music Librarian is now happy, Mr Smith is now one of your donors and friends and will be included in whatever recognition activities you have for your donors, and you have moved closer to your annual goal. Add your spendable gifts of all sizes together and you have accomplished a lot. They are critical to your success.

Spendable gifts, however, have one drawback: they must be sought again every year. Naturally, it is in your interest to do this, as most donors only make spendable gifts. They can be sizeable as well as modest, and you will (we hope) be reaching new as well as established donors each year. Yet, as a whole, they are uncertain. It is hard to predict how much money you will raise from spendable gifts each year, and thus, how much you have to count on to support your priorities. You can make viable estimates based on previous years, but the effects of the economy and donors' personal situations, as well as, frankly, how well you do at asking for gifts, can make a large difference from year to year in how much you raise.

There are two other types of gifts that you should also seek for your library to balance your fund-raising program and to help stabilize your fund-raising revenue stream, as well as your long-term funding pipeline. These are endowments and planned gifts. Both of these types of gifts can significantly improve your overall fund-raising totals and offer choices for certain donors that are far more attractive than simply making a spendable gift.

A donor-established endowment is a sum of gift money invested to earn interest (usually according to the investment policies of the institution's governing board). Endowment gifts must be agreed upon by both the institution and the donor and created by a written document that legally establishes the endowment as a separate fund in perpetuity (e.g. forever!). Endowments can be "true" endowments, for which it is specified in the legal establishing document that only the annual income from the endowment, not the principal, may be spent, or they may be "quasi" endowments, where there is no legal specification that only the interest income will be spent but the institution chooses to operate the endowment this way barring unusual circumstances.

Needless to say, creating an endowment is not something to be undertaken lightly, since it will be around forever. Library endowments should be established only for purposes that will remain priorities of the library indefinitely, and the gift agreements should allow for a shift in the purpose of the gift if the original gift purpose ceases to exist at the library. This can prevent a situation in which a library has an endowment for which the income cannot be used because the original gift purpose has disappeared (e.g. you have an endowment for acquisitions of photography books but you no longer have a library that collects these or a university program that needs them). The library usually works with the central Development Office and possibly the Office of the General Counsel and the Office of the Treasurer at your institution to draft endowment gift agreements, and the donor may also consult with their financial advisers as the gift is being negotiated.

There is likely a minimum funding level for your institution at which separate named endowments can be created. At the Smithsonian, it is $25,000, although many colleges and universities have a $10,000 minimum. Most institutions also have some form of "payout policy" governing the amount of the endowment's earned income that can be spent each year. Prudent institutions reinvest a portion of the earned income from each endowment to guard against annual market fluctuations and the effects of inflation. Thus you will probably have about 4-5 per cent of the endowment's value each year as spendable income, regardless of how much the endowment actually earned that year. This would give you approximately $1,000-1,250 to spend annually for each $25,000 endowment.

Once you have determined which of your gift opportunities lend themselves to being funded by endowments, you have something to offer donors that many find very appealing. Establishing an endowment is a lasting way for a donor to match his or her vision and personal interests with the library's needs and mission. Endowed funds can be named according to the wishes of the donor, and are excellent ways to honor or memorialize a loved one. They can also be added to at any time, by anyone, in any amount, once they are established.

Many libraries have named collections endowments that recognize donors' family members or themselves. Other endowments can be established to fund internships or fellowships, collections preservation, or at larger amounts a named librarian's or director's position. Endowed funds can also support technology initiatives or the maintenance of a lab or reading room in the library. Best of all, endowments give you two things permanently: an annual income stream that you can count on, and an annual excuse to report to the donor on the use of the funds and thereby keep them engaged with your library.

The third major type of gift method is a planned gift or, in brief, a gift that is made today with the promise that the library will receive income from it in the future. These are sometimes called deferred gifts. There are many kinds of planned gifts, and going into great detail would require another article. For the purposes of this article, suffice it to say that planned gifts are important to the future health of your library, for they provide a source of future gifts from donors who may very much want to support you, but cannot make an outright gift for either an expendable purpose or to create an endowment now.

The simplest form of planned gift is a bequest. Although bequests are not irrevocable (the donor can change their mind and will at any time), once a donor makes a bequest intent known to you, it is unlikely they will alter it unless they are treated badly by the library or the institution, or the donor's circumstances change dramatically. Bequests can be made for any gift priority of the library, and simple bequest language for a donor to use should be available from your institution's general counsel if you don't already have it. Endowments can be and often are funded by bequests.

Other types of planned gifts include pooled income funds, charitable gift annuities, various types of trusts, and gifts of real estate or life insurance. All of these may have substantial tax benefits for the donor depending on their personal situation, and most allow the donor to make a much more substantial gift than they might otherwise be able to make.

Most also generate income or some other benefit during the life of the donor, and sometimes their beneficiaries also. Setting up planned gifts can be a bit more complex than accepting a spendable gift or creating an endowment, but most institutions have professional staff within the central Development Office or the General Counsel's Office, or at least have an outside financial adviser to consult, who can help you and the donor effect such a gift. It is well worth exploring what planned gifts your institution generally accepts and then deciding which of your donors and prospects to ask for one.

Note that some institutions, especially smaller ones, do not generally accept certain potentially difficult gifts such as that of real estate. However, you can easily find out what your institution can handle and go from there.

Planned gifts, in addition to benefiting the donors, will also benefit the library greatly. First, you will build a list of donors who are virtually guaranteed to be interested in you from the day they make the gift throughout their lives. As well as fleshing out your donor list, these individuals will be among your most important advocates in the community. They will come to your events and speak proudly of their support for you; they will often let you publicize their gifts in your newsletter to inspire others; and if your institution has a "Legacy Society" to which all planned gift donors become members, they will talk about the Library to their fellow members, thus widening your potential circle of support.

Second, planned gifts are your gift to your successors as well as to yourself. Many planned giving donors are over 65, although not always, and their gifts will be realized over time ranging from a common 4-7 years to possibly 10 or 20 years, or even more. Thus, they are not usually appropriate for funding immediate or short-term needs, but can be wonderful gifts for ongoing and always needed purposes. You may be long gone before a planned gift you recruited is realized, but you can take satisfaction from knowing that you have created a future funding pool that will feed your library a stream of welcome income far beyond your tenure.

To sum up, as library directors you should invest time in doing two basic things to enhance your fund-raising ability: first, you should develop a list of gift opportunities that meets the needs of the library and is appealing to donors; and second, you should be sure you understand the three main types of giving methods – spendable, endowment, and planned gifts – and seek all three types to broaden your donor base and create a private sector funding stream that lasts over the years. If you do these two things, you will achieve better success in your fund-raising program and ensure the fiscal health of your library, both now and for the generations to come.

Gwendolen Rochester LeightyDevelopment Officer, Smithsonian Institution Libraries, Washington, DC, USA