The Difference Between Annual and Capital Campaign Gifts

Difference Between Annual and Capital Campaign GiftsA Guide for Prospects and Donors

You may be clear on the difference between Annual and Capital Campaign Gifts, but can you explain the distinction to your prospects and donors in quick, clear and concise language? If not, here is your cheat sheet.

Annual Campaign

An Annual Campaign supports unrestricted operating expenses—part of your annual budget. Salaries and overhead are a part of what is covered (although hopefully allocated to particular programs as either direct or indirect expenses). This income ensures you can provide your essential programs and services. This fund has to raise money each and every year to keep your nonprofit sustainable. Note: Because it is a yearly gift, donors usually give this gift based upon their income.

Capital Campaign

A Capital Campaign supports larger expenses—usually restricted to physical plant and facilities— that come around once every 20, 50 or even 100 years. These are one-time expenses that may not occur for the foreseeable future. (These one-time expenses are often paid for by capital campaign pledges that span 5 years). Building renovations, major equipment purchases, and infrastructure overhauls would be included in a capital campaign. Note: Because this gift is a once in a generation gift, the donation will often be based on assets rather than income.

Endowment Campaign

An Endowment Campaign supports the annual budget but is created by larger, one-time gifts that are pooled together. Return on the endowment’s capital are often used as revenue in the annual operating budget or restricted to use for a particular program.. While return on investments vary from year to year, organizations currently tend to assume a 4-5% return based upon a 36 month trailing average. This translates into $40,000-$50,000 into your budget for every $1,000,000. Note: Endowment campaigns are often run in conjunction with capital campaigns so these gifts are also based on a donor’s assets.

Which campaign should donors support?

No nonprofit is looking for capital or endowment support at the expense of an annual gift.

And, hopefully, your donors will be able to support both.

Major gift prospects of a capital and/or endowment campaign can even be solicited for both gifts at the same time. How? “All of us at Organization YYY appreciate your annual gift of $5,000 a year. Your support enables us to offer free and reduced-rate memberships to those in need. And, we hope you will continue to give at that level, but we are starting this exciting capital campaign in which we hope you will want to participate. (Fill in details here). Will you join me in donating to our capital campaign with a gift of $50,000. Over five years, that would translate to a $15,000 gift, $10,000 to help create a new pre-school and $5,000 would continue your annual fund support. Could we count on you for a gift of $15,000 a year for each of the next five years?”

An annual gift, over a long-term donor’s lifetime, will almost always be worth more to the organization than a one-time gift.

If you are still a bit confused on the concept consider the following example to explain the difference. “Your donation to our annual fund is what we use to provide mentorship opportunities to hundreds of students each year, and our capital campaign will ensure the students have enough space to learn and grow.”

If you would like to learn how we can help you with your annual fund or capital/endowment campaign, email me today.

Read a case study on about the “Double Ask” by clicking here