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pledge term beyond 10 years and NPV

  • 1.  pledge term beyond 10 years and NPV

    Posted 12-20-2019 10:11 AM
    All,

    We have a family foundation making an 8-figure pledge payable over 25 years. (They have a well-established history with us.) We've agreed for our campaign that we would extend our five-year limit to 10 years for the face value of the first $XXM coming in. Years 11 - 25 would be booked at Net Present Value, to be provided to us from our treasurer's office. 

    How do I record and count years 11 - 25? Do I do one pledge for the total of $FV due 2020-2029 and $NPV due 2030-2045? Or should they be two separate pledges? And then how do we record the payments for years 11- 25 that come in at face value? Would it be a pledge payment for the $NPV and new business for the difference? Or something else entirely? 

    Many thanks for guidance as we head into holidays/year-end!


    ------------------------------
    Jodie M. Ralston
    Executive Director
    Advancement Services
    T 315.443.1718 F 315.443.2874
    jralston@syr.edu
    640 Skytop Road, Room 241, Syracuse, NY 13244
    giving.syracuse.edu
    Syracuse University
    ------------------------------


  • 2.  RE: pledge term beyond 10 years and NPV

    Posted 12-20-2019 10:31 AM
    Jodi, you are treading into unfamiliar territory for many.  Booking pledges of this length is very unusual.  However, discounting to net present value isn't!  Quite honestly, though, every time I have encountered this at an organization, the "how to" has been dictated by the Business Office.  Furthermore, there is the question of donor recognition.  Are you going to recognize the donor at the full face value, or the discounted amount?  Lastly, there is the issue of just how flexible is your CRM?!

    One constant I have observed is that since this is one pledge, you record one pledge with one pledge date - not two pledges with two pledge dates.  Then depending on your CRM you record the recognition amount in one field and the discounted amount in another field.  Thirdly, you record payment schedules equal to the amount the donor is going to pay.

    The main question is whether your system will allow you to essentially "overpay" the pledge - as the total you will receive is going to exceed the counted amount.  Many CRMs will allow this.  If yours does not, you may want to call the vendor to seek ideas to accomplish your goals.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987






  • 3.  RE: pledge term beyond 10 years and NPV

    Posted 12-20-2019 11:05 AM

    Thank you John! Yes, we're on BBCRM, so there's a lot of flexibility in that regard.

     

    We'll be recognizing the donor for the full face value, which will be what we put in our recognition amount, and then we will book one pledge for the NPV total as provided by the treasurer. I'm glad that is the constant as it's definitely the easiest. Since the overpayment was already recognized in the Full Face Value, that must just go on as a regular cash flow transaction and not new business in our CRM, regardless of how the business office records it on the GL. I think that's where I was getting myself into a confused state.

     

    --Jodie

    Jodie M. Ralston
    Executive Director, Advancement Services
    Advancement and External Affairs

    T 315.443.1718  F 315.443.2874
    jralston@syr.edu

    Syracuse University Forever Orange The Campaign for Syracuse University