Good morning,
Our Foundation is discussing booking all annual fund pledges as a non-binding commitment. Below is a summary of the proposal points and implementation notes.
I am curious to hear if anyone else is doing this or if we have overlooked a point.
Booking annual fund pledges as non-binding gifts (1/6/22)
Issue: Currently, we book annual fund pledges as binding pledges in Advance. Suppose donors make pledge payments from a DAF, Foundation or another third party. In that case, it creates a tremendous amount of extra work and opportunity for error that can result in the donor's receiving a past due notice that's incorrect.
Additionally, the Foundation confirms that the payment is NOT related to a binding pledge to receive payments from a DAF.
Proposal: Book all-new annual fund pledges (starting now) as non-binding commitments (LOIs). Keep existing annual fund as currently booked.
What would change:
- No matter the source, payments would be booked against the scheduled payments, but no adjustments would be required to the "pledge."
- Foundation's balance sheet would decline pledge receivables over time as existing annual fund pledges are paid off, and newly booked ones were not recorded as binding pledges.
- Slight language adjustments on pledge forms.
- (What would remain the same:
- Tracking and forecasting of payments due would be visible as LOIs
- Payment reminders would still be sent
- The count of new pledges raised each year (already includes LOIs)
- Recognition and Stewardship levels
Benefits:
- While the gift administrator would still review gifts to make sure they were properly applied to the right donor and LOI,their time spent requesting and tracking adjustments to pledges and incorrect payment applications would be eliminated
- UAS would save time on adjustments and reduce errors made when pledges are inadvertently not written down by third party payment amounts
- Donors would not receive inaccurate past due statements created because a pledge was not written down by the amount of a third party payment. DOs/gift administrators would not have to spend time following up on those frustrated donor calls.
- Aside from eliminating errors, this is invisible to Donors' experience.
Concerns:
- Potential that donors might feel less obligated to pay (My hypothesis is that donors continue to pay out of a sense of honor and commitment, not because of a legal obligation. In reality, the Foundation would not pursue someone legally over an pledge. We could compare default rates of binding vs non-binding pledges to see if there's a difference if we start to see a problem.)
- Others?
Thoughts?
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Cindy LaVarra
Sr. Director of Development Operations
The College Foundation of UVA
cindy@virginia.edu------------------------------