Queensland University of Technology Brisbane, Australia Modernising Charity Law Day 3: Saturday 18 April 2009 Policy Strategies to encourage philanthropy What Works, Why and at What Cost? MATCHING STRATEGIES Dr Daniel McDiarmid CEO Asia-Pacific, Global Philanthropic Email: d.m@globalphilanthropic.com
Matching Strategies are not all the same. The primary distinction is the source of funds. On this basis we can distinguish between Government matching, Donor Matching, Corporate Matching, and Institutional matching and most recently, stranger-on-theinternet matching. I will explore each of these, as well as the related techniques of challenge gift, seedfunding and a technique that might seem like the opposite of everything you have ever learnt about fundraising, the technique of giving the money back. Government Matching I will start with government matching programs. These have been most obvious in higher education Government matching programs are government initiatives to encourage donations to institutions by matching them with public funds. In May 2004, a task force report entitled Increasing voluntary giving to higher education (to become known as the Thomas Report, after the chair Eric Thomas) recommended that There should be a matched funding scheme to support institutions capacity building for effective fundraising and that consideration should be given to following this with a matched funding scheme for donations. i One member of that panel, Sir Peter Lampl, was Chairman of the Sutton Trust, and in that capacity commissioned a report on the effectiveness of matching gifts. This Report was published in December 2004. It examined matching gifts programs in USA, Canada, Singapore and Hong Kong. It reported the following ii (paraphrased) Matching programs were widespread, including 24 states of the USA, in addition to provinces in Canada, and also Singapore and Hong Kong. Matching gift programs have been effective where the philanthropic culture and practice is reasonably mature: and to kick-start changes in individual support for education. Where matching gift programs are used to kick-start support, they have been usefully time to coincide with other incentive changes such as greater government investment and/or tax changes. They have not been associated with reductions in levels of government support. Matching schemes can be tailored to different kinds of institutions, new, old, large, small, etc. The matches do not have to be uniform. For example, Singapore has sometimes offered different match ratios for support to different institutions. Matching gift programs were effective in increasing the level of investment from the public, and so represented an excellent return on the government spending. They helped some universities meet and exceed their campaign goals. Some characteristics proved to be important: short period of time for the match (even if this is extended), thoughtful detail about the eligibility of donations, minimum and maximum levels of matching, and of course, the matching ratio. At this time, most matching scheme for higher education had been for building endowments or for increasing scholarship funds. 2
This fundraising aid was most effective when government put up sufficient funds to make it worthwhile, when the economy was robust, and when institutions had the capacity to make best use of the opportunity. As a result of this information, and with the personal drive of Tony Blair, the UK Government did invest in the capacity building of English universities, and then at the start of 2007 announced 200million pounds to provide for a 2:1 match to gifts to universities. There has been some interest in Australia iii on establishing a similar scheme but government response has been half-hearted and ineffective. The Higher Education Endowment Fund (HEEF) documentation around recognition of philanthropic support was completely unworkable. The public servants simply refused to put it in the legislation and just kept their heads down until the government changed. The completely unworkable element was that a donor had to commit irrevocably to donating funds, before the university could make application to the government for HEEF funding, and there was no certainty that a HEEF funding application was going to be unsuccessful. The Education Investment Fund arrangements are different but no better in this regard. The recent report into higher education, the Bradley Report rejected the idea that government should help universities build fundraising capacity (as the UK did as a precursor to the matching strategy), and has recommended another ill-conceived request for matching strategy. iv Recommendation 39 That the Australian Government provide funds to match new philanthropic donations received in the sector as a means of stimulating an additional revenue stream from this source with the cost capped per institution, and in total at $200 million over three years. It is ill-conceived because there is currently no agreement on what constitutes a donation to a university; much less agreement on what will constitute a new donation (is a scholarship renewed each year, new?), and the lobbying for the capping formula is would not be pretty. As to Quantum is $200 million enough? No one knows. No one knows what is being donated to Universities today v. But there is hope in this regard. Surely any matching gifts scheme would start with a baseline measurement of the current levels of donations to universities, so that Government could measure the effectiveness of the matching program. In the absence of a government matching gift program (supply side) we have seen effective pressure for a matching gifts program from donors and institutions (demand side). When institutions asked The Atlantic Philanthropies for support, sometimes the answer was yes, on the condition that government match the amount we contribute. Here in Queensland, after the first couple of times the state government faced this irresistible offer, they established a formal Smart State Grants Scheme to consider such requests. 3
A final word on Government matching: Singapore has run a very effective matching gift program for higher education, with variable ratios, emphasis on endowment, limited time periods combined with double-tax deductions, and anyone one interested in matching gift strategies would do well to make a close examination of Singapore s success. Donor Matching On an individual level, this has been a staple of personal solicitation technique since the 1960 s. I think this cause is terribly important, I am going to give $10,000 to it, and I would like to ask you if you would do the same. It might be effective to say, Mrs Jones will match all gifts to the School up to $1million, but as the Sutton Trust recognised, matching programs are most effective when timelimited. It would be more effective to say Mrs Jones will match all gifts to the School up to $1million that are received by the school by 30 June. New Zealand has seen several expatriate citizens put up matching gift incentives. These have been in the region of $1million to $5million. Corporate Matching The number of corporations matching employees gifts has been growing in the Asia Pacific. In Australia many more companies joined after the introduction of workplace giving. Workplace Giving provided a mechanism by which they could clearly see the employees giving and the matching mechanism was pretty straight forward. The expansion of Charities Aid Fund from the UK to Australia with their promotion of workplace giving and corporate giving also made a difference. Global corporations like BHP Billion now offer their matching gifts program to staff everywhere. Institutional Matching It seems that the temptation to say to donors If you fund half the project, we will fund the other half? has been too great to resist. A number of Universities make offers like this. This offer makes the best sense when the project involved is an endowment for something the University will always want, such as a professorial chair in physics. It is always wise in fundraising to ask only for important projects. This is particularly important if your institution is offering to pay for half of it. Stranger on the Internet Matching One of the innovative on-line fundraising techniques used during the Obama election campaign was the ability to list your gift as a match to another gift. Like many other techniques used in that campaign, it helped build solidarity and community amongst supporters as well as increasing the total contributions. I think we will see much more of these on-line matching schemes for causes that have the capacity to reach large numbers of people. 4
Challenge Strategy A related strategy is the Challenge Gift. Perhaps in response to a request for a million dollars towards a ten million goal, a donor might respond. I tell you what; if you get to $9million I will give you the last million dollars to reach your goal. We have seen very little use of this in the Asia Pacific, where donors tend to focus on what is to be accomplished with the money rather than the campaign goal, but with the number of large institutional campaigns that are being planned, perhaps we will some use this strategy. Seed funding In conclusion I draw your attention to two other strategies that are often overlooked. The first is seed-funding. This has been standard practice in fundraising campaigns -- launching the campaign publicly only when half the funds are already promised. This will increase the prospects confidence that this challenging task is achievable. There is another use of the seed-funding idea. A field experiment with direct mail examined whether seed funding made a difference. vi The request was similar to the following. We would like you to give towards equipment costing $x. We already have obtained funds to cover y% of the cost. They found that the total donations increased with the level of seed-funding provided. Refund the money The same field test examined whether it would make a difference to offer to refund the donations if the target was not achieved. They found it did. The offer to refund the donation increased the total donations made, but not as much as providing seedfunding. I hope all these techniques from matching funds, through to the offer to give the money back, prove useful in raising funds for your important work. i Task Force Report to Government: Increasing voluntary giving to higher education, Department for Education and Skills Publication Centre, Nottingham, UK. ii Select Government Matching Fund Programmes: An Examination of Characteristics and Effectiveness, December 2004 iii Increasing Private Support for Australian Universities BHERT Position Paper No 13, December 2006. iv Review of Australian Higher Education Report v See Global Philanthropic Special Report on Australian University Revenue at http://globalphilanthropic.com/images/downloads/gpspecrep20081.pdf vi JA List, D. Lucking-Reiley, The Effect of Seed Funding and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign The Journal of Political Economy; Feb 2002, page 275 5