Counting What Counts

“If you can’t measure it, you can’t manage it,” insisted the CFO, parroting what is often accepted as revealed wisdom and usually attributed to management guru Peter Drucker (although the Drucker Institute insists he never said it). And yet, this “what gets measured gets managed” sentiment persists despite its obvious defect, namely, “But what are we going to count?” No less than theoretical physicist Albert Einstein is said to have stated, “Not all things worth counting are countable and not all things that count are worth counting.”

Nevertheless, we in planned giving must hold ourselves and our programs accountable to our organizations and our donors. Doing that requires that we count … count something, but what?

Before we delve into an integrated approach to counting planned gifts as a component of all fundraising, let us acknowledge that determining the value of a specific planned gift can be quite difficult. Significantly different values can be calculated for the same planned gift depending upon the variables and methodologies used and the purposes for which the calculations are made. There are at least three different approaches to calculating the “value” of a planned gift, each designed for a specific purpose, and each capable of producing a different value for the very same charitable contribution.

• Tax Deduction Value – The deduction calculation is an estimate at a specific point in time (the date of gift) of the present value of the gift, which, while irrevocable, may not be fully usable by the organization until sometime in the future. It is calculated based upon formulae and factors set forth in the Internal Revenue Code, U.S. Treasury Regulations, and IRS guidance.
  
  
• Financial Accounting Value – Accounting rules based on Financial Accounting Standards Board (FASB) or Governmental Accounting Standards Board (GASB) standards are designed to provide comparability for financial statement purposes in the estimation of payment liabilities, asset values, and contribution income among multiple charitable organizations. Unlike the tax deduction calculation, accounting valuations are typically re-calculated annually.
  
  
• Counting and Recognition Value – Various standards may be used to determine the value of charitable contributions for the purposes of recording donor gift histories, providing donor recognition, and reporting fund raising totals. While these standards should be sensible and consistent, the organization has considerable leeway in designing and choosing standards for counting and recognition.

Both intuitively and practically, the fundamental measurement of success in fundraising is the total amount of cash received by the organization. The audited financial statements provide a precise measurement of charitable contribution receipts. However, financial accounting is only one dimension, one measurement of fundraising productivity. Donors’ giving rarely fits neatly into calendar or fiscal years, and sophisticated charitable gift plans (i.e., “blended gifts”) often involve current and future as well as revocable and irrevocable giving. For these reasons, a coherent and consistent system of gift counting – as opposed to accounting – is needed to provide a useful gauge of the full results of current fundraising activity. In addition, a coherent system of gift counting helps ensure appropriate recognition of donors who are likely to feel that they have made a significant contribution no matter the charitable deduction amount or what the financial accounting rules may dictate.

Some 30 years ago, the Council for the Advancement and Support of Education (CASE) developed standards to guide the counting of charitable contributions. Initially intended for educational institutions engaged in capital campaigns, the CASE standards have become an accepted framework for counting charitable giving across the fundraising sector.

In brief, the CASE standards suggest that charitable contributions should be counted in one of three categories:

1. Current Gifts – contributions that are available for expenditure by the organization in the near term, usually the fiscal year; formal pledges to be paid over a limited number of years are counted at full value
2. Irrevocable Deferred Gifts – contributions irrevocably committed to the organization but that will not become fully available for expenditure until sometime in the future; charitable remainder trusts and charitable gift annuities fall within this category
3. Revocable Planned Gifts – contributions where the donor (or others) retains the right to alter or eliminate the gift before the organization receives it; charitable bequests are in this category

The CASE standards suggest that organizations develop specific dollar goals for each of the three categories and measure success against fulfillment of each of the categorical goals, not merely the grand total.

We believe many organizations would be well served by a gift counting methodology built upon the CASE Standards to count and report planned gifts both internally and among prospective donors.

Counting planned gifts in overall fundraising reporting helps integrate planned giving into all aspects of fundraising, producing increased contributions for the organization and introducing new potential donors. Counting planned gifts is not a substitute for, and need not intrude upon, other fundraising. Rather, it is an enhancement of the overall fundraising effort generating new development activity, yielding additional revenue, bolstering the perception and credibility of the planned giving program, and enhancing the perception of the organization as worthy of increased donor support.