Most retirement communities either have a philanthropy operation or they want one.
When they hear vignettes about 3:1 return on investment, six-figure gifts, seven-figure bequests, endowments and predictable new revenue streams, management sits up and takes notice. Two major questions frequently asked are: What is the investment required to experience those results? And how can I tell whether our expectations are reasonable — are we on track, and how do we compare?
Fortunately, we now have a body of objective research to inform those questions.
Philanthropic consulting firm Marts & Lundy built on earlier surveys and reports from LeadingAge Virginia, Giving USA and others to launch the Philanthropy in Aging Services Study, or PASS, the most comprehensive set of data to date of our industry’s growing philanthropic practices. With research gathered every other year, 2023’s edition spanned the pandemic era, when the aging services sector featured prominently in the national consciousness. Philanthropy rose to the crisis.
The 2023 PASS data draw from 257 sites across 41 organizations in 20 states across the continent. Fifteen of the organizations are single-site, and 26 are multi-site, ranging from two campuses to 59 campuses. Most participants are continuing care retirement communities, also known as life plan communities.
The majority of participants, 62%, organize their philanthropy efforts in a departmental model, requiring smaller staffs and expenses. The remainder work through a foundation, a separate 501(c)(3) entity that is more complex but potentially yields more robust results. The median staff size is 2.25 full-time equivalents, with an emphasis on major gifts, planned giving, annual cycle giving and administration.
By far, this is the most comprehensive study of its kind. The findings were encouraging.
Why donors give
First, why do donors give to aging services? Just as with any nonprofit, they are inspired to participate as volunteers and donors by the opportunity to make a difference and a connection to the organization’s mission. The most common causes, according to the PASS report, in order of popularity, are benevolent care, capital needs, employee scholarships and support, programming for residents, endowment and resident-directed priorities that enhance the quality of life for their community.
Campaigns are increasingly common, with 59% of respondents stating that they are currently in or have recently completed a campaign. The smallest campaign was $213,000; the median, $3.8 million; and the largest campaign was $100 million.
Sixty-five percent of participants report increasing their endowments. Compared with the 2021 PASS report, the median endowment holdings surged from $8.1 million to $14.1 million (75% increase), whereas the largest endowment only grew from $87 million to $90 million (about 3.5%). This is a marked increase from the 10% of organizations reporting endowment holdings in the 2017 LeadingAge Virginia study, and it indicates a growing sophistication in the sector.
Residents themselves are the largest donor group. In some organizations, almost 100% of the donors are residents; in organizations that serve the neediest elderly, that number may be closer to 0%. The median among respondents is 57%, followed by nonresidents (such as family members and staff members), at 10%. Foundations, corporations and others are at 3% or less. Given that most residents are in their 80s or older, immediate impact and legacy giving have strong appeal.
A $1 million divide
The PASS research seems to demonstrate a million-dollar divide: there are notable differences between philanthropy operations that raise $1 million or more annually versus those that do not. Seventy-four percent of the organizations submitting data to PASS are hitting this mark.
The amount of funds raised per independent living unit is $5,289 for those raising more than $1 million, compared with just $1,183 for those raising less. Overall, the median funds raised per independent living unit sits at $3,553. That median is higher for single-site organizations ($4,416) than multi-site organizations ($2,934).
The million-dollar threshold appeared again when comparing median fundraising expenses. Organizations that topped $1 million raised also spent just more than $453,000, compared with approximately $241,000 for those raising less than $1 million. The cost-per-dollar-raised metric for the over-million-dollar club is just $0.20, in sharp contrast with organizations raising less than $1 million, at $0.39 per dollar raised.
What does this mean for return on investment? The entities raising more than $1 million experience a median ROI of $3.97 for every dollar spent, compared with $1.57 for those raising less than $1 million.
Another way to look at this: Investing in a great philanthropy operation, big or small, is a revenue center, not a cost center. The median staff of such operations nationwide is just two fundraising professionals, but the revenue per fundraising staff is $803,580. After costs, the net is still $697,207. Where else will you get that kind of return?
When looking at the costs to raise money, multi-site philanthropy operations need much more than single sites — a $774,437 median compared with $271,382. Multi-site organizations, however, raise much more than single-sites — a median of $3.12 million versus $1.37 million.
Does 100% board giving matter? Without a doubt. For those organizations with boards that participate completely, the median amount raised is $1.82 million, compared with $1.43 million among those with less than 100% board participation.
The 2023 PASS project added questions to learn more about “transformative” gifts, those donations that organizations self-define as much larger than usual, game-changing contributions. To demonstrate the relative nature of “transformative” gifts, the largest reported gift of this class is $23 million; the smallest is $150,000; the median $1.95 million.
More than half of the respondents said that those gifts take more than three years to develop, so they require patience and deliberate building of relational trust. A median of more than 60% of agencies report that those gifts came from residents themselves, with almost 70% in the form of bequests.
3-year ramp-up timeline
Not in the PASS data but relevant for new philanthropy operations and organizations considering a venture into this realm, the fundraising profession sets expectations on a three-year ramp-up timeline:
- Year One of a nonprofit’s professional fundraising effort focuses on infrastructure-building: visionary leadership, the case for support, developing volunteers, hiring and training staff members, selecting software, and “annual cycle” fundraising strategies. Successful evaluation of those strategies is not only measured in dollars; the strategies are designed to raise awareness and attract new donors. Annual cycle strategies include direct mail, events, online giving, short campaigns and most grants. Obviously, you cannot raise millions of dollars — net expenses — from bake sales, golf tournaments and galas. Those strategies are not intended to net large revenues due to the high cost of expensive employee time. Ironically, the greatest temptation in fundraising is to bet our strategic resources on those low-return methods.
- Year Two is when larger gifts typically start to materialize — defined as 1% to 5% or more of the annual goal. Those gifts come almost exclusively from relationships with individuals who are deepening their involvement with the organization’s mission. Select members of the philanthropy team are dedicating the majority of their time to visits with individual donors.
- Year Three of philanthropy operations is usually when relationships and trust are strong enough to merit advocating for planned giving. Gifts from a person’s estate often are the largest and most meaningful gift a person will ever make.
This timeline is helpful but is based on the wide scope of the social sectors. In aging services, anecdotal evidence indicates that most annual cycle strategies are not worth the time and should be critically evaluated. Since, in most cases, residents make up the largest part of our donor base, we should focus intensely on relationship development with them, providing philanthropic opportunities with immediate impact.
A final takeaway is the essentiality of a professional, experienced staff, especially in organizations that are just embarking on their philanthropic journeys. Finding an experienced philanthropy professional with a passion for older adults is not easy, and because this combination of specializations is rare, such professionals are not inexpensive, either.
Wise managers know that the set of skills needed to start a philanthropy operation or take it to the next level is not for entry- or mid-level candidates. But the evidence shows impressive results absolutely are worth the investment.
Marts & Lundy’s Philanthropy in Aging Services Study is available as a free download. Its work results in nationwide comparable data, and the industry appreciates what is becoming a meaningful longitudinal study.
Dr. Z. Allen Abbott, CFRE, is vice president of philanthropy at Baptist Homes Foundation, a 501(c)(3) nonprofit charitable organization that is part of the Baptist Senior Family, Pittsburgh.
Irina Thompson, CFRE, is a consultant at Marts & Lundy, a consulting firm serving the nonprofit sector.
The opinions expressed in each McKnight’s Senior Living guest column are those of the author and are not necessarily those of McKnight’s Senior Living.
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