According to a report released by the National Conference of Bar Foundations at its Midyear Meeting in February, bar foundations and other legal foundations significantly impact their communities through grant-making and other programs. However, the report indicates that many foundations could pursue additional avenues for growth, including diversifying revenue streams, increasing staffing, and improving grant reporting.
In 2008, NCBF commissioned ALPS Foundation Services to conduct a national survey of foundations. Part I of the resulting National Conference of Bar Foundations Report on "The State of Bar Foundations" Survey, released last August, showed that foundations distributed more than $210 million nationwide in 2007 (see "Report shows bar foundations significantly impact their communities," Bar Leader, March-April 2009, page 15). The full report—Parts I and II—is available at www.ncbf.org.
The survey, the first of its kind, was sent to 269 foundations in 2008. While Part I was brief, Part II was comprehensive. Among all bar foundations and other legal foundations nationwide, 27 percent responded to Part II and its wide array of questions about foundations’ revenue streams, expenses, fundraising activities, grant-making activities, and board and staff composition. The fund development techniques, board and staffing possibilities, and grant reporting described in the report provide food for thought for foundation boards and staffs as to how to better achieve their missions and increase their impact. In this article, we’ll explore some of Part II’s highlights.
Revenue and fundraising
All responding foundations that did not receive interest on lawyer trust accounts revenue reported that they engaged in one or more of a variety of fundraising activities. By contrast, 80 percent of IOLTA foundations reported not engaging in any fundraising activities at all. Nearly every responding IOLTA foundation is actively engaged in efforts to increase IOLTA interest rates.
For both types of foundations, the most popular and successful method to generate revenue was income earned from investments. Nearly 60 percent of foundations surveyed receive earned income, which accounted for nearly 30 percent of foundation income.
After IOLTA and earned income, the biggest moneymakers for foundations are cy pres awards and fundraising events. Fundraising events are fairly common, with 40 percent of responding foundations engaging in one or more event each year. They yield a $2 to $1 return on investment, on average (in other words, they bring in $2 for each $1 spent). Metropolitan area foundations had the most success with fundraising events, specifically with balls. The same events hosted by smaller and rural bars generated less income.
Cy pres awards, on the other hand, are not frequently utilized by foundations. Cy pres awards happen most often in class-action lawsuits when plaintiffs fail to claim their awards. The court may distribute the residual funds to a bar foundation or other legal foundation. Less than 6 percent of foundations attempted to generate revenue through cy pres awards. However, those that did generated significant income from the awards—as much as $2.75 million for one foundation.
Half of foundations responding to the survey solicited funds through dues checkoffs, which are foundation-specific line items on bar members’ attorney license or bar dues statements. Most dues checkoffs for survey respondents are voluntary, with the foundation suggesting an appropriate amount. Despite its popularity, dues checkoffs accounted for only 5 percent of foundation income.
Fellows programs remain popular—80 percent of foundations with these programs continue to solicit new members. On average, foundations have 850 fellows and require a $1,300 donation over a five-year period. This revenue source provided 8 percent of the total income for foundations and was most common in state and county bars.
Surprisingly, two-thirds of responding foundations do not actively solicit funds from the legal community. Only 30 percent of all foundations sent one or more direct mail pieces. No foundations solicited for funds electronically. Only 10 percent undertook a law firm campaign or solicited law firms for funds. These percentages are true across all types and sizes of foundations. The result is a shockingly low $35,000 legal community donation per foundation, which translates to an average of $1.60 per lawyer.
On the other hand, those foundations that did solicit lawyers and law firms for donations had very high returns. The average donation per lawyer skyrockets to $35 when lawyers are actively solicited for donations. And for some foundations that engaged in law firm campaigns, the campaign generated 50 percent of their annual revenue. These figures indicate that foundations have much potential to generate revenue from traditional nonprofit solicitation of stakeholders. The question is whether foundations are appropriately staffed to undertake additional fund development activities.
Staffing
The majority of foundations responding to the survey do not have staff and are run entirely by a volunteer board of directors. As foundations contemplate undertaking additional fund development activities, the key concern becomes who will, for example, send a direct mail piece or meet with potential donors or contact judges about awarding cy pres funds to the foundation.
The report shows that foundations with higher staff expenses also tend to experience better fund development and growth. This is an important consideration for boards: If the mission of the foundation is to improve access to justice, which the foundation accomplishes in part through grant-making, then the foundation should seek avenues to maximize the revenue distributed in grants. Many foundation boards question whether staff or additional staff will decrease or increase revenue; the survey indicates that staffed foundations tend to generate significantly greater income.
For example, the survey compared fundraising events undertaken by foundations with staff to fundraising events undertaken by foundations without staff. Foundations with staff engaged in three times as many events and raised more than four times the revenue from those events as foundations without staff. Staff that focus their time on fund development activities with a high return on investment often generate more revenue, allowing foundations to better achieve their missions.
Grant-making and reporting
Part I of the survey pointed out a discrepancy between the number of foundations with a primary mission to support law-related education programs and the funding granted to law-related education programs. Part II of the survey confirmed this initial finding. While 25 percent of foundations stated that supporting law-related education is their primary mission, only 2 percent of foundation grants went to law-related education programs.
This discrepancy is explained in small part by funding from foundations to foundation-run programs focused on law-related education. However, the question still remains whether foundations with law-related education as their primary mission adequately support that mission through their grants process.
The survey asked whether foundations require grant reports from their grantees. Only 40 percent of foundations require grantees to report back on the use of foundation funds. This lack of grantee reporting is problematic for a variety of reasons. First, it precludes the foundation from discovering the actual use of foundation funds, creating a lack of accountability and oversight. Second, many foundations use grantee reports to provide assistance, support, and feedback to grantees. Third, without reports, the foundation is unable to use statistics and stories provided by grantees to market and promote the work of the foundation and to better solicit additional funds.
Those foundations that do require grantees to report show an incredible impact. Only 10 percent of all responding foundations provided grantee information in the survey, and yet the numbers are staggering. Grantees reported that foundation funds allowed 535,000 people to be served through law-related education projects, 414,000 people to receive legal assistance, 50 organizations to stay in business, 87 programs and projects to continue, and 125 organizations to increase staff salaries or hire additional staff.
Are you doing all you can?
The NCBF survey and reports show the importance of foundations and their impact on communities. The report on Part II of the survey offers some possible avenues for growth for foundations nationwide, from improved fundraising in the legal community to accessing cy pres awards to increasing staff to requiring grantee reports.
In doing so, the report is intended to raise a question for foundation boards and staffs to ponder: Has your foundation maximized its potential? If not, the report can provide guidance on improving the performance of the foundation and its ability to achieve a mission vital to the health of the legal profession and of the citizens in our communities.