What to do about unfulfilled pledges?

Dear Kim:

We were at $950,000 toward a $1,000,000 capital campaign goal and feeling pretty good about ourselves when we learned that a donor who is giving us $75,000 is not going to be able to pay.  He signed a pledge form and a lawyer on our board says a signed pledge is legally binding and we can sue him for the money, but most of the board is reluctant to do that.  $75,000 doesn’t sound like a lot in the scheme of $1 million, but the loss of this gift has taken all the wind out of our sails, and now we don’t seem to be able to raise even the final $50,000 that we knew we needed, let alone make up this gift.  What should we do?

~Windless

Dear Windless:

What a drag!  The loss of gift so close to the end can be demoralizing. Your lawyer board member is technically correct, but I would recommend against suing. It leaves a bad taste in everyone’s mouth, and if this person does not have the money, he doesn’t have it.  A mistake you made in setting your goal was not including a line item for unrealized pledges, which are often as much as 15% of the goal.

You have a couple of choices at this point:

1)    Finish the campaign with another $50,000 and announce that you have reached your goal of $1 million in cash or pledges, which is technically true.  Then either cut $75,000 out of the budget or finance (borrow) the remaining money.  Figure out your cash flow—over time, the loss of this gift may not make that much of an impact.

2)    Put most of the board and capital campaign committee people on the task of finding the final $50,000, and put two or three of you on the task of looking through your current capital campaign donors to identify one or two who might be willing and able to make up this loss.  It is not unusual to go back to the person who gave the lead gift and ask for another gift.  You may even ask the donor who cannot fulfill his pledge who he would suggest going to.  The criteria for deciding whether to go back to someone for another gift is not so much their ability, but their friendliness and commitment to the organization.  If they love your organization deeply, then there will be no harm done in asking them, even if they have to say no.  If no one can give the money, someone may be able to loan it to you at 1%-2%, which is almost as good as a gift.

It sounds like you have told your board members about this pledge, which is fine.  However, everyone needs to understand that no good will come of gossiping about this to people outside the organization.  Even in seeking to make up the gift, do not reveal the name of the donor who can’t pay unless you absolutely need to.  You want to preserve that relationship especially if the person made the pledge in good faith.  People’s finances can change drastically and quickly and often through no fault of their own.  By maintaining a relationship with this person, if his fortunes reverse for the better, he may eventually pay some or all of this pledge.

Pull yourselves together—you are yards from the finish line!  If this is the worst thing that happens in your campaign, you can count yourselves very lucky.