Measuring the effectiveness of a Charitable Gift Annuity (CGA) program can be a challenging task. A wide variety of factors can contribute to or detract from a program’s success. From its inception date and the gift-longevity it has experienced to its marketing and promotion, every CGA program has its own story. Evaluating your program can not only help you understand its past performance, but more importantly, provide the necessary details to chart an effective path forward.
When evaluating your CGA program, it is important to remember that both internal and external factors have influenced its performance. Support from leadership toward the promotion of life-income gifts would be an example of an internal factor of influence, while the timing of your existing CGAs entrance into the program would be an example of an external factor of influence. Understanding which is which will inform a more robust understanding of what has contributed most to the results of your analysis.
While researching your existing gifts and those that have matured can be a challenge, it is certainly not impossible. Most necessary information can be obtained from finance or development office teams and your existing files. When staff attrition or incomplete files create difficulty, lean into your financial or administrative service provider for institutional archives that can often bridge any historical data gaps.
Internal Considerations
Program Establishment – Consider the circumstances under which the program was first launched. Is it an older program with gifts issued at higher rates? Or is it a newer program with more gifts issued at lower rates? Is there an appropriate gift acceptance policy in place for the program, and if so, does it appear to have been consistently followed?
Gift Activity – Consider the historical pattern of gift donations. Has there been a continuous flow of gifts or have CGAs waxed and waned? A gift-by-gift analysis can reveal attributes of repeat donors, donors who make deferred gifts, and even periods of successful marketing efforts. This can be especially helpful to professionals who are inheriting an existing program. Development teams can fine-tune their efforts based on past interest and popularity of new gifting.
Program Resources and Support – Consider the human resourcing around the program. Has staff expertise, support by leadership and marketing effort remained consistent and in line with best practices?
Finance & Development Partnership – Consider the relationship between the Finance and Development offices. Have they regularly monitored and reviewed the pool’s performance and administrative processes? Successful programs have teams from both offices who are engaged and communicative. A gift-by-gift analysis of longevity experience and liability-to- funding levels can provide them both with valuable insights. The resulting discussion often brings a program’s history alive before both teams and provides a unified understanding of its current state.
External Considerations
Investment Experience – Consider the asset holdings, allocation and markets in relation to the states where your program is registered. Is the investment policy delivering performance returns in line with your investment goals? Has your investment manager remained aware of the changes to the CGA program’s ongoing liability?
Gift Timing – Consider the level of activity during both market downturns and times of growth. Was the gift activity steady or variable during these times? This factor is often the least controllable but the most impactful.
Life Expectancy – Consider how the asset was used and its longevity. The American Council of Gift Annuities (ACGA) assumptions would predict that 50% of the original gift amount will remain at the gift’s actuarial life expectancy. When it comes to life expectancy, some annuitants pass away before their time, but many can live beyond it. Has your program experienced one scenario more than the other?
Donor Demographics – Consider the concentration of donors. What are the key characteristics (age, gender, etc.) of your donor base? Is your organization’s mission attracting new CGA donors or is it becoming an increasing challenge?
Knowledge is Power
Whether you continue to lead a CGA program that you were responsible for starting, you have inherited an existing program at a new place of work or you are interested in revitalizing a dormant program, the benefits of evaluating a program’s success will undoubtedly provide a better understanding of the program’s history, which in turn, can become an important guide in revealing the best next steps for your program.
Just as no two CGA programs will have an identical story, the same can be said for the evaluation process. Measuring the effectiveness of your program can be a unique challenge, but PNC can help your team understand the many intertwined factors contributing to its performance. Whether you seek to justify to leadership the continuation of promoting CGAs, or you are researching past gift experience to revisit your existing processes and gift acceptance policy, PNC can help guide and facilitate the conversation. Let’s talk!
ACGA Assumptions in Setting Suggested Maximum Rate Schedules
- A 50% target residuum with the present value of the residuum being at least 20% of the original gift.
- An ACGA commissioned study provided that a 45-55 blend of the 2012 IAR male and female mortality rates was most appropriate.1
- Annual expenses for investment and administration are 1% of the fair market value of gift annuity reserves.
- The gross total annual return on gift annuity reserves is 5.75%.
- Annual payments are made in quarterly installments at the end of each period.
Source: ACGA
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