Recession hits US private fundraising, but others do better

As alumni donations to US universities plummet, Canada and Asia forge ahead. Hannah Fearn writes

September 4, 2010

For US universities, the results of the Council for Aid to Education’s Voluntary Support of Education survey for 2010 confirmed many fundraisers’ worst fears.

Gifts made to American colleges and universities had plunged by nearly 12 per cent during 2009, to $.9 billion (£18.4 billion) – the biggest decline on record.

The recession had taken its toll, and trends in giving, which had seen contributions to higher education institutions increase by an average of 4.1 per cent a year for the previous decade, had reversed.

The 20 US universities that raised the most in 2009 picked up $7.28 billion between them – $1.13 billion less than the previous year – while the overall number of contributing alumni declined by almost 6 per cent.

Together with the catastrophic fall in the value of endowments, it painted a desperate picture for the US sector.

Experience, it seems, does not always reap rewards. While the US, with its historic engagement with alumni and mature fundraising sector, faced a plummeting income stream, other countries started to capitalise on the recession.

Canada’s fundraising efforts started more recently, yet the sector has remained resilient, building on its success in generating new philanthropic income.

According to the Ontario Higher Education Examiner, government grants accounted for 72 per cent of Canadian public university operating revenues in 1977. By 2007, government grants made up 48 per cent of operating revenues, with Canada’s 93 universities also receiving C$1.1 billion (£700 million) in charitable donations.

The Canadian Council for the Advancement of Education was unable to offer more recent figures, but despite suffering major cuts to endowment funds (Gary Brewer, vice-president of finance at York University, Toronto, reported that its C$300 million endowment fund lost approximately C$45 million in 2008), anecdotal evidence suggests donors have continued to give throughout the recession.

The University of Waterloo, for example, announced that it raised C$53.3 million in 2008-09, just as the economy spiralled downwards.

More concrete results are available for the UK. The Ross-CASE survey 2010, published by the Council for Advancement and Support of Education in Europe, suggests that British universities survived the downturn when it came to donor income.

Cash increases

Donations to the higher education sector topped £500 million for the first time in 2008-09, with cash income also significantly increased.

Over one year, the value of gifts grew from £430 million to £511 million, partly as a result of the government’s popular match-funding scheme, under which donations to higher education institutions were matched by the state.

Yet the benefit of new funds is not spread equally across the UK’s large university sector, as the universities of Oxford and Cambridge, which already have by far the largest endowments, pocketed almost half of all donations between them.

Joanna Motion, vice-president of international operations at CASE, said newcomers to the fundraising game, such as the UK, were “reaping the rewards of relative novelty”, which would prove especially important as the Western world recovers from recession.

“They are at different points in the wheel [from countries such as the US],” she said. “Given that most of the rest of the world has not been putting a great deal of muscle into this for more than 10 years, it’s really still quite new. There are times when that’s a hindrance and there are times when it provides some extra energy.”

In other parts of the world, fundraising and development are newer still.

The 2008 Association of Development and Alumni Professionals in Education (Adape) report, which covered Australia, New Zealand and South East Asia, found that most alumni and fundraising offices in education were less than five years old. But despite being late developers, 89 per cent of institutions in these countries had alumni programmes.

The average Australasian university sought to raise A$22 million (£12.7 million) in 2008, up from A$13 million in 2005.

The highest earners hit or exceeded this target, and a third of institutions had put in place campaigns targeting major gifts of more than A$1 million. Newer figures will be published in autumn, with further gains expected.

Universities responding to the Adape survey said that annual gifts were the most important source and provided the highest percentage of income.

The study did not reveal an overall sector income for the countries covered, but a survey of 18 Australian universities by Queensland University of Technology published in 2007 revealed only modest results for 2006. Bequests were worth just A$50 million and individual donations amounted to A$8.5 million.

In most of the remaining regions of the world, the higher education fundraising industry is in a fledgling state. CASE said that no centralised data were currently available to demonstrate the level of alumni donations in Asia or South America, but added that, anecdotally at least, these areas are also seeing rapid change.

Ms Motion said that, in fundraising as in so many other areas, Asia is likely to emerge as the dominant market in coming years.

“In the longer term it’s about Asia, partly because money is heading East. The shift in balance in wealth is towards China and India,” she said.

Singapore’s lead

Already there are outliers in these markets. Others in Asia would do well to follow the lead of the National University of Singapore, which has a clearly established philosophy of engaging with alumni first, and waiting until later in the relationship to ask for money.

Among the strategies it has developed to achieve this is the creation of an “alumni house” on campus, a university resource that remains open to all former students.

Another notable Asian institution in the field is the University of Hong Kong, which is among the largest recipients of philanthropic income within China and has been asked to share its expertise with universities on the mainland, as well as further afield in countries such as Vietnam and Pakistan.

“Alumni giving, which was not a culture here, is now taking shape,” said Bernadette Tsui, director of development and alumni affairs at Hong Kong.

“Asia is on the rise, economically and politically, and higher education is riding the wave. Asia’s own economy is doing well – it is certainly expected that there will be a growth in donor income and the philanthropy landscape. We’ve seen a sea change in the past few years, with the size of individual donations getting larger and larger.”

This development has important implications for universities in the West. Last year, the biggest gift to an Australian university came from a Chinese philanthropist. Chau Chak Wing, chair of Kingold Group, gave A$25 million to the University of Technology, Sydney, to fund a new building.

Asian universities

But as Asian universities become better at fundraising, and if they manage to prove their quality and rise up global league tables such as the Times Higher Education World University Rankings, rich donors from the area may be expected to lend their support to institutions closer to home.

Ms Motion said that countries such as the UK should look towards Canada for guidance in the coming years. When the country faced its own period of austerity in the 1990s, universities used public funding cuts as a spur to generate a greater interest in alumni fundraising.

“They got serious about this when their backs were to the wall because of the economy. It was a driver for them to invest and to get creative about their discussions with supporters. I find that quite encouraging,” she said.

And there is another reason to be optimistic: according to the CASE Fundraising Index published earlier this year, giving worldwide will increase by 3.7 per cent during the current year.

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