At the 2010 LWV Convention, the LWVUS/LWVEF Board of Directors agreed that the national League would analyze the funding model for the LWVUS and LWVEF, including taking a special look at the Per Member Payment (PMP). The following report was prepared in winter 2010 - 2011, and discussed by the LWVUS/LWVEF Board of Directors at their January 2011 meeting and by the Budget Committee at their February 2011 meeting.
Reviewing the Funding Model for LWVUS/LWVEF
January 2011

I. Overview

As proposed by the Board to the 2010 Convention, the national League is reviewing its funding model for the LWVUS and LWVEF, including taking a special look at the Per Member Payment (PMP).

At the outset of such a review, it should be noted that the funding model for the LWVUS and LWVEF is already a diversified one.  In FY09-10 the funding base for LWVUS and LWVEF –including our reserve funds which stand separate from our operating budgets—was composed of:

  • PMP  (20 % )
  • Individual Donations, including those from
    • Direct Marketing and List Rental (38%)
    • Major Gifts (12%, including 4% unrestricted and 8% restricted)
    • Bequests (2 %) 
  • Foundation and Government Grants (16 %, including 10% foundation and 6 % government)         
  • Corporate Support (0.42%) 
  • Council/Convention Fees and Publication sales (3% )
  • Investment Earnings (9%)

The challenge for the LWVUS/EF is that none of these channels bring in enough revenue to meet the larger goals and aspirations of the organization.  Therefore, it makes sense to consider whether we could (1) raise more funds from the existing channels named above, and/or (2) raise funds from any potential new channels, such as “earned income,” an area that the League has not vigorously pursued in the past.  What follows is an examination of these options.

II. Raise More Funds from Existing Channels

  1. PMP
    1. The League could consider various changes to the current PMP system, some of which would require bylaws changes—including such things as:
      1. the amount  and how to calculate it;
      2. how often, if at all, to raise it; 
      3. whether to change the collection system (so it's done by LWVUS with funds sent back to Leagues);
      4. how to determine the member count upon which payment is based  (eg: basing a League’s member count as it stands on January 31, as we do now, versus taking the average of a League’s monthly member count in the preceding year, which would be more accurate).  As an example, the impact of changing how the member count is done is illustrated below:

        Yearly Average Membership  
        Reported PMP Membership




        In any event, the amount of funds generated for LWVUS through the PMP is not likely to increase significantly in the near term.

  2. Individual Donations
  3. LWVUS relies most heavily on financial contributions from individuals for its operating funds.  The LWVUS is likely to, and should continue, focusing the largest part of its fundraising investment in individual giving, because:

    • individual donors provide the largest segment of charitable support for organizations nationwide [typically around 83% annually as opposed to foundations (13%) and corporations (4%)];
    • the League is a membership-based organization with 60,000+ very dedicated members;
    • the LWVUS has a robust and mature direct marketing program targeting individuals, which annually generates support from 12,000 local League members and an additional 64,000+ donors; and,
    • there are a limited number of national companies and foundations likely to support the League’s work with charitable contributions, and we are already “working” those contacts as hard as possible.
        1. Direct Marketing  - The League’s direct marketing program has developed into a finely tuned workhorse over the past 11 years, in particular.  During this time, our partnership with Avalon Consulting has developed for the League a solid operating income stream that is larger than any other single area.  It extends the League family beyond its membership to engage an additional 65,000+ individuals annually as League supporters, and is the primary source for bringing in new $1,000+ donors.  Direct marketing is a sophisticated, intricate program guided by precise and finely tuned strategies, forecasting, predictive modeling, analysis, and its long track record.  It is advisable that we stay on our present course with Direct Marketing to ensure that it remains a vital source of funding for the foreseeable future.  While it is not likely that the League will be able to significantly increase the percentage of funds received from direct marketing, a modest increased investment in acquisition of new donors could result, over the long term, in modestly increased income.  
        2. Major Gifts  - The League’s major gifts program is not nearly as mature as the direct marketing program.  This is an area where growth is possible.  We have a total member/supporter base of 150,000 individuals, 1/3 of whom have net worth of $1 million and greater.  Our members, in particular, are loyal and dedicated to the League’s mission.  And the 1/3 who donate to LWVUS are our most loyal and generous donors. But we have not invested in this area in as great a proportion to potential as we have other areas (eg: direct marketing, grants, corporate support.)  We have insufficient development staffing---one full-time position---to mine the major giving potential among our larger member/donor base of 150,000 individuals.  We also need greater board involvement in both “giving and getting.”  We know that to increase giving significantly from current donors requires a hands-on, consistent, person-to-person approach that is based on careful research and planning.  It is a labor intensive process that cannot be done in a scattershot fashion.

          Various strategies have been tried in the past with varying degrees of success.  The most successful has been the inception of the Leaders for Democracy program, which has grown in numbers of donors and revenues raised since 2003. (See Appendix).   

        3. Bequests  -  Like the major gifts area, the League receives far fewer bequests than it has the potential to, given the age and dedication of its members.  This is another area where growth is possible.  Studies show that wills including charitable bequests are most often completed by persons in their late 70’s-early 80s who execute their wills three to five years prior to death.   Of the LWVUS’ 150,000 members and supporters, 42% of them are 70+ years of age.  Meanwhile the League’s membership declines annually from a significant death rate.  Over the last five years, 4.36% to 7.44% of the membership has passed away annually.  And yet of the 800 to 1,500 members who have passed away annually in the last decade, the LWVUS received bequests from a mere 10 to 16 individuals annually, a strikingly low figure for a membership as fiercely dedicated as it is.  Again, we have not invested in what it takes to secure bequests in as great a proportion to potential, as we have other areas (eg: direct marketing, grants, corporate support.)  Our single major gifts officer can spend only 5% to 10% of her time on the bequests program.  This is another area where we know that consistent, hands-on, person-to-person contact based on careful research and planning is necessary.

          Various strategies have been tried in the past with varying degrees of success.  We see potential to expand the number of bequests we receive, based on our membership’s death rate and feedback gleaned from a pilot project in 2009.  (See Appendix) . 

  4. Foundation and Government Grants  -  Nearly all foundation and government grants are restricted to particular projects undertaken by the Education Fund.  Grant budgets also typically support some level of national staff salaries and a minimal amount of overhead.   Given the limited number of national foundations and government agencies that support the type of work done by the League, and the size of the typical grant awarded, it is not likely that the League will significantly increase the amount of grant funding it receives, nor the amount it recovers for administrative overhead and national staff.   Still, it is vital that we continue on the course set over the last ten years—whereby national staff nurture substantive relationships with foundation and government grant officers; prepare compelling proposals on specific topics; and, oversee pass-through grants to local and state Leagues who carry out project work in accordance with the grant specifications. 
  5. Corporate Support  - The League is likely to continue receiving only limited grant support from companies, given League positions on issues, which tend to discourage corporate interest.  Corporate grants and partnerships should continue to be pursued, at the current level, particularly to support the LWVEF’s voter service work, including VOTE411, which continues to be the primary area of interest by companies in League work. 

III. Raise Funds from New Channels: Earned Income

  1. Overview of the Literature/Best Practices
    1. Earned income differs from fundraising in that it engages market forces and leverages an organization’s existing assets to generate sustainable resources to support its mission.
    2. Business Ventures vs. Business Partnerships - Two primary strategies
      1. There are two primary strategies by which nonprofits earn income (as opposed to charitable giving solicitations).  One is business ventures that are directly related to a nonprofit’s mission, or supportive of a mission-related activity (eg services, products, and distribution). When organizations consider the world of earned income, they tend to think in terms of business venturesThis is the strategy focused on in this paper.
      2. The other earned income strategy is business partnerships, a relationship between a nonprofit and a company: in exchange for money, products, or services, a nonprofit provides the corporation with recognition and/or permission to use the nonprofit’s name in corporate marketing (eg; licensing, cause related marketing, and joint ventures).   {The League has already delved into this earned income strategy, with our cause related marketing relationships with Allergan in 2008 and with Charming Shoppes, Conde Nast and Oldsmobile in 2000. This paper assumes that the League will continue on our current course of being receptive to having such partnerships as opportunities arise.}
    3. Basic tests for feasibility/viability - There are recommended basic tests for determining the feasibility and viability of a particular business venture.  The first step is to address several questions related to whether an organization is ready to take on a new business venture. The following are quoted from a publication entitled Unlocking Profit Potential, a joint product of BoardSource and Community Wealth Ventures, Inc., the sector leader in earned income consulting.  The questions include:
      1. What is your current economic situation? Social entrepreneurship is not a get-rich-quick scheme for nonprofits. It often takes two to three years for a small business to break even, let alone generate a profit. Organizations launching business ventures need to be financially stable and able to afford the investment social entrepreneurship requires.
      2. Is there a need to diversify funding? If your organization gets most of its funding from one source, social entrepreneurship may be an option worth considering. Organizations that are getting a sufficient amount of funding from a broad variety of sources may not have as great a need for alternative sources of revenue.
      3. How good is your organization at traditional development? If you know your organization could hire development staff that could bring in more money than a business could, your organization should probably stick with traditional fundraising. If, however, your organization has a hard time finding funding from traditional funders or existing funding relationships are reaching a mature level, it may be time to try social entrepreneurship.
      4. Have you effectively tapped your development opportunities? Is your list of potential funders continuously growing, or has the funding well run dry for your organization? Organizations that have only touched the tip of the iceberg when it comes to development opportunities may not need to consider social entrepreneurship.
      5. How stable is your management situation? An organization that launches a business venture must be secure. Times of high staff turnover or executive transitions are not the times to start a new business venture.
      6. Are you an entrepreneurial organization? Is your organization flexible and open to new ideas, or do staff and board members tend to stick to the traditional, more conservative ways of doing business? If your organization has a history of being innovative and resourceful, the organization will be more likely to have success with social entrepreneurship.
      7. What are the opportunity costs? In other words, are there other ways the money might be spent more productively? For example, if a nonprofit invested in a small business activity when it could have used that money to hire a grant writer who could bring in more money than the business activity, the opportunity cost is the money invested in the business that is lost because hiring a grant writer would have been more effective.
      8. What are the risks? The board and staff must assess the potential risks involved with social enterprise before deciding whether the organization is ready to try a new business venture. It is worth noting that the risks can be multiple and not limited to economic issues.
      9. What is your risk profile? Staff members, board members, and constituents also need to be willing to change and to take risks, even if that means going against institutional culture. In order to make the organization more comfortable with taking risks, there should be a clear connection between the venture and how it will support the organization’s mission. If staff and board members can see that the earned income strategy does indeed relate to the organization’s mission and could possibly make the nonprofit more effective, they will be more likely to be supportive.
      10. Do you have the capacity to support a social enterprise? In addition to money, an organization needs time, people, and energy to support a social enterprise. Few nonprofits have the resources to suddenly spend the vast majority of their time on a new business. Therefore, many organizations often spend a year or more planning and saving for a venture.
      11. How will external stakeholders respond to a social enterprise strategy? External stakeholders could include funders, clients, constituents, or the general public. Their reaction to a venture or partnership strategy is important, especially if an uneducated impression could pose problems for your nonprofit. For example, some funders may decide to cut funding because they may think the organization is becoming self-sustaining and no longer needs outside support. Board and staff members should identify all external stakeholders before launching a venture to ensure the organization maintains proper communication with these stakeholders throughout the venture planning process and at strategic intervals thereafter
      12. How does your board feel about social enterprise? The board must be supportive of the venture. If board members are involved in planning the venture from the start, they will be more likely to be supportive throughout the process. Board members should serve on the business project team so they can be involved from day one.  This does not mean that they shouldn’t ask tough business questions about the venture for fear of not being supportive. Board members with business savvy may need to be reminded that they should give a nonprofit business venture the same scrutiny they would give a for-profit venture in their professional lives
      13. Is your staff ready to embrace social entrepreneurship? The staff must believe in what the organization is doing. If the organization does not have support and commitment from the staff, daily demands could end up taking priority over the earned income strategy. Staff members must understand the extra effort the business venture will take and be willing to focus on long-term strategies.


  1. Options for LWV – The League has already delved into earning income through business ventures: the LWVUS provides local Leagues the service of holding and managing their Ed Funds accounts in return for the interest earned on their deposits.  (And, on the local level, some Leagues provide fee-based services such as administering homeowners and condo association elections.)

     Areas for business venture expansion might include: 

    1. Externally/Public oriented
      1. Services such a debates moderating academy, “Good Housekeeping” type seals of approval, good government certifications, etc.
      2. Product sales, such as a Citizenship 101 Curriculum or Open Government Toolkits and such
      3. Distribution of candidate and ballot initiative information
    2. Internally/League oriented
      1. Services such as
        1. endowment/reserve fund management
        2. dues renewal
        3. use of
      2. Product sales, of such items as League-logo items and toolkits.
  2. Red Flags for New Ventures – In considering our options, it is important to remember the initial questions about feasibility/viability outlined above.  

    In addition to these internal considerations, there are external factors that the League would need to assess, particularly about the market: eg: what the target markets might be; whether they are growing or slowing; who the competition is and how they position themselves; etc.

    There is also the sobering rule of thumb to consider that most of the types of businesses that most nonprofits consider typically have net profit margins of less than 5%--and take at least two to three years to break even, much less make a profit.  (Source:  BOARDSOURCE EBOOK SERIES - UNLOCKING PROFIT POTENTIAL / © 2002 BoardSource)

  3. In conclusion - These considerations raise red flags about the wisdom in and viability of pursuing new business ventures that center on providing services or products to an external audience, such as “Good Housekeeping” type seals of approval , certifications, debates academies and such.

IV. Investment Ideas for Consideration

Bearing in mind the considerations outlined above, it appears far less risky for the League to “stick with what it knows.”  That is, the League would be smart to invest in areas where we already have (1) experience, (2) on-staff expertise, (3) an existing network of vendors allowing for quick scalability/expansion, (4) and a basic understanding of the market opportunity.  

The following opportunities for increasing revenue—some traditional fund-raising and some in the realm of business ventures—have those characteristics. 

  1. Expand Existing Activities  - 
    1. Major and Planned Giving – increase LWVUS investment in/commitment to maximizing the potential for larger restricted and unrestricted gifts from current donors and increasing the numbers of members making bequests to the LWVEF. This will require an expansion of both staffing and Board of Director efforts.
      1. Staffing
        1. Hire at least one additional major gift officer, and provide the requisite increase in the travel budget.  We need more staff capacity  to do the hands-on, in person work necessary to getting more $1,000+  and five and six figure gifts and planned gifts. This work includes mining the League’s current member and donor base of 150,000 individuals, to find the most promising major donor and planned giving prospects, then cultivating and soliciting them directly. 

          The more trained hands we have doing this work, the more donors we can reach and the more money we will raise.

        2. Institutionalize and make full-time the current part-time development assistant.  We need to reduce the administrative burdens on Lauren Frank, our sole major gifts and planned giving officer.  Making our current temporary part-time assistant a full-time staff position will allow Lauren to spend the majority of her time on strategies (rather than operations and tactics) that increase major gifts and charitable gift annuities and bequests, particularly developing and carrying out direct solicitations of major donors and planned gifts prospects.   

          The current budget allows for 16 hours of work weekly by the part-time assistant for direct marketing and, due to a one-time allocation from another source, 5 hours weekly for major giving.  Making the assistant position full-time will provide an added 12 hours of assistance weekly to major giving.  This would change Lauren Franks’ current work mix to 80% personal interaction/strategy development for major gifts and charitable gift annuities & 15% interaction/strategy development for bequests, with only 5% administrative oversight.  Currently she must spend some 40% on administration.  

          Providing more administrative help to Lauren will put us on the road to meeting our unrestricted revenue goal, but will not do it alone.  We need more professional staff if we are to reach revenue goals, current and future. 

      2. Board of Directors
        1. Institute a specific annual fundraising goal for each LWVUS board member, with a requirement, for example, to “give and get” a total of at least $10,000 annually.
    2.  Increase charges for providing state and local League Ed Fund services.   
  2. Potential New Channels – Internal
    1. Endowment and reserve fund management -    With a relatively modest increase in accounting efforts and the League’s relationship with its current investment services provider (eg: Roger Lidell), the League could expand services offered to local and state Leagues beyond holding their Ed Fund monies—by taking on the management of their endowment and reserve funds, rather than referring Leagues to their community foundations as we now do.   We would charge appropriately for the service, while “keeping the dollars in the family.”
    2. Dues renewal services for local and state Leagues – By expanding our use of current direct marketing vendors and investing modestly in additional development and accounting functions for oversight and execution, we could undertake a centralized program of dues renewals for Leagues.  We believe that by professionalizing dues renewals, we can develop the local League membership dues renewal into a stronger revenue stream for the League as a whole.  By instituting best fundraising practices (eg: timely schedule of contacts, requests for upgraded membership levels, and professional handling of receipts), combined with interpersonal contact by local Leagues, we can improve an area where we have seen local Leagues’ continued failure and where LWVUS has systems and expertise already in place. This could be done on either a fee-for-service basis, or for “free”, with the LWVUS taking a share of the increased giving that staff thinks will occur through the professionalization of dues renewal.
    3. Cooperative fundraising with local and state Leagues – By hiring one or more field fundraisers or field support staff, LWVUS could work cooperatively with willing state and local Leagues to facilitate (1) dues increases to realistic amounts, where needed (so that they cover a League’s costs); (2) coaching on and assistance with expanding funding locally through community foundations, local business leaders, earned income such as election monitoring or condo elections, etc; and (3) outreach to individual donors to benefit all levels of the League, using a shared revenue model.
  3. Potential New Channels – External   
    1. Distribution or licensing of - Taking less traditional avenues, the League should explore income producing opportunities for VOTE411.  This would not require investing in a whole new product/service, as would be if we were to pursue a debate moderating school or a certification program of some sort.  What would be necessary, however, is either an additional person on staff or retained on a contractual basis to help determine a feasible pricing structure, market the product, and assist with contractual arrangements.  Ideas to explore include:
      1. Charging for VOTE411 “widgets – A widget is a program that is installed on a website and appears like a picture-in-picture photo viewer, video player or text box.  The VOTE411 widget has long been a key element in our strategy to increase public awareness and use of the site, either for free or for a fee.  It allows one to take key information from VOTE411 (e.g.: VOTE411’s poll locator, voter feedback tool and key general election information) and bring it to potential users through Web sites they already use instead of requiring users to come to VOTE411.  The widget could be marketed to interested companies, media outlets and other organizations that may want to provide access to VOTE411 information on their own website as a benefit to their customers or employees.
      2. Sponsorship of VOTE411 “widgets” – A variation on charging for the widget would be to solicit corporate sponsors to sponsor VOTE411 widget placement in the media, as a means of advertising their products or services while demonstrating their commitment to a healthy democracy.  The League would then work with an advertisement placement service to buy ad space on popular websites and blogs (eg: CNN, MSNBC, The New York Times, Slate, etc) where the widget would appear and be available free to the public.
      3. Investigate charging other organizations to include specific questions posed to candidates, for their own Voters’ Guides – Just as it possible for organizations like the League to pay to include specific questions in polls conducted by national polling firms, the League could provide this service to other organizations that do not have as good access to the candidates as the League.


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