Why school boards need to use deductible gift recipient (DGR) vehicles more in fundraising

Article by Jeff Buchanan
AskRIGHT / 01 August 2018

The reality of non-government schools is that even though they are non-profit entities, they must still operate a viable business from year to year if they are to provide a good quality service.

Fundraising revenue represents an important value-add opportunity for non-government schools, particularly in the current economic environment where many families are experiencing flat wage growth and rising school fees. Add to this the increasing competition between non-government schools and some significant movement of student enrolments back to government schools and it all adds up to an opportunity to re-examine the opportunities presented by fundraising.

Many non-government schools could do much more with the fundraising vehicles at their disposal in the form of building funds, scholarships funds, library funds, and more to generate additional revenue that can be put to good use for capital projects, learning resources, and maintaining a strong enrolment base. These funds offer donors the value of tax deductibility for their gift and while this is not necessarily a primary driver of giving behaviour, it is nonetheless an attractive part of the giving propositions that can be put to prospects and donors.

The loss of a single enrolment can represent a significant cost to a non-government school budget that ranges anywhere from $15,000 to well over $20,000, depending on the particular levels of government funding and fees for any given school. The loss of 10 enrolments in a year can represent a very large amount of lost income that can send an annual school budget into serious distress.

With ongoing changes to, and controversy around, government education funding models and policies at state and federal levels, the reality is that the growth trajectory of all forms of government funding of non-government school students will slow down or go backwards in relative terms.

The chief financial executives (Business Managers, Bursars) of nearly every school I talk to, or work with, tell me the same things, such as:

  • More grandparents than ever before are paying school fees;
  • More families are struggling to pay fees on time;
  • The budget line they have for fee relief is increasing;
  • More families than ever before are making contact to seek relief due to their own financial distress;
  • They are looking at very small growth (if any) in their government funding and in some cases are more likely to lose some funding;
  • There is growing nervousness in board rooms around the annual task of setting operating budgets and explaining the resulting fee rises to current families; and,
  • There is growing interest in fundraising to augment both operational and capital needs.

Since their introduction in the nineties, scholarship funds with deductible gift recipient status (DGR) status have arguably been the fastest growing fundraising stream across 2,700+ non-government schools. At the same time, many schools continue to make use of building funds (also with DGR status) with varying degrees of success. Some clever schools are also using other DGR vehicles such as library funds and the Australian Sporting Foundation to raise funds for all kinds of other projects earmarked for their current budget year.

There are a few schools who enjoy the fortunate position of having built (or are continuing to build) substantial endowment funds through bequest programs or other activities. These schools are using their increasing endowment fund returns to support families in financial distress and as noted above several times, retain the valuable government funding that accompanies that enrolment.

Data sourced from the Australian Business Number (ABN) register[1] in the table below shows the number of the respective DGR funds that have been established by schools over the last 18 years.

The data clearly shows that scholarship funds have some way to go as their total number and rate of establishment remain substantially behind that of building funds and library funds.

 

 

 

 

 

 

 

 

 

 

If your board and executive management are not currently pursuing a conversation about maximising every possible avenue to retain current enrolments and maintain a strong pipeline of new enrolments, then it is time to start that conversation.

[1] Data sourced from https://abr.business.gov.au/Tools/DgrListing on 30-6-2018