Giving to universities

In difficult economic conditions, attention inevitably turns to potential alternative sources of income for universities such as philanthropy. But philanthropic income will never be a panacea that will fund the UK’s higher education system and proposals that fail to recognise that should be given short shrift. However, giving has increased substantially over the past decade and there is clear potential for donations to provide greater support to institutions in the future. Government investment has successfully helped universities to expand fundraising efforts in the past and additional support is necessary now in order to secure that progress.

2008-11 matched funding scheme

The previous government attempted to boost voluntary giving through a matched funding scheme which had been recommended by the 2004 Increasing voluntary giving to higher education report [the Thomas Report]. Set up in 2008 and administered by HEFCE, it aimed to achieve “a step-change” in voluntary giving. Institutions were invited to choose the tier that best matched their fundraising experience. Those with the least experience could join tier 1 in which their fundraising income was matched 1:1 up to a limit of £200,000. More experienced institutions could join tier 2 in which their fundraising could be matched up to £1,350,000 at a public to private ratio of 1:2. Those in the third tier could match up to £2,750,000 at a ratio of 1:3. The matched funding received by each institution as part of the scheme can be seen in the chart below (an interactive version that identifies individual institutions can be found here).

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Has a “step-change” has been successfully delivered? In a speech in September 2012, David Willetts hailed the “substantial momentum” made since the 2004 Thomas Report. In total, £143 million was distributed in a scheme that HEFCE judged to have been “very successful”. The number of alumni giving increased by 38% from 2007-08 to 2010-11. By contrast, the number of alumni giving had only increased by 22% from 2004-05 to 2007-08. The performance in terms of overall funds secured by institutions was less impressive because of a steep fall in the size of donations during the recession. However, overall giving has now surpassed pre-crash levels.

The most recent Ross-CASE survey included positive headline figures such as a rise in new funds secured (£774m in 2011-12 against £676m in 2010-11) and an increase in the number of donations (up 12,000 from 2010-11 to 2011-12). However, those overall figures eclipse the fact that progress has stalled in much of the sector. The changes to philanthropic giving to universities has been polarised within the sector since the end of the matched funding scheme. More than two-thirds (79) of surveyed institutions reported that their philanthropic income fell. 39 experienced a drastic fall of 50% or more. The drop in median annual income for each institution, from just over £1m to £453,000 a year, reveals that the precipitous drops in income were in institutions with smaller fundraising operations. These changes were identified by the chair of HEFCE’s 2012 review of philanthropy as “a consequence of the end of the matched funding scheme”.

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Coalition policy & untapped potential

The Government’s strategy for boosting philanthropy to HE institutions has been a small element of BIS’ policy platform which did not even feature in HEFCE’s report on the reforms since 2010. The Coalition’s principal policy shift was its decision to cut the funds for the matched giving scheme. Despite having “reaffirmed” its commitment “to fund fully the £115 million for the third and final year of this highly successful scheme” in the 2011 White Paper, BIS’s 2012 grant letter to HEFCE actually revised that final contribution down to £63 million. A BIS spokeswoman was subsequently quoted saying “there were no plans” to reintroduce a matched funding scheme.

There remains a strong case for government to support the expansion of fundraising efforts. The Thomas report identified that the upfront investment required to set up a fundraising office can act as “a barrier to institutions devoting resources to this area”. For, as the Ross-CASE report put it, “the first three years of a fundraising programme can be unpredictable and there can be a considerable period before significant benefits are forthcoming”. As the income from philanthropy has plummeted for many universities with less established fundraising operations, it’d be unsurprising if many were not now considering cut their fundraising given the financial pressures and uncertain immediate returns. Such cuts risk wiping out the progress made for, as HEFCE’s September 2012 review of philanthropy summarised, “fundraising is a long-term game that cannot be turned on and off without losing the support of donors.” A new matched funding scheme would reduce the risk of universities cutting their investment in fundraising.

The decision to not repeat the matched funding scheme also means many universities would not capitalise on the considerable potential for increasing UK universities’ philanthropic income. Of course, newer universities will face a challenge simply as a result of having a smaller cohort of generally younger alumni. However, 10% of US public university alumni give back to their almae matres while only 1.2% of UK alumni do the same. With such a low base of alumni engagement there could be far more university income from donations, even in the present economic climate.

A new scheme

Given the current funding constraints, a repeat scheme would need to be cheaper than its predecessor. The first scheme overwhelmingly focused resources on boosting the best established fundraising efforts, as the pie chart below illustrates.

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It is therefore clear how a repeated scheme could be done at a lower cost by excluding institutions which have no further need for government support to pump-prime their fundraising efforts. The institutions to exclude could be determined by using the Ross-CASE typology of institutions’ fundraising programmes (in the last survey). Institutions were classified into five different clusters based on their fundraising experience, ranging from the fragile programmes through to elite fundraising programmes at the top (Oxbridge).

There are ten institutions which clearly do not need further pump-priming. Oxbridge and 8 other Russell Group universities with “established fundraising programmes” collectively raised £546 million of the £774 million secured in 2011-12, over 70% of the total. The median cost of each £1 raised is 12p for those 8 in the Russell Group and 10p per £1 for Oxbridge. Given their continued success since the end of the matched funding scheme, there is no need for government to spend another penny let alone another £27.5m on boosting their fundraising efforts. Oxbridge raised £3867 per student in donations in 2011/12 while Million+ universities raised 72p per student. A repeated matched funding scheme need not further exacerbate this inequality by giving yet more money to universities with successfully established fundraising efforts.

Less money could also be focused on many of the 38 institutions with “moderate fundraising programmes” which were in tier 3 of the last scheme. However, with a median cost of 27p per £1 raised, those institutions remain far behind the elite 10 and so still merit support. The most important element of a new scheme would be to focus more of the resources on institutions with the new fundraising operations, the 36 tier one institutions which only received £4.3 million in the whole of the last scheme. A repeat scheme need not be prohibitively expensive if it were more selectively focused.

Philanthropy will not provide a miracle cure for HE’s funding problems but greater giving would give a welcome boost to the sector. A repeat matched funding scheme could help support expand this stream of income. Vince Cable said that “in a rational world” we’d be increasing funding for the UK’s higher education sector. An intelligent investment now in supporting university fundraising efforts would pay excellent dividends and prevent the progress of the past decade being squandered. One reason not to invest in another matched funding scheme would be if the government didn’t envisage universities remaining charitable bodies, something that may explain why no such repeat scheme is forthcoming. Anyone concerned with philanthropy in UK HE should watch that policy closely.

3 responses to “Giving to universities

  1. As one of the authors of the 2012 HEFCE review chaired by Professor Shirley Pearce I welcome this interesting post. And I think there is very good evidence to suggest that the matched funding scheme did its job, and that more would be good for those outside the top flight of fundraising success. But I think there are some nuances……

    You refer to a steep fall in donations because of the recession. That indeed appears to be the case, since 2007/8 was a very good year in the Ross CASE numbers, and the following year looks much less good. But it’s instructive to strip Oxbridge out of that analysis, since it turns out 2007/8 was an exceptionally good year due to a couple of very very large gifts made to one of the those universities. Without those distorting numbers, giving to HE has increased in every year since 2006/7, despite the recession.

    In respect of matched funding there is a further question to be asked – one which is hard to answer but where the asking is perhaps more important than the answer itself. And that question is: “Did the 2008 – 2011 matched funding scheme work because donors liked the idea of matched funding and this persuaded them to give, or did it work because the chance of matched funding increased universities’ risk appetite for investment fundraising; this in turn meant there was more asking and greater integration of fundraising planning into overall university strategic planning?

    With this in mind, the new typology for the Ross CASE survey is indeed an interesting one, but I think that the names given to the largest group (the (second to lowest performing one) is misleading. This is the largest group of universities (89 or 62% of the entire survey) described in the survey as “emerging”. 60 of these have had a fundraising programme of some kind for at least five years prior to the latest survey, and many for rather longer. I would argue that for many of this group they have had plenty of time to emerge.

    If you dig a bit deeper into the data and the practice that lies behind the older development offices that are still emerging, I think you find that, for many, the lack of success has little to do with external factors (like donors) and a great deal to do with internal factors (like vice chancellors, registrars and chairs of governors.) Typical issues to address would be “what are we fundraising for; are the fundraising expectations realistic and connected to University strategy; does the Development Director as a senior member of staff “manage up” and have the confidence and ear of the Vice-Chancellor and Registar / Finance Director; does the Development Office have enough resource to do what’s needed and does it have enough traction at senior management level?” For a number of universities in the emerging group the answer to almost all of these questions will be “no, or only a bit.”

    None of these issues will be addressed by throwing public money at universities to match gifts. However, the earlier “fundraising capacity building scheme” which operated from 2006 – 09 and which was administered by UUK for HEFCE directed funding at Development Office operational budgets. And let’s face it, on the whole the larger and better resourced a particular part of the University administration, the more voice it has at a senior level.

    So what are the solutions? We wrote about many of these in the 2012 Pearce Review, but for the purposes of this comment, I would like to suggest that a further matched scheme aimed at matching new resource committed by a university to Development and Alumni Office budgets, together with renewed effort on Workforce Development (currently under way) and more opportunities for university senior management teams to engage with fundraising would be the way to speed the emergence of this largest group of universities into more mature development operation, more money and greater net return on investment.

  2. Adrian, thank you for your interesting comment. That’s a good spot on Oxbridge & the large gifts, I didn’t realise that.

    I take your point on the hard question – as you say, it’s relevant for how you’d do another matched funding scheme. It’s not something I know about from personal experience so I’ll have to defer to your knowledge.

    More generally, philanthropic income is surely far less zero-sum between universities so certainly an area which it’d be nice to see greater collaboration on between universities.

    On the fundraising capacity building scheme idea, I think that would be a good idea. However, I still think that that would best complement a scheme matched funding linked to income rather than replace it. As the university finances get tougher, the carrot of matched funding could encourage greater attention to the issue from university management. However, either alone would be preferable to nothing.

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