Independent schools and colleges are, with few exceptions, 501(c)3 organizations. This means that the U.S. government has designated them as charitable organizations and any money that is donated to them is tax-deductible through the donor.

Schools raise revenues in four ways:

1. Tuition
2. Annual giving
3. Drawdown on endowments
4. Miscellaneous streams such as summer camps or book fairs.

Schools look to the following tools as major sources of funding for their operations.

• Annual funds: Soliciting every member of its community every year to support the school. Funds raised go to the operating budget for the current year.
• Capital raising or fundraising for the endowment: Soliciting individuals for a one-time gift, often in addition to their annual giving, to support a specific financial priority, for example for building an arts center. Capital campaigns target specific projects.
• Events, like auctions, golf tournaments: Events tend to produce only small financial rewards and entail a large amount of work. The most valuable benefit to the institution for events is community building rather than direct financial support.
• Bequests and planned giving: This tool requires a specialized skill set due to its legal implications. Some donors try to add troublesome stipulations to bequests, but it is welcome whenever a school is named as a beneficiary in a will. 

For both annual funds and capital giving, there are restricted and unrestricted gifts. A school may solicit funds earmarked for a specific need. For example, the donor may be asked, “Do you want your contribution to go to scholarships? To athletics? To the area of greatest need?”  Some schools will offer alternatives. Others prefer restricted gifts because they want to know specifically where their money is going. Some donors are willing to give to a school and allow it to use the funds as it sees fit.

To get the most out of these tools and revenue streams is increasingly difficult, as the competition for donor dollars has expanded. Potential donors are overwhelmed with requests for money from everyone from co-workers, to various alma maters, to television ads in the teeth of a natural disaster overseas. The proliferation of communication technology and media hasn’t made communicating with donors any easier – on the contrary, it can make it more difficult to reach people with their proliferation of phones, devices and e-mail addresses.

In addition to these trends, fundraisers for schools face perennial challenges internally. One of the critical factors is board leadership. The board must lead by example by supporting the financial goals of the school. Board members must also understand that the board is ultimately responsible for generating the financial resources necessary to continue the school’s mission. A strong, committed board that understands its leadership role is essential.

Fundraising for schools is a process. It is a young science but practitioners have articulated clear principles and processes. One of the biggest obstacles to success in fundraising is ignorance that there is a process involved. Getting educated about the process and putting proven tools and approaches in place goes a long way toward modernizing your fundraising efforts.