“I can do things you cannot, you can do things I cannot; together we can do great things.” – Mother Teresa
Mission is at the heart of every not-for-profit organization, and is a driving force and motivator for all those involved. Working towards achieving the mission is a goal shared by all of the departments within the organization, but how each functions and contributes to the overall goal, throughout the year, may be very different.
Two of the most important departments within an organization are development and accounting. Together, they are responsible for raising and managing funds to help the organization work towards their mission goals.
Development is tasked with raising money to fund philanthropic efforts. This involves building relationships with donors and exploring new fundraising opportunities from various sources. Amongst other duties, accounting is responsible for proper recognition and reporting of the funds raised by development, whether they be grants, contributions, or other forms of planned giving within the financial statements.
Accounting is also responsible for monitoring the fulfillment of the organization’s fiduciary responsibility to the donors by tracking the satisfaction of donor-imposed stipulations on the funds, if applicable.
Collaboration between these departments is essential. The actions of one department directly impact the other. Lack of communication between the two can have a negative impact on the organization; it is important for these departments to collaborate throughout the year.
When development and accounting departments are mutually exclusive, a breakdown in communication can occur, leading to dire consequences. By way of illustration, most grants come with reporting requirements, purpose restrictions, and sometimes, special audit requirements.
If the specific terms of the grant agreement are not identified and communicated in a timely manner between departments, deadlines could be missed and restrictions not met, putting the funding in jeopardy.
It is important to note that development employees are not accountants, nor are they fluent in Generally Accepted Accounting Principles (GAAP), or its application. Likewise, with the advancement of technology, there are creative and innovative fundraising methods surfacing that accounting employees may not be familiar with.
It is important for development and accounting to share their relevant knowledge and educate each other. Here are some things each department can do to bridge the gap.
Educate development on some key concepts related to accounting recognition of the funds they are raising. Some concepts to discuss include, but are not limited to: conditional vs. unconditional and revocable vs. irrevocable. An overview of the various types of split-interest agreements may also be helpful. The idea is not to teach how to account for these transactions, but how to identify transactions that need to be evaluated for proper accounting treatment.
Periodically, meet with members of the development department to discuss any new grant proposals in process, new funding sources, new methods of fundraising, new campaign initiatives, and any related financial reporting requirements. This will allow you to determine proper accounting treatment of such transactions on a timely basis.
Teamwork and communication are essential to the success of any endeavor. Together, the development and accounting departments of a not-for-profit organization can have a significant impact on achieving the organization’s mission.