Mixing Oil and Water and Making it Work in a Nonprofit Organization
The receiving and handling of donations made to nonprofit organizations is simple to do, but often poorly done. If not well-handled, a vital block is taken out of the foundation we strive to build in an effort to ensure donor loyalty for future gifts. Lost or misplaced checks and other communications from donors, late and erroneous recording of gift/pledge dates and amounts, delayed and otherwise neglected acknowledgements, spelling errors in donors' names, etc. all lead to lost or upset donors.
We can all agree that this critically important process must be done right. And it starts with the very first check or pledge that arrives in the mail room. But in many nonprofit organizations, there is a sharply divided opinion regarding just where those checks, pledges, and other donor communications should go next to ensure that all goes right with the receiving, posting, acknowledging, reporting, and banking process.
Show Me the Money
The Finance Department wants to be the receiver of the first resort. They are worried about possible theft, lost or misplaced funds, and failure, in general, to meet what they regard as standard accounting procedures. They are under the gun to provide up-to-date budgets and forecasts for the monthly meetings of the board of trustees and for all other such timely reports required in between.
The Development Department wants to be the receiver of the first resort. They want to know the results of their fundraising campaigns as quickly as possible, with no delay. They not only want to see successes to better gauge their progress toward meeting goals, but they especially need to know of major losses, from donors either refusing to give or greatly reducing their level of giving. Development is under pressure to move fast to try to reclaim the lost or reduced income by expanding the fundraising campaign's activities in time for the end of the campaign year.
The argument regarding where the contributions are physically received in a nonprofit organization is perhaps the most common of what are actually a number of conflicts between the development and accounting departments. These may be easily identified, but resolving them is another matter. And you may be sure that they must be resolved.
The Finance Director vs. the Development Director
I believe there is a decided gulf in many nonprofits between the chief development and finance officers concerning basic accounting standards and financial principles — principles which no doubt were mostly mutually shared in the for-profit world when the chief financial officers (CFOs) worked with their colleague sales managers.
Development professionals work in fundraising which, after all, is a subjective science of sorts. That seeming contradiction in terms is what gets them into trouble with the more precise and policy-oriented accounting professionals. Development professionals' donor service mentality — constantly striving to please our donors, prospects, and volunteers and "flying by the seat of our pants" most of the time while doing so — causes nothing but the most severe consternation in the finance department.
But still, finance directors in small nonprofits especially have it tough; many wear too many "hats." Finance directors coming from for-profit to nonprofit especially find great difficulty in the nonprofit job: having no peer support, frequently receiving no sympathy for financial concerns, being prevented from operating sound internal controls, etc. — all distinctly different from what it was like in their for-profit finance jobs.
While the tough times experienced could involve the full scope of nonprofit operations and most personnel, I think that the situation is made tougher when the finance director and development director deal with each other directly regarding fundraising activities. I've experienced them all — many times — with my own finance director, and have heard similiar stories from many other directors of development.
So Who Gets to Open Those Donation Envelopes?
It seems that the biggest problem between finance and development is when the latter, counter to the finance department's desired practice to be the first receivers of donations, insists that the routing-of-gifts process begin with the development department's receipt of all contributions. Along with the fact that this makes sense from good organizational and efficiency points of view — considering the avoidance of the troublesome problems discussed previously and time lags to thank donors, apprise solicitors, develop timely progress reports for the campaign leadership, etc. — something else is lost on most folks outside of the development department. That is the morale boost and the excitement the development staff experience when contributions are received in the morning's mail.
I have always insisted that all checks — all gift transmittals — from any source should first go directly to the development department. Gifts should not be received after-the-fact from finance when they are able to get around to it, but should be delivered first and foremost to the department and location where such gifts should logically be directed — whether those gifts come from donors or from other departments. My finance director and I differed mightily when it came to my development department's point-of-receipt of our organization's charitable gifts. I understood the concern of the finance director that anti-theft measures were best lodged in the finance department, but opening the mail each morning, with the hope and the anticipation of first seeing those new and renewed gifts, was something I simply would not give up.
With the above in mind, one of the main things to consider is the creation of a flow chart that contains the daily donor report listing of all contributions received — perhaps electronically transmitted from the development department to accounting — and a process for the prompt delivery of the checks by hand or via internal mail to accounting. Or maybe the process will include both the flow chart with the typed daily donor report listing and checks being hand delivered to accounting from the development department once the gifts are reported and posted. Development will want to be up-to-speed when finance receives some checks directly, or when checks are being routed to finance from an office other than development.
I've seen this happen a great deal. You can impress everyone with the need to be alert for irreconcilable checks and to trace them to where they were received within the organization. A flow chart should be part of a policy for all to follow in the organization — all checks, pledges, letters of intent, etc. are delivered to the development department first.
What About Pledges?
Just as receivables are booked in a for-profit business, in your nonprofit organization, you will be posting donation totals that include pledges. The overall pledge might bring with it a cash installment payment. Or the committed donation could be in the form of a pledge in the entire amount.
Finance naturally would not regard those pledged, non-cash, transactions as money received, and its daily log of total money contributed would differ from the development department. You might ask, "How are receivables set up with finance?" We development professionals will invariably — and properly — tout our daily total including pledges to the campaign. Finance — properly — will not, but they should set up receivable accounts for the pledges with payment schedules obtained from the donors.
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