Oil and Water

When Nonprofit Accounting and Development teams are like oil and water and don’t work well together, the situation can lead to more than employee hostility and conflict. It can affect the not-for-profit’s financial statements and lead to the forfeiture of grant funds. To ensure the staffers in your Accounting and Development departments communicate fluidly, you may need to revise certain procedures and actively encourage collaboration.

Different Recipes

The first step is to make sure staffers understand that Accounting and Development departments typically record their financial information differently. Development may use a cash basis of accounting, while Accounting typically records contributions, grants, donations and pledges in accordance with Generally Accepted Accounting Principles (GAAP). This means that the two departments produce numbers that vary, but nonetheless are both correct.

Let’s say a donor makes a payment in February 2023 on a pledge made in December 2022. Development enters the amount of the payment as a receipt in its donor database in February. But Accounting records the payment against the pledge receivable that was recorded as revenue when the pledge was made in December. Receipt of the check doesn’t result in any new revenue in February because Accounting recorded the revenue in December. Both departments’ records for February (and December) are accurate, but they disagree with each other.

Mixing Effectively

To truly collaborate, Accounting and Development should reconcile schedules at least monthly. If, for example, Development fails to inform Accounting about grants on a timely basis, the latter won’t be aware of the grants’ financial reporting requirements and could forfeit funds for noncompliance. If Accounting doesn’t record grants or pledges in the proper financial period according to GAAP, your organization could run into significant issues during an audit — which could jeopardize funding.

Schedule meetings so that Accounting can educate Development about what information it needs, when it needs it and the consequences of not receiving that information. For its part, Development should provide Accounting with ample notice about prospective activity such as pending grant applications and proposed capital campaigns. Development should also present status reports on different types of giving — including gifts, grants and pledges. This is especially important for those items received in multiple payments because Accounting may need to discount them when recording them on financial statements.

New Policies and Procedures

If you’re encountering oil and water personalities and resistance between departments or if problems continue, we can help design policies and procedures that promote the efficient communication of financial information and prevent negative repercussions.

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DISCLAIMER: This blog is provided for informational purposes only and is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant. Presentation of the information in this article does not create nor constitute an accountant-client relationship. While we use reasonable efforts to furnish accurate and up-to-date information, the evolving landscape surrounding these topics is supported by regulations or guidance that are subject to change.

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