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Cultivating a Relationship Between the Finance and Development Offices

March 25, 2014

Shannon Crowley, CPA, MSA
Manager

It is not uncommon for the relationship between the finance and development offices at non-profit organizations to be strained or non-existent. Yet this relationship is probably one of the most important within a non-profit organization, especially for those organizations that rely heavily on donations and grants. Poor communication between these two offices can result in the improper receiving and handling of contributions and, ultimately, lost funding and upset donors. 

Effective Non-profit Communication 

Effective two-way communication is vital to cultivating the relationship between the finance and development offices. Below are specific situations in which communication is important:

  • Reconciliations – Most organizations have two independent systems that track contributions, one used by the development office and one used by the finance office. Also the treatment used by each office to track contributions can be different, resulting in variances when comparing reports for the same time period from one system to the other. If the two systems are not reconciled, this can be very confusing to a finance committee or management when reviewing the reports. Therefore, it is important that a reconciliation between the two systems is completed monthly, or at least quarterly. Monthly reconciliations will enable the two offices to ensure that there are no errors (such as incorrect, duplicate, late or missed postings) and confirm that the reports are complete and accurate. The only reconciling items should be the differences in treatment of the contributions.  

Reconciling the two systems requires cooperation and good communication between the development and finance offices. In order for a reconciliation to be completed, the two offices must first understand the underlying differences in the treatment of various types of contributions. There could be several differences. For example, when a verbal pledge is received, the development office will usually record the pledge; however, the finance office might not record a pledge unless it is agreed to formally in writing, or if it is contingent upon an event or a matching contribution. Once these differences are understood, the two offices should then work collectively to reconcile the reports. The two systems should be set up so that they are in alignment with each other as much as possible (for example, having the same tracking number for each type of contribution, e.g. annual fund, endowment), which will assist with the reconciliation process. 

  • Restricted Donations and Grants - Many times, only the development office is involved during the beginning stages of a grant. Not involving the finance office early in the process could result in important deadlines being missed, restrictions being broken and, the worst case situation, the funding falling through. It is important that, during the RFP stages, the development office communicates to the finance office any deadlines for reporting requirements and details on any restrictions. This will enable the two offices to work together to evaluate the opportunity, prepare a proposal budget (or complete any other necessary paperwork or reporting requirement) and ensure that the restrictions meet the goals and fiscal needs of the organization. The finance office will also need to adequately understand the restrictions for financial statement reporting purposes and to ensure the funds are spent in accordance with the restriction and the proper information is tracked for reporting purposes.  
     
  • Campaigns and Pledges - Likewise, with restricted contributions, the development office should involve the finance office, senior management and the board in the beginning stages of a campaign for funds. In particular, the offices should work together and agree on the purpose of the campaign to ensure that any restrictions on the funds are in accordance with the goals and fiscal needs of the organization. 

When pledges are made, the development office should communicate the details (donor, amount, restrictions, timing of the pledge, as well as verbal or written) to the finance office as soon as possible. It is important that the finance office records the pledges in the correct fiscal year and spends the funds in accordance with the restriction.

Effective two-way communication requires the willingness of the personnel within both the development and finance offices. Both offices should be proactive and seek out necessary information, rather than waiting or assuming the other office will communicate the information. Scheduling frequent meetings between the two offices is also recommended. Agenda discussion items can include new grant opportunities, new campaign initiatives, reporting requirements and other topics. While both the development and finance offices are essential to a non-profit organization, the two offices working together collectively is invaluable.

For more information, please contact Shannon Crowley at scrowley@blumshapiro.com or 781-610-1245.

 

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