March 7, 2023 •HoganTaylor
When Accounting and Development teams 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 resistance from either department or if problems continue, contact us. We can help you initiate policies and procedures that promote the efficient communication of financial information and prevent negative repercussions.
How HoganTaylor Can Help
The HoganTaylor Nonprofit team of business advisors and CPAs is comprised of former CFOs, controllers, and industry experts with extensive experience providing the guidance organizations need to lean forward again in their leadership. If you have any questions about this content, or if you would like more information about HoganTaylor’s Nonprofit practice, please contact Jack Murray, CPA, Nonprofit Practice Lead.
INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.
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