Training Program Developed by:
YOUR PART-TIME CONTROLLER, LLC
Copyright © 2013 by Your Part-Time Controller, LLC. All rights reserved
Has this ever happened to you:
You are making a presentation to your board and you discover that development and accounting numbers don’t agree???
◦ Rather embarrassing at the least and unnerving to your audience
◦ The presentation falls apart as everyone starts questioning the numbers
What is the problem we are trying to solve? ◦ Fundraising and accounting numbers often disagree
What are the causes? Why does this happen? ◦ We will discuss the most common reasons
What are the solutions?
◦ Good news: we can solve these issues!
Double data entry into the donor database and the
◦ How to eliminate the wasted effort
Should your fundraising/donor database have an
integrated accounting software component?
◦ Does this solve the problem?
© 2013 Your Part-Time Controller, LLC Slide 3
Your board is having their quarterly meeting. ◦ Your development department presents a financial report
showing support of one amount, while;
◦ Your accounting department presents a financial report showing support of a different amount
Who is right?
Can they both be right?
How is your board supposed to interpret and understand this conflicting information?
Here is an example of two reports presented by the
accounting and development departments:
◦ How do you explain this to your board?
© 2013 Your Part-Time Controller, LLC Slide 5 Accounting
Individuals $17,000 $19,500 Conditional Corporation $0 $75,000 Fabulous Foundation $300,000 $100,000 Wonderful Foundation $0 $50,000
Total $317,000 $254,500
We will break down the most common reasons why fundraising and accounting information may not agree.
The concept of “cutoff” is very important when reporting numbers of any type, financial or non-financial
Say a contribution received from an individual arrives by check on the last day of the month.
◦ If the check went to accounting, they may record it on the last day, but development might not receive
notification until the next day, so they record it on the first of the next month.
◦ The opposite could also happen if development got the check first
© 2013 Your Part-Time Controller, LLC Slide 7
Assume $17,000 of individual contributions were recorded by development and accounting in the same month
But there was a check for $2,500 that came in to the development dept on the last day.
◦ Development recorded it in their software this month, accounting did not
Accounting Accounting Accounting
Individuals $17,000 $17,000
Individuals $0 $2,500
The general accounting rule is that a “conditional” contribution may not be recorded until and unless the condition is met.
◦ (There are some exceptions, such as if the condition is unlikely to come into play.)
© 2013 Your Part-Time Controller, LLC Slide 9
Assume Conditional Corporation contributes
$75,000 but adds a condition that the money must be returned if a particular condition is not
◦ The accounting department cannot record this yet as revenue. (They record increases to assets and liabilities instead.) ◦ However, development may enter the gift in their
fundraising software . The following report may result:
Accounting Accounting Accounting
Accounting rules require all the revenue from a
multi-year gift, a foundation grant for example, to be recorded as revenue in year 1
◦ Provided there are no conditions and the gift meets several other accounting requirements.
© 2013 Your Part-Time Controller, LLC Slide 11
Fabulous Foundation grants $300,000 over three years. They send a check for Year 1 of $100,000.
◦ Provided the grant meets the accounting rules, it is recognized in its entirety, as revenue in Year 1.
(We will later address the topic of restrictions)
Wonderful Foundation gave a grant last year for $150,000. They are paying the grant over three years
◦ Accounting recognized the revenue last year, so this year’s grant payment is a reduction of a receivable
◦ Development might show a report listing the $50,000 payment
© 2013 Your Part-Time Controller, LLC Slide 13 Accounting
Wonderful Foundation $0 $50,000
How should gifts of stock and other nonfinancial assets be recorded?
It commonly happens that development values the gift at one price and accounting uses a different price
Example: Board member A donates 100 shares of ABC Corporation to pay off their outstanding pledge balance of $3,000.
◦ Assume that accounting values the gift net of
commissions at $2,940. Perhaps development credits the donor for the full $3,000. Reports are now off by $60.
Differences between classifying gifts for: ◦ General operating support vs. programs vs. capital
Differences caused by reporting on funds that are: ◦ Unrestricted vs. temporarily restricted vs. permanently
Differing treatment of pledge payments Cash vs. accrual presentation differences Communication breakdowns:
◦ Development recorded a pledge but accounting never got a copy of the pledge letter, or vice-versa
© 2013 Your Part-Time Controller, LLC Slide 15
There could simply be a mistake, or several mistakes, by one department or the other
The solutions generally fall into four broad areas:
1. Better communication 2. Report formats
3. Monthly reconciliations
4. Document all policies and procedures
© 2013 Your Part-Time Controller, LLC Slide 17
Development department needs
Accounting department needs and accounting rules
Cash versus accrual issues Timing issues
Reports, if formatted correctly, can show the information both departments want to show, and the information will agree
© 2013 Your Part-Time Controller, LLC Slide 19
Your fundraising and accounting systems MUST be reconciled to each other at least monthly!
◦ This should catch errors, timing issues, and all the other issues already discussed
◦ Prepare something that both accounting and development can use to know how to prevent the problems we have discussed
© 2013 Your Part-Time Controller, LLC Slide 21
What is the problem we are trying to solve? What are the causes? Why does this happen? What are the solutions?
Double data entry into the donor database and the accounting system:
Should your fundraising/donor database have an integrated accounting software component?
Some organizations enter all contribution information,
donor by donor, into their accounting system even after it has already been entered in detail into the
◦ If you only get a few donations per day, this is not a problem
◦ However, if you get dozens, hundreds, or more, this is a problem
SOLUTION: enter the details in the fundraising
software, and summary information only into the accounting system
◦ This is similar to how many organizations handle their payroll if processed by an outside vendor
Coordination is required between the departments
© 2013 Your Part-Time Controller, LLC Slide 23
A fully integrated software system in theory should solve many of the problems discussed, but in
reality it often times does not
◦ Coordination between development and accounting is still necessary
PROS and CONS of integration
DonorPerfect and Quickbooks Integration• Identify Income Accounts in QB
• Create Accounts in DonorPerfect
• Assign GL Code to Accounts in DonorPerfect • Enter Gifts and Pledges
• Export datafile from DonorPerfect • Import datafile into Quickbooks
Enter Gifts and Pledges
Remember to enter General Ledger
Reconcile with Financial Reports
President and Founder of: ◦ Your Part-Time Controller, LLC
Washington, DC; Philadelphia, PA; New York, NY Website: www.YPTC.com
Eric’s blog on nonprofit financial management best practices: www.EricYPTC.com
Follow Eric on Twitter: @EricYPTC
Read Eric’s blog: http://EricYPTC.com/2013/05/ Eric is not affiliated with DonorPerfect (though he likes
We look forward to seeing you in our next webcast on July 25 entitled
How to Make the Ask Successfully Please send your suggestions and comments
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