Finance vs. Development?
by Tony Poderis
Mixing Oil and Water and Making it Work
in a Non-Profit Organization
The receiving and the handling of donations made to non-profit organizations are simple to do, but very often poorly done. When that happens, 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 acknowledgments, spelling errors of 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 from a donor when it arrives in the mail room. But in many non-profit organizations, there is a sharply divided opinion regarding just where those checks, pledges, and other donor communications should go next in order to ensure that all goes right with the receiving, posting, acknowledging, reporting, and banking process of donations.
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 fund-raising 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 from what they gave previously. Development is under pressure to move faster to try to reclaim the lost or reduced income by expanding the fund-raising campaign's activities in time for the end of the campaign year.
The argument regarding where the contributions are physically received in a non-profit 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
Right at the beginning, I believe there is a decided gulf in many non-profits 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 fund-raising 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. A development professional's donor service mentality---as we constantly strive to please our donors, prospects and volunteers, and "flying by the seats of our pants" most of the time while doing so---causes nothing but the most severe consternation in the finance department.
That's because we non-profit fund-raising development professionals:
- Book pledges "not exactly" confirmed and seek to carry them out for a short period of time past the fiscal year's end so we can publish that we met our goal. For example: a Board member of a family foundation that has been a generous annual fund contributor over many years tells us that we are in their budget for a specific amount for the current fiscal year--however the foundation board vote, which is simply a formality, takes place a short time after our books close. We would book the pledge, but not acknowledge it to the foundation until we received formal notification. (The Finance Director and I fought tooth and nail with transactions such as this one.)
- Refuse to commit to make income projections for the Finance Director of actual endowment or capital cash payments---in amounts by quarter---for fund-raising campaigns not even yet organized, but just being talked about.
- See the "bottom line" fund-raising projection for the end of the fiscal year in a way completely at odds with the Finance Director's expectations. Most commercial sales goals are based on the market potential. The numbers are generally scaled to realistic achievement. Most non-profit fund-raising campaigns are based on the number needed to balance the budget. Those numbers are often far out of the realm of possibility, and the Finance Director just does not understand that while there are many things a for-profit can do to improve its bottom line to meet a sales goal, most are not at all possible for non-profits to do to meet a fund-raising goal. They just cannot accept our inability to forecast as accurately as they insist and think we should.
But still, Finance Directors in small non-profits especially have it tough; many wear too many "hats." Finance Directors coming from for-profit to non-profit especially often find great difficulty in the non-profit job: having no peer support, frequently receiving no sympathy for financial concerns, being prevented from operating sound internal controls, etc.---all usually distinctly different from what it was like in their for-profit finance jobs.
While the tough times experienced could involve the full scope of non-profit operations and most personnel, I think that the times are made tougher when the Finance Directors and Development Directors deal with each other directly regarding fund-raising activities. I've experienced them all---many times---with my own Finance Director, and from what many other directors of development have communicated to me.
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 must 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. Not as an after-the-fact from finance when they were able to get around to it, but first and foremost to the department and location where such gifts should logically be directed---whether from donors or from other departments. We 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 antitheft 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 to create a flow chart that contains the daily donor report listing of all contributions received--perhaps electronically transmitted from the development department to accounting---and the checks then promptly delivered by hand or via internal mail to accounting. Or maybe the flow chart will have both the typed daily donor report listing and checks hand delivered to accounting from the development department once the gifts are reported and posted. Then you will want to be up-to-speed when finance is receiving some checks directly, or when checks are being routed to them from someone else's office---not from development.
I've seen this happen a great deal. You can impress everyone 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 non-profit 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.
The very best fund-raising and accounting software programs, regardless of their benefits, cannot counter human error, indifference, turf-guarding, and individuals who will not cooperate regarding what is in the best interest of the organization.
It's critical for the good relations an organization must have with its donors that, once the paperwork reaches the organization, checks and pledges should be recorded, checks deposited, and acknowledgments sent to donors that day, or at the very latest the next day. Held checks too easily become misplaced checks. You want to avoid having any donor call to tell you the check hasn't shown up in their bank statement and have them wondering whether you received it. Quick acknowledgment need be nothing more than a preprinted card or a form letter from the campaign chair. However, in this age of the computer, what could be easier than a personalized form letter from the campaign chair on his or her business letterhead, that of the organization, or special campaign stationery?
No matter what, a careful receiving and posting process in development and a careful receiving and validating process in finance---with both departments having at least two persons cross-checking their results---are absolutely necessary. The lifeblood of an organization, being the precious funds it receives from generous and caring donors, makes it essential that the routing-of-gifts process be worked out and agreed to and followed to the letter by finance and development.
The Final Word
Despite what may be perceived, I hasten to add that I am not a CFO "basher." Far from it. I have a great deal of respect for such professionals. When I was a Director of Development, it was the Finance Director's department which saw to it that I received my paycheck on time, worked well with me to develop and review regular budgets and forecasts, and helped to pay development-incurred invoices as promptly as possible.
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About the Author: Tony Poderis was for 20 years to 1993 Director of Development for The Cleveland Orchestra and its Summer Home, Blossom Music Center. He was responsible for Cleveland's largest annual institutional fund-raising campaign. Since 1993, Tony has been a fund-raising consultant serving all non-profit institutions' needs to develop and to maximize their potential to raise Annual, Endowment, Capital, and Sponsorship & Underwriting funds.
Tony's experiences have won him a wide audience. At many hundreds of seminars and workshops in the United States, Canada, Puerto Rico, and Mexico over the course of his 30 years in fund-raising, he has addressed every facet of raising contributed income for social service, medical, educational, religious, and cultural institutions. He is a fund-raising Speaker/Specialist consultant to the United States Information Agency and the Mexican Government.
Tony is the author of a 115 page book on fund-raising published by FundAmerica Press titled "It's a Great Day to Fund-Raise!" In this publication, he has condensed his nearly three decades of fund-raising experience to provide a concise step-by-step guide to help all volunteers and professionals be as successful as possible as they carry out their fund-raising responsibilities for their respective non-profit institutions.
Visit his web site at http://www.raise-funds.com for more information about his book and lots of other great fundraising advice.
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