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 both departments communicate fluidly, you may need to revise certain procedures and actively encourage collaboration.
The first step is to make sure staffers understand that each department typically records its financial information differently. Development may use a cash basis 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.
To truly collaborate, each department 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.
To learn more about how PKF Texas serves not-for-profit organizations, visit www.PKFTexas.com/NotForProfit.