Why Accounting and Development are Critical to Not-for-Profits

by | Aug 12, 2019 | Not-for-Profit, Tax and Accounting Desk

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m here again with Nicole Riley, an Audit Senior Manager and one of the faces of the PKF Texas Not-for-Profit team. Nicole, welcome back to The Playbook.

Nicole: Thanks. Thanks for having me.

Jen: So, we’re touching on topics important to not-for-profits. Accounting departments and development departments are two really critical components of a not-for-profit organization. How do you facilitate cooperation between the two departments?

Nicole: As you mentioned, they really are critical components of an organization, and when they work together well it can really benefit an organization.

The first way they can do that is by communication. Just like in anything, communication is really key here, and it should be a two-way street where they both talk amongst themselves, educate each other on what they need from each other so they’re well aware of the needs of each other and help each other be successful.

They also need to realize that there are differences between them and that they each report on a different basis. A lot of times, we see development departments are on a cash basis, so they record a donation once it’s received. In accounting, they have to actually record it once the contribution is communicated. For example, as someone sends a letter that they’re going to give a two million-dollar contribution over the next two years, accounting is going to report that the day they get their letter as a two million-dollar contribution.

Jen: So, it will be in that current year, even though it’s a two-year contribution.

Nicole: Yes. But the development department often will record it as the checks come in, so it will be over the two-year period, and they won’t match up.

Jen: Interesting. So, what challenges does that pose?

Nicole: It really is difficult, because if they’re both reporting to the board, they’re reporting different numbers. So, it’s important that they realize those are differences and then implement some policies and procedures. And the biggest policy and procedure to have is to be able to reconcile so that you can tell the difference, you know the differences of what’s going on between the departments.

Jen: Now is that something we can help with policies and procedures around?

Nicole: Absolutely, we can always provide some consulting; we can help with them to figure out what the differences are, as well as making sure they are communicating any individual grant requirements so that the accounting department can get things set up. If there is a financial reporting requirement that needs to be sent in, it’s always easier if you do it on the front end than at the very last minute.

Jen: Perfect, well, we will get you back to talk a little bit more. How does that sound?

Nicole: Thanks.

Jen: To learn more about how we can help your organization, visit PKFTexas.com/NotForProfit. This has been another Thought Leader Production, brought to you by PKF Texas – The Entrepreneur’s Playbook. Tune in next week for another chapter.

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