Finance and Fundraising: Don’t Underestimate the Power of Collaboration

Guest Blog by Erica McGeachy Crenshaw, CEO of Execute Now!, Member of Maryland Nonprofits

Read the original blog here.

Communication between the development office and the finance department is a highly critical competency as it relates to sound nonprofit leadership. Yet, so often -too often- nonprofits neglect in-house practices in lieu of seemingly more visible objectives such as cultivating and attracting donors.

Just last fall, The Washington Post reported, “More than 1,000 nonprofit organizations checked the box [in Schedule O of their 990 form] indicating they had discovered a “significant diversion” of assets, disclosing losses attributed to theft, investment fraud, embezzlement and other unauthorized uses of funds … The diversions drained hundreds of millions of dollars from institutions that are underwritten by public donations and government funds. Just 10 of the largest disclosures identified by The Post cited combined losses to nonprofit groups and their affiliates that potentially totaled more than a half-billion dollars.”

Reginald Brewington, audit manager for Tate & Tryon in Washington D.C., recently added to this discussion about the importance of financial checks and balances in a recent post “Improving the Communication Between the Accounting and Development Department.” Brewington’s article targets several root causes of how a nonprofit can get into financial trouble if it doesn’t connect the dots between the accounting and development departments. At Execute Now!, we liked the fundraising tools below that Brewington highlights as opportunities for the two departments to start talking.

If you’re a development director, you should inform the accounting department when:

-Soliciting restricted funds for specific programs – “Using the funds for any other purpose can violate the terms of the grant agreement and force the organization to repay the funds.”

-Soliciting pledges – “It is important that the development department communicate with the accounting department when a pledge has been made either verbally or by email/mail, especially at or near the end of a fiscal year.”

-Conducting capital campaigns – These campaigns entail all of the above accounting red flags, such as restricted funds, pledges, pledges over multiple years, etc. Accounting departments are held to a high standard and they appreciate knowing when a pledge originates and fulfillment plans.

If you’re an accountant, take the first step.

Conversely, Brewington encourages accounting and finance staff to be proactive about staying informed mostly due to the fact that development officers don’t necessarily have financial training. He advocates for setting up regular meetings with development staff as well to stay informed about fundraising prospects on the horizon. At Execute Now!, we would add that the accounting and development staff agree on maintaining a clear flow chart of accounts and protocol for each of the giving mechanisms (gifts, pledges, multiyear pledges, designations, etc.).

Characteristics of healthy financial management practices

In the spirit of bringing together accounting and development departments with better communication, let’s revisit what sound financial management looks like at the leadership level. Here are a few reminders:

-Exceptional financial judgment is applied to all organizational decisions.

-A clear flow chart of accounts and ethical policies honor donor requests.

-Multi-year data is easily reviewed while monthly projections are conservative and regularly monitored by staff and board.

-All external and internal systems are fully integrated with budgeting.

-Finances reflect a commitment to transparency.

At Execute Now!, we are dedicated to helping organizations demonstrate great communication behaviors within and between every department so they can operate with financial ease. Join me in observing Brewington’s post and The Washington Post’s article as important reminders to look internally at your financial matters and communications.

Join Maryland Nonprofits’ 2014 Annual Conference “Connecting for Impact!” November 5th at the Universities of Shady Grove in Rockville, MD. 

 

 

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