Communication between departments in anon-profit facilitates collaboration, fostering an understanding of different roles within the organization, and more connections to support each other. A breakdown in communication between a non-profit’s development and accounting departments can lead to confusion, embarrassment, and even financial problems.Here are three ways your organization can facilitate cooperation between these two critical functions.
Each department has different method of structuring data, categorizing financial data, and has different goals which impacts how reports are created. Development may use a cash basis of accounting, while accounting records contributions, grants, donations, and pledges in accordance with the non-profit Generally Accepted Accounting Principles (GAAP).
As an example, a donor could make a payment in March 2018 for a pledge originally made in December 2017. The development department will enter the amount of the payment as a receipt in its donor database in March. On the other hand, accounting will record the revenue when the pledge was made in December and record the payment against the pledge receivable. This means that the receipt of the check in March 2018 will impact the development department’s record but not the accounting department’s, even though they both have accurate records of the donation.
Define procedures for reconciliation
Due to these departmental accounting differences, it is important for your non-profit to try to reconcile its accounting and development schedules at least monthly. At the very least, both departments need protocols for communicating important donor activity throughout the organization to avoid confusion and potentially negative consequences.
For example, if development does not communicate grant activities to accounting on a timely basis, accounting may not conduct the proper reporting requirements and could forfeit funds for noncompliance. Moreover if accounting does not record grants or pledges using the financial period according to GAAP, your organization could run into significant issues during an audit — which could also jeopardize funding.
Create communication processes
Once you have acknowledged differences and defined procedures to bridge those gaps, the final step is to consistently put those resources into action. This begins by conducting training sessions with both accounting and development staff representatives to clarify the procedures and ensure that each department understands their responsibilities.
A simple way to ensure this is implementedconsistently is to set a short standing monthly meeting where both accountingand development department representatives meet to review how the processes aregoing, suggest improvements, and discuss any notable recent donor or grantactivity. Development should also present status reports on different types ofgiving — including gifts, grants, and pledges. This is especially important forthose items received in multiple payments because accounting may need todiscount them when recording them on the financial statements.
Ernst Wintter & Associates LLP specializes inCalifornia non-profit audits and tax preparation. Contact us today for helpwith your non-profit audit or tax prep needs.