5/23/2013. Training Program Developed by: YOUR PART-TIME CONTROLLER, LLC Copyright 2013 by Your Part-Time Controller, LLC. All rights reserved

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1 Training Program Developed by: YOUR PART-TIME CONTROLLER, LLC Copyright 2013 by Your Part-Time Controller, LLC. All rights reserved Has this ever happened to you: You are making a presentation to your board and you discover that development and accounting numbers don t agree??? Rather embarrassing at the least and unnerving to your audience The presentation falls apart as everyone starts questioning the numbers 2013 Your Part-Time Controller, LLC Slide 2 1

2 What is the problem we are trying to solve? Fundraising and accounting numbers often disagree What are the causes? Why does this happen? We will discuss the most common reasons What are the solutions? Good news: we can solve these issues! Double data entry into the donor database and the accounting system: How to eliminate the wasted effort Should your fundraising/donor database have an integrated accounting software component? Does this solve the problem? 2013 Your Part-Time Controller, LLC Slide 3 Your board is having their quarterly meeting. Your development department presents a financial report showing support of one amount, while; Your accounting department presents a financial report showing support of a different amount Who is right? Can they both be right? How is your board supposed to interpret and understand this conflicting information? 2013 Your Part-Time Controller, LLC Slide 4 2

3 Here is an example of two reports presented by the accounting and development departments: Support: Accounting NOTHING AGREES! How do you explain this to your board? Development Individuals $17,000 $19,500 Conditional Corporation $0 $75,000 Fabulous Foundation $300,000 $100,000 Wonderful Foundation $0 $50,000 Total $317,000 $254, Your Part-Time Controller, LLC Slide 5 We will break down the most common reasons why fundraising and accounting information may not agree Your Part-Time Controller, LLC Slide 6 3

4 The concept of cutoff is very important when reporting numbers of any type, financial or nonfinancial Say a contribution received from an individual arrives by check on the last day of the month. If the check went to accounting, they may record it on the last day, but development might not receive notification until the next day, so they record it on the first of the next month. The opposite could also happen if development got the check first 2013 Your Part-Time Controller, LLC Slide 7 Assume $17,000 of individual contributions were recorded by development and accounting in the same month But there was a check for $2,500 that came in to the development dept on the last day. Development recorded it in their software this month, accounting did not Support: Accounting Development Individuals $17,000 $17,000 Individuals $0 $2,500 Total $17,000 $19, Your Part-Time Controller, LLC Slide 8 4

5 The general accounting rule is that a conditional contribution may not be recorded until and unless the condition is met. (There are some exceptions, such as if the condition is unlikely to come into play.) 2013 Your Part-Time Controller, LLC Slide 9 Assume Conditional Corporation contributes $75,000 but adds a condition that the money must be returned if a particular condition is not satisfied. The accounting department cannot record this yet as revenue. (They record increases to assets and liabilities instead.) However, development may enter the gift in their fundraising software. The following report may result: Support: Accounting Development Corporations $0 $75, Your Part-Time Controller, LLC Slide 10 5

6 Accounting rules require all the revenue from a multi-year gift, a foundation grant for example, to be recorded as revenue in year 1 Provided there are no conditions and the gift meets several other accounting requirements Your Part-Time Controller, LLC Slide 11 Fabulous Foundation grants $300,000 over three years. They send a check for Year 1 of $100,000. Provided the grant meets the accounting rules, it is recognized in its entirety, as revenue in Year 1. (We will later address the topic of restrictions) Accounting Development Support: Fabulous Foundation $300,000 $100, Your Part-Time Controller, LLC Slide 12 6

7 Wonderful Foundation gave a grant last year for $150,000. They are paying the grant over three years Accounting recognized the revenue last year, so this year s grant payment is a reduction of a receivable Development might show a report listing the $50,000 payment Support: Accounting Development Wonderful Foundation $0 $50, Your Part-Time Controller, LLC Slide 13 How should gifts of stock and other nonfinancial assets be recorded? It commonly happens that development values the gift at one price and accounting uses a different price Example: Board member A donates 100 shares of ABC Corporation to pay off their outstanding pledge balance of $3,000. Assume that accounting values the gift net of commissions at $2,940. Perhaps development credits the donor for the full $3,000. Reports are now off by $ Your Part-Time Controller, LLC Slide 14 7

8 Differences between classifying gifts for: General operating support vs. programs vs. capital campaigns Differences caused by reporting on funds that are: Unrestricted vs. temporarily restricted vs. permanently restricted Differing treatment of pledge payments Cash vs. accrual presentation differences Communication breakdowns: Development recorded a pledge but accounting never got a copy of the pledge letter, or vice-versa 2013 Your Part-Time Controller, LLC Slide 15 There could simply be a mistake, or several mistakes, by one department or the other 2013 Your Part-Time Controller, LLC Slide 16 8

9 The solutions generally fall into four broad areas: 1. Better communication 2. Report formats 3. Monthly reconciliations 4. Document all policies and procedures 2013 Your Part-Time Controller, LLC Slide 17 Cutoff Development department needs Accounting department needs and accounting rules Chart-of-accounts Cash versus accrual issues Timing issues 2013 Your Part-Time Controller, LLC Slide 18 9

10 Reports, if formatted correctly, can show the information both departments want to show, and the information will agree Example 2013 Your Part-Time Controller, LLC Slide 19 Your fundraising and accounting systems MUST be reconciled to each other at least monthly! This should catch errors, timing issues, and all the other issues already discussed 2013 Your Part-Time Controller, LLC Slide 20 10

11 Document everything! Prepare something that both accounting and development can use to know how to prevent the problems we have discussed 2013 Your Part-Time Controller, LLC Slide 21 What is the problem we are trying to solve? What are the causes? Why does this happen? What are the solutions? Double data entry into the donor database and the accounting system: Should your fundraising/donor database have an integrated accounting software component? 2013 Your Part-Time Controller, LLC Slide 22 11

12 Some organizations enter all contribution information, donor by donor, into their accounting system even after it has already been entered in detail into the fundraising system If you only get a few donations per day, this is not a problem However, if you get dozens, hundreds, or more, this is a problem SOLUTION: enter the details in the fundraising software, and summary information only into the accounting system This is similar to how many organizations handle their payroll if processed by an outside vendor Coordination is required between the departments 2013 Your Part-Time Controller, LLC Slide 23 A fully integrated software system in theory should solve many of the problems discussed, but in reality it often times does not Coordination between development and accounting is still necessary PROS and CONS of integration DonorPerfect has a new bridge to QuickBooks 2013 Your Part-Time Controller, LLC Slide 24 12

13 DonorPerfect and Quickbooks Integration Identify Income Accounts in QB Create Accounts in DonorPerfect Assign GL Code to Accounts in DonorPerfect Enter Gifts and Pledges Export datafile from DonorPerfect Import datafile into Quickbooks Create QB Accounts in DonorPerfect 13

14 General Ledger Account Number Enter Gifts and Pledges Remember to enter General Ledger 14

15 Download Accounting Data Import File into Quickbooks 15

16 Reconcile with Reports from Receipts Reconcile with Financial Reports Periodic Gift Comparison 16

17 President and Founder of: Your Part-Time Controller, LLC Washington, DC; Philadelphia, PA; New York, NY Website: Eric s blog on nonprofit financial management best practices: Follow Eric on Read Eric s blog: Eric is not affiliated with DonorPerfect (though he likes the software!) 2013 Your Part-Time Controller, LLC Slide Your Part-Time Controller, LLC Slide 34 17

18 Thank you! We look forward to seeing you in our next webcast on July 25 entitled How to Make the Ask Successfully Please send your suggestions and comments to us via Facebook.com/donorperfect or in our follow-up survey 18