The development director and the finance director at the Society for the Promotion of Boat Racing were good friends outside of work, but they tended to spar when they were in the office (physical or virtual). The squabbling recently became even more heated as the Society moved into a capital campaign.
Even though the nonprofit was wildly successful in both membership and fundraising, the problems stemmed from the fact that the two directors were continually reporting different numbers to their CEO and even to the Society’s board. And, with the advent of a campaign committee made up of prestigious community leaders, matters became even worse.
The campaign chair loved the early fundraising totals that she’d been seeing. But at a recent meeting, the board treasurer, against whom the campaign chair had raced in the past, told her point-blank ‘cash is king. We cannot break ground before we have the money in the door.’ The CEO was embarrassed. The finance director and the development director might have engaged in fisticuffs, were it not for the need for social-distancing.
With this camel’s back broken, a mediator was engaged by the CEO. By happy accident, that mediator happened to have been both a development director and a nonprofit finance director in his past. After listening to the backstory, his solution was straightforward: effectively integrate the fundraising database with the accounting system.
In the wake of astonished stares from the stakeholders, the mediator realized that while the solution might be straightforward, the path to success might be rocky. With that in mind, he shared some tips for getting started:
Ensure both teams have a clear understanding of what Finance needs from Development
The Finance team is responsible for financial reporting that complies both with Generally Accepted Accounting Principles (‘GAAP’) and meets the requirements of organizational leadership, government agencies, and auditors. Since financial reporting emanates from the general ledger (GL) and possibly other areas of the accounting system, it’s incumbent upon the Development team to understand what fundraising financial information is needed: what data from the fundraising database needs to go into the accounting system – and what doesn’t.
Determine whether the Development system can – or can’t – maintain the information the Finance needs
The fundraising database will certainly preserve basic financial data – gift amount and gift date, for example – but other key information may not be housed in that system in standard fields, or may not be presented in the format needed by Finance.
For example, the fundraising system may use a gift type and a fund code, whereas the accounting system needs the same information in the form of a GL account number. The Finance team should remain cognizant not to force the Development team to use unfamiliar (or ‘unnatural’) structures, coding, and distributions – but if the fundraising system cannot maintain and provide the data that Finance needs in the way they need it, some type of ‘bridge’ or ‘crosswalk’ software may be needed to translate.
Discuss the processes that need to put into place to ensure reconciliation
The purpose of integration is defeated if the two systems in question cannot be reconciled when they need to be. When the systems are effectively integrated, the GL will see the fundraising system as one of its subsidiary ledgers, and at any given time the detail in the subledger must be able to ‘tie’ to the activity posted in the GL for the same period and accounts, with an audit trail to back it up if necessary.
Determining how often the systems need to be reconciled, and what reports or other outputs will be used for reconciliation, are critical.
Come up with a posting schedule that works for everyone – and that everyone can agree to
How often does the fundraising system need to send data to the GL? Daily ‘posting’ is certainly a best-practice, but may not be necessary at times when transaction volume is low, which for some organizations may be year-round. One rule of thumb is to post to the GL for each bank deposit – and while more frequent posting will increase the number of items to reconcile, it will decrease reconciliation issues by a much greater factor.
Establish how fundraising financial data is going to be transmitted to the accounting system
This has to do with whether standard outputs from the fundraising system provide the right information needed by accounting, and in the right format. (Being clear on what’s needed and furnishing what’s needed are not the same.)
Will standard reports or data file(s) generated by Development work for the accounting system? If so, great! If not, what has to be done to ensure that data provided by fundraising can be used by accounting? Things to think about include whether transactions need to be summarized, whether rows or columns need to be added or removed; and whether output files need to be converted to an alternate format.
Determine if you will need a technology bridge
If financial information from the fundraising system has to be transformed in any way, should it be done manually? Or will appropriate apps and integrations be valuable to bridge the gap?
For example, different gift coding in the fundraising database may indicate if a donation is restricted or not, if it’s new revenue or paying off a pledge already recognized, where it was deposited, or how it’s classified. In the accounting system, all of that may need to be translated to an account string, the components of which reflect what are various different codes on the fundraising side. The accounting system may also want transactions summarized by date or account, and will likely want any information organized into debits and credits.
Depending on systems, technology bridges – automated crosswalk software – can be configured and deployed that transform the data as required – often saving manual effort and ensuring accuracy.
Agree on – and be okay with – who’s in charge
There needs to be a point person on each team – a problem-solver that everyone trusts – and with whom the buck stops (pun intended).
The mediator in our story from the beginning continued to work with both teams until they had ironed out the issues he discussed and questions he raised. He advised that the fundraising system have valid processes in place to record the key accounting information (gifts restricted for the campaign vs. for annual operations; new cash gifts vs. payments on existing pledges, etc.), but that users not be burdened by having to key in GL: account strings or debit and credit distributions.
He recommended that the Finance team build a crosswalk so that it would be easy to record in the GL the 90% of gift transactions that were the least complex and the most common. And he focused on reconciliation procedures – In general, but also so that the campaign chair knew both how much had been raised and how much could be spent (and how much had been spent).
The Society’s development director and finance director remained friends, and still sparred, but only in their sailboats and only when they raced each other.
About the Author
joined Omatic Software almost five years ago as Director of Professional Services. In that role, he provided leadership to Omatic’s consulting, implementation, training, and custom-development teams. Prior to that, Stu worked for 13 years at Blackbaud, also in Professional Services, working with the Raiser’s Edge, Financial Edge, and Blackbaud CRM implementation and consulting teams as a consultant, solution architect, and practice manager.
Previously, Stu spent the first half of his career as a nonprofit executive, fundraiser, and finance director, working in both the healthcare and arts/cultural arenas of the nonprofit sector. He holds business degrees from Washington University and the University of Wisconsin, and he earned his CFRE credential in 1999.
Currently, Stu serves as Omatic’s Nonprofit Advocacy Director. In that role, he is Omatic’s nonprofit sector domain specialist and subject-matter expert, and is responsible for actively promoting and demonstrating Omatic’s position as the nonprofit industry authority on data health and integration.