Finance and development each play a critical role in nonprofit organizations. Their responsibilities include fundraising, maintaining relationships with existing and new donors and providing timely and accurate financial data and financial reports. These functions are essential for the ongoing operation of the organization and successful fulfillment of its mission.
Whereas finance and development teams have different areas of focus and priorities, their work is interrelated. This necessitates their working collaboratively. Fundraising efforts and decisions made must be supported by reliable financial data and accurate financial reporting.
Areas Where Collaboration Is Needed
DONATION RECORDING AND RECONCILIATION
Whether the development and finance departments use separate systems or an integrated platform to record donations and pledges, the data entered must be accurate and aligned. Differences must be identified promptly with corrections made when necessary.
For example, a donation received and recorded in the accounting system but omitted from the development system can result in a donor being contacted asking for a donation which they have already given. The organization may ultimately lose the support of the donor due to concerns about its effective financial management.
SUPPORTING DOCUMENTATION
The finance department has specific requirements regarding supporting documentations for donations and pledges. Before any donation or pledge can be recorded in the accounting system, the donor must provide supporting documentation confirming the amount and their intent.
The format of the documentation, such as e-mail or pledge letter, is determined by the finance department. Once established, the development department is responsible for obtaining this documentation from the donor and providing it to the finance department.
POLICIES AND PROCEDURES
Establishing, documenting and enforcing policies and procedures are essential for both the finance and development departments in establishing efficient workflow and maintaining effective internal controls. It is critical for the finance and development departments to have a clear understanding of each other’s operations. By doing so they can develop policies and procedures that are realistic, practical and meet their specific needs.
COMMUNICATION AND COLLABORATION
Development and finance teams often work independently with limited communication and collaboration. This can lead to challenges when questions arise regarding donations and pledges. These must be addressed promptly to ensure accurate financial reporting and informed decision-making.
To promote effective communication and collaboration, regular meetings should be scheduled between the finance and development teams to discuss, for example, new fundraising initiatives and recordkeeping, discrepancies in recording donations and pledges, financial reports and financial data needed for reporting to donors, ensuring all parties have the information they need.
REPORTING TO SENIOR MANAGEMENT AND THE BOARD
Before fundraising results are reported to senior management and the board, both finance and development teams must work together to reconcile the information in their respective systems.
For example, differences may arise due to specific rules the finance department must adhere to for classifying, recording and reporting donations and pledges. In addition, the development department might record pledges based upon a telephone call from a donor whereas the finance department requires written confirmation. These differences must be explained to senior management and the board to ensure a clear understanding of the organization’s financial position.
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