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

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

Here is an example of two reports presented by the
accounting and development departments:
Accounting
Development
Support:
Individuals
Conditional Corporation
Fabulous Foundation
Wonderful Foundation
Total

$17,000
$19,500
$0
$75,000
$300,000
$100,000
$0
$50,000
$317,000
$254,500
NOTHING AGREES!
◦ How do you explain this to your board?
© 2013 Your Part-Time Controller, LLC
Slide 5

We will break down the most common reasons why
fundraising and accounting information may not
agree.
© 2013 Your Part-Time Controller, LLC
Slide 6


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
Accounting
Development
Support:
Individuals
$17,000
$17,000
Individuals
$0
$2,500
$17,000
$19,500
Total
© 2013 Your Part-Time Controller, LLC
Slide 8

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:
Accounting
Development
Support:
Corporations
$0
© 2013 Your Part-Time Controller, LLC
$75,000
Slide 10

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.
© 2013 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
© 2013 Your Part-Time Controller, LLC
$100,000
Slide 12

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
Accounting
Development
Support:
Wonderful Foundation
$0
© 2013 Your Part-Time Controller, LLC
$50,000
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 $60.
© 2013 Your Part-Time Controller, LLC
Slide 14

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

The solutions generally fall into four broad areas:
1.
2.
3.
4.
Better communication
Report formats
Monthly reconciliations
Document all policies and procedures
© 2013 Your Part-Time Controller, LLC
Slide 17
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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


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

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

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


One of the first slides illustrated “the problem” by
showing a hypothetical set of reports produced by
the development and accounting departments
side-by-side.
With better communications between
departments, redesigned report formats, monthly
reconciliations, and documentation of polices and
procedures, the following report formats might
have been produced.
© 2013 Your Part-Time Controller, LLC
Slide 25
Accounting
Development
Support:
Note
Part 1
Individuals
$17,000
$17,000
(A)
Individuals
$2,500
$2,500
(B)
Fabulous Foundation
$300,000
$300,000
(C)
Total REVENUE
$319,500
$319,500
(D)
Pledge and receivable payments:
Part 2
Fabulous Foundation
$100,000
$100,000
(E)
Wonderful Foundation
$50,000
$50,000
(F)
$150,000
$150,000
(G)
Total pledge & receivable payments
Conditional awards:
Part 3
Conditional Corp (cash received)
$75,000
$75,000
(H)
$0
$75,000
(I)
Conditional Corp (no cash yet)
© 2013 Your Part-Time Controller, LLC
Slide 26

Part 1:
◦ This part of the report shows revenue. The term
“revenue” has a very specific meaning in accounting. Its
calculation is governed by GAAP (Generally Accepted
Accounting Principles).
 However, GAAP does not prevent the accountant from
portraying information in helpful ways using different
formats, charts, graphs, etc., such that the user of the
information can better understand what is happening.
© 2013 Your Part-Time Controller, LLC
Slide 27

Note A:
◦ In our original example, there were no differences
between the development and accounting reports for
reporting these individual contributions, so nothing
special is needed here.

Note B:
◦ The original discrepancy of $2,500 resulted from a
miscommunication between the accounting and
development departments. With better communications,
both departments were able to record this gift in the
same month.
© 2013 Your Part-Time Controller, LLC
Slide 28

Note C:
◦ Two separate and distinct events happened with Fabulous
Foundation.
 We received an unconditional grant award letter for
$300,000
 We received a $100,000 check for year 1
◦ With better communications between departments, both
development and accounting can both show the full
$300,000 in revenue.
 Other reports may show some of the grant as unrestricted
and the remaining amount as restricted.
◦ In Part 2, both departments can show the $100,000 of
cash.
© 2013 Your Part-Time Controller, LLC
Slide 29

Note D:
◦ Now, as a result of better communications and policies
explaining how gifts should be recorded, both
departments can produce reports showing the same
amounts of revenue.
© 2013 Your Part-Time Controller, LLC
Slide 30

Part 2:
◦ Merely showing revenue, as in Part 1, is usually NOT
sufficient. Other activity is happening which development
will want to communicate to management and the board.
 Examples of other activity include receipt of pledge
payments, receipt of other receivable payments, conditional
awards, and more.
© 2013 Your Part-Time Controller, LLC
Slide 31

Note E:
◦ In this section both departments can show the year 1
payment received from Fabulous Foundation, while the
revenue of $300,000 is shown in Part 1.

Note F:
◦ Both departments can show the $50,000 pledge payment
from Wonderful Foundation now while the revenue was
recorded last year.
© 2013 Your Part-Time Controller, LLC
Slide 32

Part 3:
◦ There are other events which may cause differences
between accounting and development reports.
Conditional gifts or grants is one example.
© 2013 Your Part-Time Controller, LLC
Slide 33

Note H:
◦ Assume Conditional Corporation has sent you an award letter
for $75,000 along with a check for $75,000. The award has a
condition, however, which will require the funds to be returned
if the condition is not met. Both accounting and development
may show the receipt of the $75,000, however from an
accounting standpoint, no revenue has been earned.

Note I:
◦ In this scenario, the conditional award letter was received
without a check. From the accounting standpoint, because of
the condition, there is no entry. However, development should
enter this into their fundraising software in the appropriate
place.
© 2013 Your Part-Time Controller, LLC
Slide 34

President and Founder of:
◦ Your Part-Time Controller, LLC
◦ Offices in Washington, DC; Philadelphia, PA; New York, NY
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Email Eric: EricF@yptc.com
See Your Part-Time Controller’s website:
www.YPTC.com
Read Eric’s blog on nonprofit financial management
best practices: www.EricYPTC.com
Follow Eric on Twitter: @EricYPTC
© 2013 Your Part-Time Controller, LLC
Slide 35
© 2013 Your Part-Time Controller, LLC
Slide 36