The keys to your success are fundraising and mission delivery.
In the past, Finance personnel could make the case that “raising money is Development’s job; I’m here to record the debits and credits”. In today’s ultra-competitive environment, with more nonprofits competing for fewer available dollars, it’s become harder to justify this position.
While Development will certainly maintain the direct responsibility for securing grants, there are several things that the Finance office can do to indirectly support those efforts and help your nonprofit survive and thrive:
Distinguish Between “What’s Being Funded” and “Who’s Doing The Funding”
In a previous post, we talked about the importance of reporting on multiple funding sources that support the same program. Aside from better management of donor solicitations, this ability becomes even more important as we’re dealing with multiple grants that fund the same program. If you have gifts from both the Golf Tournament and the Phone-a-thon given in support of the Clothes For The Homeless program, for example, there’s no need to worry about spending “golf tournament dollars” versus spending “phone-a-thon dollars” – as long as the donor designation is fulfilled, those monies can be pooled.
Grants are a different animal: When we purchase clothes for the homeless, we must be able to track whether we’re spending those dollars out of the Federal Grant or out of the State Grant; those monies cannot be pooled. If you in the Finance office are unable to distinguish between multiple grants that are funding one program, both from a revenue and expense standpoint, your organization will be limited to only receiving one grant per program, and your total fundraising will suffer.
Distinguish Between “Grants” and “Gifts”
It’s important that your nonprofit properly report on the various revenue streams that make up your support; grant revenue should be journaled separately from gift revenue. Sounds insultingly simple, right? I mention it because a lot of nonprofits don’t really have a clear idea of what distinguishes a grant from a gift. Why is this? Well, here are a few things that don’t help you distinguish between the two:
- Monetary Value: We can receive major gifts (whatever “major gift” means to your organization) just as easily as we receive a grant!
- Type of Donor: Corporations and foundations award grants, sure…but they also make donations!
- Designation: Grants are most often awarded for a purpose, or to fund a specific program or initiative…but donors can specify that their gifts are to be used for those same purposes!
So, knowing what can’t be used to distinguish between the two, where does that leave us? Almost always, it will come down to the reporting requirements that are attached to the dollars (or, in the case of a reimbursable grant, you have to incur an expense and submit an invoice for reimbursement, which makes it more obvious). It’s important that the Finance Office work with Development to ensure that everyone at your organization understands what income represents a grant, and what income represents a gift.
You already know that providing accurate and timely information to your grantors is as important as providing accurate and timely information to your Board. I recommend placing “Development staff” on that same list; we should be able to provide accurate and timely information to Development just as much as we do to the Board. You, as part of the Finance office, will have a much clearer picture of the budgetary situation, the amount remaining to be spent for each grant, and any shortfalls in program funding; the more you share with Development, the better they’ll be able to properly focus their fundraising efforts.
What does that have to do with accountability?
Well, when you provide this information to the various recipients, are you providing that information directly from your books…or are you making an intermediate stop in Excel? The instant we have to massage our financial data in Excel before we send it to the intended audience, we lose any true audit trail. Excel is a great tool for data manipulation, but if we’re manipulating our financial data, even for a good purpose like separating various funding sources, we lose our claim to real accountability (not to mention that adding additional steps to your reporting process will always make the information less timely). It’s important to provide all of our financial information directly from our books, without manipulation!
Why should Development have all the fun?
It’s easy to get bogged down in the day-to-day details of running a solid Finance office; after all, nobody else has the skills or knowledge to process payroll, or get invoices sent, or generate the income statements that each department head wanted yesterday. Don’t let the everyday grind pull your focus off of what your organization is truly doing for your community! Don’t let your Development and Program staff members be the only people with a reason to smile about what you’re accomplishing. Volunteer at an event, or spend a day helping Programs do what they do! It’s a great way to remember what you’re all working towards; those Accounts Payable entries can wait just a little while!