Nonprofit Accounting Basics

Improving Communication Between the Accounting and Development Department

Note: Articles published before January 1, 2017 may be out of date. We are in the process of updating this content.

In this article, we will take a closer look at ways to improve communication specifically between the accounting and development departments.

The relationship between these two departments is probably one of the most important within an organization. The actions of one department can have a direct impact on the other; therefore, it is important that the accounting and development departments are continuously coordinating their efforts. However, when the accounting and development departments work independently of each other, communication breakdowns can easily occur.

For example, most grants come with reporting requirements, and at times, special audit requirements. Furthermore, depending on the specific terms of the grant agreement, there could be a significant amount of paperwork and certain restrictions that accompany the use of grant funds. If these important details are not identified and communicated to both the development department and the accounting department in a timely manner, deadlines could be missed, restrictions could be broken, and everyone could be left scrambling to make sure the funding does not fall through. Sound familiar?

To shed some light on what causes these communication breakdowns, let’s consider the types of information each department should consider when communicating to the other. If you are a member of the development department, here are a few examples of the types of activities you should inform the accounting department of when you come across them:

  • Grants: If you are applying for a grant, be mindful of the language used in your application. If you request grants for a particular program or activity, any funds received can be restricted by the grantor specifically for the purposes listed in your request. Using the funds for any other purpose could violate the terms of the grant agreement and force the organization to repay the funds. For this reason, it is paramount that you read the grant document carefully and make sure you provide a copy of the agreement to the accounting department. In addition, any financial statement reporting requirements associated with the grants should be communicated to the accounting department immediately. Depending on the grantor’s requirements, your organization could lose access to the funds in total or have any future reimbursements disallowed if any of the reporting requirements are not met.
  • Pledges: In most instances, pledges are accounted for when made—not when they are physically received. For this reason, it is important that the development department communicate to the accounting department when a pledge has been made either verbally or by e-mail/mail, especially any pledges made at or near the organization’s fiscal year end. It is important that the accounting department records the pledge in the correct fiscal year. If the details of when a pledge was made are not communicated to the accounting department in a timely fashion, the pledges could be erroneously recorded in the wrong fiscal year.
  • Capital Campaigns: All solicitations related to a capital campaign, or any other campaign to raise funds, should be developed in concert with the accounting department prior to mailing. The language included in the solicitation could unintentionally create a restriction on the use of the funds. Additionally, these types of contributions tend to occur over a series of years. Accounting standards dictate that the revenue generated by these types of contributions be recorded in the initial year made rather than when the funds are received each year.

Now, if you work in the accounting department and have been nodding your head in agreement for the last few minutes, here are a few things you need to keep in mind when communicating with the development department:

  • The members of the development department are not accountants. Do not expect them to understand generally-accepted accounting principles. Instead, take the time to explain the importance of regularly communicating grant and other funding information to you rather than trying to communicate each detail that makes information important in your eyes. Remember, keep it simple.
  • Meet with members of the development department periodically to discuss any new grant proposals in process, new campaign initiatives, and any related financial reporting requirements. By staying informed as early on in the process as possible, you can avoid problems later on and minimize any last minute crunches.
  • If you happen to hear members of the development department discussing a new funding source, but have yet to see a copy of the agreement, be proactive and ask for it! Being proactive is a key aspect of effective communication. Make of point of seeking out the information you need, rather than waiting for someone to provide it to you.

While every member of the staff plays a different role, everyone is working toward the same goal—fulfilling the mission of the organization. Remember, teamwork is essential for true success and effective communication is a learned skill. For most of us, the ability to effectively communicate does not come easy, but with consistent effort and patience, we can all get there.