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Fundraising Fundamentals, Section 9.4


Working with the Finance Office

A key component of development is securing financial gifts. The efficient accounting and reporting of gifts is critical because it reassures the donor that they are dealing with a professional organisation, and it means that you can:

  • ‘Count’ the money received to know how much you have raised to date,
  • Generate reports and share information on your fundraising status/success,
  • Deal with the wide range and volume of gifts – from more than £1 million to just £1 dropped in a collecting tin,
  • Meet your obligations to the financial and charity regulators,
  • Make sure that income designated for particular projects is restricted for those projects,
  • Invest endowment funds wisely and
  • Fundraise tax efficiently.
Establishing the Relationship

A newly appointed director of development should meet with the director of finance to pool their knowledge and understanding of the management of fundraising income. Some key questions to discuss are:

  • Does the institution already have any philanthropic income? How is this identified and accounted for?
  • Does the institution have an appropriate level of expertise in charity law, taxation and finance to support a growing level of philanthropic income or is there a training requirement?
  • Is there a records retention policy?
  • Who will be responsible for receiving and processing donations?
  • Does the current finance system allow income to be restricted for special projects and carry forward from one accounting year to the next?
  • Is the institution familiar with government funding incentives or matched funding schemes (e.g., Gift Aid in the UK)?
  • Does the finance office have capacity to support the development office or are there some staffing issues to resolve?
  • Where should the boundaries of responsibility lie?
  • How are pledged gifts accounted for?
  • Are there any IT infrastructure issues that need to be overcome to enable communication between the two offices?

Once this initial discussion has taken place, the two directors need to work together on a strategy to establish a strong working relationship. An initial decision is whether the balance of finance management should fall in the development or finance office responsibilities.

Some larger development offices have their own finance teams who work closely with the institution’s finance office; others just do gift processing and rely on the finance office for the management accounts. Some rely totally on the finance office for everything from gift receipts to annual returns.

Staff members in both the development and the finance office need to develop a strong understanding of the journey a gift makes through the finance systems from the moment it is pledged to its receipt, recording and processing and ultimately to when it is spent. This journey needs to be transparent and accountable.

Identifying Previous Donors

When you start your development office, you must determine who has given to your institution previously. The finance office may be the most likely place for you to find this information.

Advising on Budget Development and Management

The finance director is a great source of help and advice when you are preparing your budgets. He or she will be able to offer insight into what level of funding is feasible and assist you to gather financial data to support your bids for further investment. The finance director will also have advice on how to best manage your budget on an ongoing basis.

Reporting Obligations

Your finance office will be best placed to help you to measure your progress by generating reports. It will also be able to work with you to provide the relevant returns to organisations such as:

  • Government or charity regulators (e.g., the Charity Commission in the UK),
  • The Ross-CASE survey,
  • Higher education funding councils,
  • Larger trusts and foundations and
  • Your institution’s board of directors.
Advising on Endowment Fund Investments and Gift Fees

As your development activities mature, your institution may find that it is able to build up an endowment fund to support its long-term ambitions (or may elect to have a gift fee).

Your institution needs to decide what percentage of the interest generated through endowment investments (or fees) can be spent or will be reinvested, and what the criteria for expenditure should be. An endowment policy or gift fee policy will also need to be established.

Colleagues in the finance office play an important role in devising the best investment strategies to nurture this endowment. They will also be able to assist in recruiting external advisers as appropriate, and to help establish policies and endowment administration procedures.

Making It Work

You will have a successful working relationship with your finance office if:

  • You communicate frequently and openly,
  • You respect each other’s expertise,
  • You have mutual understanding of each other’s objectives,
  • The boundaries of responsibility are clear and
  • The level of service each can expect is clear.

Action Item
  • Establish a relationship with the finance office early on – defining roles and responsibilities, outlining the procedures for processing a gift, identifying past donors, learning about the budgeting process and reporting obligations, determining how you will work together, etc. The strength of this relationship is critical.

You Might Also Want to Read:

Reviewing the current situation
Preparing and managing the budget
Development operations
Gift accounting and reporting
Financial and legal implications of international development activities

Leisl Elder talks about whether or not to have a finance person on your institution's development team, and how development departments can work with finance departments.