At Fundriver, we work with both the Accounting office and the Development office. Very often these offices’ gifts and contribution revenue do not match at the end of the year! However, there are common reasons behind these discrepancies. Most often Development is recording every gift according to campaign goals. The Accounting office records differently, due to their need to follow General Accepted Accounting Guidelines (GAAP). Let’s look at various examples and how each office records the transaction.
- Mr. Anderson has named XYZ Organization as the beneficiary of his $1 million term life insurance policy. Mr. Anderson owns the policy and will pay the annual premiums.
Development: $1 million gift recorded!
Accounting: $0 recorded. The Accounting office will not record a gift until the donor passes away and the policy changes hands.
- Ms. James has pledged $500,000 to be paid through her estate, which will serve as an endowment for XYZ’s programs. Pledge card has been signed and there are no other conditions present.
Development: $500,000 gift recorded!
Accounting: $400,000 recorded; this includes a present value discount based on the donor’s estimated life expectancy and discount rate.
- Mr & Mrs. Smith previously donated $300,000 to XYZ Organization which is held in a Donor Advised Fund. This year, they recommended that XYZ distribute $80,000 to the annual campaign from their previously contributed Donor Advised Fund.
Development: $80,000 gift recorded!
Accounting: $0 recorded in current year for the distribution to the annual campaign; Accounting recorded this as a gift when received by the Donor Advised Fund and can’t count it a second time.
- ABC Construction Company has been selected to serve as the construction manager for XYZ Organization’s upcoming building expansion project. ABC has agreed to provide a 30% discount on their services- which is equal to $300,000! Project starts during the next fiscal year. XYZ’s Board has approved the ABC contract, and it is signed by all parties.
Development: $300,000 gift recorded!
Accounting: $0 recorded in current year; GAAP requires contributed services to be recorded when received, in this case gift will be recorded NEXT fiscal year.
- A professor will be receiving a $5,000 summer stipend. Instead of receiving the stipend, he would like the money to go to the school he is teaching at as a contribution.
Development: $5,000 gift
Accounting: $0 recorded when professor makes this decision; to count for GAAP purposes, the organization must payout the stipend and the professor must then write a check back to the organization.
How do we get the Development office and the Accounting office all on the same page? It’s good practice to have your Accounting office review your gift policy and pledge cards/donor agreements. Make sure gifts are documented in writing and a clear understanding is established with donor. Reconcile between Accounting and Development often. This allows teams to address issues as they come up and not wait for audit time! Talk with your auditors throughout the year as complex gift transactions come up. And remember, GAAP accounting and Development accounting are not the same!
Feel free to drop us a comment, what’s your most unusual gift received?
For more information:
National Council of Nonprofits: https://www.councilofnonprofits.org/tools-resources/gift-acceptance-policies
Council for Advancement and Support of Education (CASE) Standards: https://www.case.org/