By Doug Hasler, CPA, Director at Blue & Co.
Many organizations postponed or extended timelines for fundraising campaigns during the pandemic. Campaigns for capital expansion or renovations will need to restart to keep projects and commitments on track toward completion.
Organizations with changing needs may have depleted reserves and now need to begin new campaigns to replenish reserves or to work toward sustainability moving forward. Other organizations are recognizing their tolerance for leverage levels pre-pandemic has decreased as uncertainty has risen and campaigns to pay down debt obligations are also being pondered.
As you contemplate the parameters of your next fundraising campaign, we suggest that you consider the following related to campaign communications and documentation, and their impacts on the proper recording of contributions and pledges receivable.
Accuracy Of Campaign Solicitation Materials
If your organization solicits funds from donors for a specific purpose and a donor responds to that appeal with a gift, absent any explicit restriction provided by the donor with the gift, the gift is assumed to be restricted for the purposes outlined in the organization’s solicitation. Therefore, it is extremely important that the organization’s appeals for gifts outline intended restrictions appropriately.
- The organization should specifically outline to donors what it intends to do with the proceeds of the appeal so that when donors give to that appeal without further specification, the purposes of each gift are clear to everyone.
- If the organization intends that the funds raised by a campaign are intended to fund the cost of the campaign in addition to the building project itself, this should be explained to donors in the appeal.
- If a certain percentage of each gift is intended to be classified as unrestricted to cover administrative overhead, this should also be specified.
- If the campaign is intended to be an unrestricted campaign, the wording of the campaign should make this clear.
Recording Of Pledges Receivable
Pledges receivable, or promises to give, are unconditional written or oral agreements by donors to contribute cash or another asset to the organization. Pledges can be verbal or written but require verifiable documentation to be recorded.
We recommend that all pledges be documented in writing and that structured payments be scheduled out with the donor if the pledge is to be paid over multiple years; this will assist with solidifying and documenting the donor’s intention. Verifiable pledges should be recorded as support at the time the gift is made.
Review Of Capital Campaign Allowance Methodology
Given what will likely be a large volume of pledge receivables from a wide range of donors, we recommend that the organization consider the recording of an allowance for doubtful pledges at an appropriate level. As the campaign progresses, this includes considering specific allowances for past due pledges as well as a general allowance percentage applied to all outstanding pledges.
Good Communication Among Management Personnel
Any time an organization is asking donors for support, it is imperative that open communication exists between the accounting department and development personnel. The delivery method (email, mail, one-on-one visits, or conversation) can greatly affect how the gift is reflected in financial reporting, including timing and fund restrictions. We recommend that you develop policies for open communication among these personnel to ensure all pertinent information is being captured and shared both prior to and after the solicitation for such gifts.
We believe it is important to take advantage of opportunities to be achieved with effective campaigns, while avoiding pitfalls resulting from inadequate communication of objectives or creating inherent restrictions that are unintended.
Blue & Co.’s Not-For-Profit team offers a holistic approach to optimize your fundraising campaigns. We’ll guide your management team in aligning objectives with effective funding strategies to enhance donor communication while preventing unintended consequences. Contact a Blue & Co. advisor for assistance today.