Fundraising success: Properly managing accounting, risk and technology

Fundraising campaigns are critical to the sustainability of nonprofits, and organizations must consider several key elements to help ensure campaign success. To achieve your objectives, you must properly account for the campaign activity and results, determine effective technology options, understand the risks associated with a campaign and implement necessary controls. Gaining this additional perspective can increase the success potential of your campaign and help avoid harmful issues later in the process.

RSM US LLP recently held a Strategies for a successful fundraising campaign webinar series to help nonprofit organizations understand and overcome capital campaign challenges. In this article, the second of a three-part Muse series, we examine a campaign’s necessary accounting, risk and technology components. The first article examined strategies to lay the groundwork for an effective fundraising campaign, and the final article in the next issue of Muse will explore obtaining the green light and maintaining momentum.

Building from the ground up

Before deploying resources, you must gain a clear understanding of your campaign. To properly scope your campaign, you must begin by defining your purpose, objectives, strategies, goals and estimated timeline. When you build your timeline, incorporate milestone dates, as well as the revenue, anticipated cash receipts, and the expenses related to the project.

After determining the overall purpose of the campaign, leadership and development team meetings should take place to discuss the fundraising targets, development plan, intended purpose and use restrictions, tax-exempt bonds and other financing considerations, including accounting for donor-advised funds. You must understand whether your goals are feasible, how you are going to connect with donors and communicate to stakeholders how funds will be used, and how you will properly evaluate and manage financing.

Establishing a donor framework is an important step; review the draft statement of gift intent (SOGI) to ensure it reflects your campaign’s purpose. It should detail the planned use, addressing all different scenarios (a letter of intent, a donor pledge or a donor advised fund) and allowable modifications that could be made to the SOGI to accept a contribution. A process to redirect gifts that don’t meet the campaign’s purpose should be established so that non-campaign opportunities are not overlooked. Furthermore, you should review the donor response process to evaluate coordination between development and accounting, and acceptance communications to donors with appropriate thank you’s and IRS information for tax returns.

Your organization must determine reporting requirements for the campaign, including internal management, the development team, campaign chairs and committees, the board and any external stakeholders. After understanding the reporting needs, you should evaluate the capabilities of current systems; general ledger requirements must be appropriately detailed, with new accounts and subaccounts, new report formats and interaction with donor software. To that end, donor software must be able to manage new needs and requirements and effectively interface with accounting software.

Leveraging systems and technology

Fundraising technology systems are often a key determining factor in the success or failure of a campaign. Before initiating a campaign, your technology systems must recognize that a campaign has a defined time period, and is not an ongoing process. It also must track the overall goals and milestones for the campaign, and understand the difference between a pledge and a gift. Almost any fundraising system can accept a one-time gift and record it, but many do not understand the concept of a pledge.

Systems must also determine between different types of giving, such as designating funds to specific areas, restricted funds and unrestricted funds. In addition, the campaign budget is important to track within IT systems, recording not only revenue, but also campaign expenses. Many fundraising systems can track revenue, but expenses are often left to accounting systems, limiting visibility into total campaign activity. In that scenario, corporate performance management (CPM) or business intelligence (BI) systems can pull the information from the two disconnected systems for enhanced visibility.

The right fundraising solutions can help your organization track the “inventory” of past pledges associated with prior campaigns (typically repeating annual campaigns) with projections of “asks” for the current campaign. Such solutions also provide analytics for specific donors (e.g. gave last year but not this year (LYBUNT)) and enhanced reporting and dashboards, with the campaign pace (e.g. dollars raised or number of pledges received in week “x” versus same time last year). Proper systems should also provide necessary pledge and payment acknowledgements and tax reporting. The fundraising system must also integrate with your accounting system, mapping to the appropriate accounts and general ledger segments, and that interface must work properly.

A fundraising system must be able to manage your campaign structure, and break down the campaign into various subcomponents reflecting how the campaign is actually managed and tracked. For example, the campaign’s overall goal should be able to be segmented and tracked by various affinity groups, geographies or other logical groupings, and reflect the team, including staff and volunteer assignments. Dashboards should be designed to reflect the campaign structure and team assignments.

The fundraising solutions must have the ability to identify major individual and institutional prospects, creating donor profiles with demographics, financial information and other key areas of interest. Automated tools can also provide enhanced research capabilities, with wealth screening for individuals, and integration to GuideStar and Charity Navigator for institutional prospects. With that information, you can implement a donor action plan, with the fundraising system tracking the moves management plan, offering opportunity and pipeline management, and proving proposal development tools.

Marketing and communications is a key aspect of your campaign, and your fundraising system should manage donor segmentation, email marketing and key distribution lists. Your solution should also help your organization leverage social media to find and cultivate individual donors. Newer systems have links to various social media platforms, to monitor prospect and donor activity and initiate friendraising activity.

Evaluating your campaign risks

With the amount of activity associated with fundraising campaigns, risks can emerge in several areas related to external parties, people, processes, technology and relationships. If risks manifest themselves, the effects can be significant, including reputational damage, financial losses, falling stakeholder confidence and sustainability concerns.

Potential risks that are common to fundraising campaigns include:

Third-party risks are often overlooked during fundraising campaigns. While your organization may utilize third-party fundraisers, you should never surrender control. An important governance obligation is to safeguard your organization’s assets. When utilizing third parties, your board of directors should discuss and develop organizational policies and processes to capitalize on the benefits of third-party fundraising initiatives while reducing risks.

Your organization should also exercise adequate controls to protect against third-party risks. For example, you should protect your organization’s trademark and reputation by not loaning, selling or transferring your charitable registration number, clearly defining the duration of agreements, not allowing further transfers of third-party responsibilities, reviewing materials with your logo and ensuring third parties act within your policies and procedures. For further controls, check a third party’s insurance and liability to evaluate risks, ensure proper compliance with tax guidelines and determine whether outside parties obey state, federal and local regulations.

In many fundraising campaigns, you likely collect personally identifiable information (PII) from donors, which is designated as first and last name in conjunction with elements such as social security numbers, date of birth, driver’s license numbers, or financial account or credit card numbers. This information is the focus of U.S. privacy laws, as it can be used for identity theft, or to locate an individual. Your organization must have controls in place to account for and protect donor PII that is acquired and stored during a campaign.

In addition, cybersecurity is a key consideration for all organizations, as modern threats are built to bypass preventative network controls such as vulnerability, patch and configuration management, and access and authentication controls. Unfortunately, many organizations’ mitigation efforts focus almost 100 percent on preventative controls. Instead, you must implement robust detective controls, which include active monitoring and alerts, and corrective controls such as incident response, forensics and quarantine capabilities.

Conclusion

Fundraising campaigns are complex initiatives, and require close consideration of several elements to unlock their true potential. Implementing measures to properly account for campaign details, leverage the appropriate technology and mitigate risks prior to launch can reduce stress and eliminate common obstacles to campaign success. Being more proactive with these key functions can help your organization’s campaigns better support your mission.