• DAF Gifts: Budget/Financial Docs vs Fundraising Report Confusion

    Posted by Joseph on May 31, 2023 at 1:53 pm

    Hi All,

    I work in fundraising and handle the Annual Fund and Annual Fundraiser for our organization.

    While I took finance related classes in my MPA/Nonprofit Management program and did well, I do not consider myself to be super knowledgeable about finance and budgeting. I have served on boards with other organizations.

    The issue I am running into is our board is struggling to understand that some gifts to our annual fund are coming in the form of DAF grants or donor-directed gifts from family foundations. (Happy to be told if I am thinking about this wrong.)

    Example: We have a donor who has given us a personal check in the past, instead direct her family foundation to give us a $2,500 unrestricted grant in response to an annual fund appeal mailer. There is no additional reporting required beyond acknowledging the grant. I recognized we needed to send a thank you to both the supporter, and legally needed to send an acknowledgement to the Family Foundation. (In this case, the family has hired people to manage their family foundation for them.)

    In our current chart of accounts/finance docs, DAF grants get lumped in the same account with all of our 6 figure operating grants that are handled by our Grants Manager.

    This makes it hard for the board to see from the financial documents they receive each month how we are doing on our annual fund goals. In the finance docs, it looks like we only had $36,000 in income in the annual fund last year when I count more than $80,000 with DAF and donor-directed grant gifts from family foundations.

    I use Salesforce to maintain my relationships with all of our donors and generate separate fundraising reports from there. Our Quickbooks and Salesforce accounts are not linked. I include DAF gifts received as part of our annual fund campaigns because that more accurately reflects our income vs. money spent fundraising. I clearly label in Salesforce what type of gift it is. We do not track our program specific, large operating grants in Salesforce.

    Our board gets really confused by this. I’ve tried explaining that finance and fundraising are just categorizing income differently. My way of categorizing is focused on our relationships with donors and stewarding and upgrading donors/DAF decisionmakers strategically. The finance reports are our source of truth for ensuring we are legally meeting our obligations for each type of income.

    Are there any best practices I could advocate for better aligning finance and fundraising reports? Are there ways I should be thinking differently? We are in the midst of hiring a new finance person so we are going to be revisiting our chart of accounts, budget structure, and processes as a part of onboarding the new person.

    Wade_Rogers_Forum_Moderator replied 8 months, 3 weeks ago 17 Members · 18 Replies
  • 18 Replies
  • cmooreme

    Member
    June 1, 2023 at 12:28 pm

    Hi Joseph,

    I’m on the finance side of an organization with a similar systems arrangement: QuickBooks and Salesforce, where the systems are not linked and Salesforce is a stewardship management system, not a subsidiary accounting ledger. We struggle with the same issue of confusion about DAF gifts and to a lesser extent, gifts from family foundations. Something that has helped is to add sub-accounts in the G/L under the Foundations account, to show DAF gifts and Family Foundations separately but so they still roll up in the correct finance category of Foundations. Perhaps that might help your board, especially if you can use a little color-coding or other visual reminder in accounting reports that helps folks see how the finance numbers correspond to the fundraising numbers.

  • Dana

    Member
    June 1, 2023 at 12:30 pm

    In the short term, perhaps you could create a journal entry on a monthly basis to redirect the DAF portion of grants to the account/cost center for your annual fund? I would think that this would result in accurate reporting for both the grant manager and the Board of Directors that you’re looking for. Long-term solution would be to partner with the new financial manager to identify new or different cost centers that are specific to a subset of grants.

  • courtney

    Member
    June 1, 2023 at 12:32 pm

    Hi Joseph,

    This is an area we also spend a lot of time thinking about, and how to better create clarity in terms of grants v. individual gifts.

    If I’m understanding your question correctly, the issue at hand is the treatment of the DAF in your books, vs how you handle the gift from a fundraising/donor relationship perspective, and how reports out from Salesforce. In our organization, we have started to craft policy around when a family foundation or DAF constitutes a grant vs when it is handled more as an individual (our triggers tend to be reporting requirements). Based on the policy, some of our DAFs or family foundation gifts are then booked to the individual giving fund as opposed to our grants category. This has helped create a bit more alignment in terms of reporting without upsetting any GAAP reporting or compliance requirements. I hope that helps, and also interested to hear how others have handled. This is an area we continue to evolve.

  • hollynd

    Member
    June 1, 2023 at 12:35 pm

    Hi, Joseph,

    I ran into a similar issue, with the same confusion over how the development staff categorized funding and how the finance team did.

    I recommend starting with your grants manager. Ensure that you are on the same page so the dollars aren’t being counted twice. What my department did was lay out a series of questions to determine whether a DAF/family foundation gift should be classified as a grant or individual donation. Questions included:

    – Did we write a grant to prompt this gift?

    – Did the gift come in response to a giving campaign?

    – Has your team historically categorized this funder as an individual or a foundation?

    – Who holds the relationship with this funder?

    You can determine what questions work for your situation; the main thing is to agree on how to decide if there are yes answers that go both ways. For us, some answers were decisive, but in other cases, majority ruled.

    The next step is to work with your finance team to align these categories, so they are accounting for the dollars the same way your team is. You’re in a great position to do this with new staff coming in, since they won’t have established habit patterns. As each donation comes in, the finance lead can verify classification with the dev team. It may feel slow going at first, but it quickly becomes second nature.

    Good luck!

  • luis

    Member
    June 1, 2023 at 12:40 pm

    I’ve also dealt with similar issues at my current and past organizations. I generally categorize DAF/family foundation gifts under individual contributions because those types are gifts tend to be stewarded in the same way for individual donors and makes more sense to track them there. If a DAF/family foundation gift is received through a grant application process, we track it under foundation grants since it falls within our grant portfolio and purview of our grants manager. At a previous nonprofit I worked with, we did a lot of work to better align Salesforce with QuickBooks to make sure gifts were tracked consistently. All of our Salesforce categories matched our QuickBooks chart of accounts/revenue categories. We also built out a separate donor advised giving field in Salesforce – sometimes a donor would give directly, sometimes through their DAF, but when we looked at that donor’s record, we only saw what they directly gave. So we worked with a consultant to create “total gifts + DAF” category that accounted for both and was easily accessible on the donor’s contact record. Hope this helps!

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