• DanCT

    June 1, 2023 at 2:23 pm

    We separate grants from individual gifts based on whether we had to apply for the grant or not. If the gift did NOT require an application, we record it to the Individual Giving G/L and NOT as a Private Grant.

    (By the way Government Grants are recorded in a separate G/L from Private Grants, as they are really two different animals.

    You could also create sub-G/L’s within Individual Giving if you wish – for Donor Advised Funds, Bequests, Corporate Giving, you name it. Or you could accomplish the same thing by using a separate segment/dimension if your accounting software allows it. For example, all Individual Giving could be recorded to the same “G/L Account”, but could be recorded to a different “Funding Source”

  • Eula

    June 1, 2023 at 2:39 pm


    The very first item should be to link as many of your software products as possible. It will save a lot of manual/one-off task that is common when products are not link. Think of it as managing the software.

    Next, because I have spent more than half of my career working in the profit world and I can tell you there is a difference in how non-profits record keep. Highly recommended since you stated that the organization will be overhauling its chart of accounts, etc. Hire a firm that specializes in non-profit auditing and accounting. Yes, it will cost; however, the money spent will be well worth it as the consulting firm will have insight into all items non-profit. Allow the new finance person to work with this firm to create a seamless transition and also a more workable set of day to day parameters for accounting.

    Best practices and the Board is huge and there is no one size that fits all board members. Unlike the professionals who prepare the numbers (accounting) most board members do not have this level of training.

    I have found that starting with the most important aspect of non-profit, the revenue. Finding the perfect way to explain:

    • Restricted funds. These are the funds that must be spent on certain projects and activities at your organization.
    • Temporarily restricted funds. These funds should be spent on certain projects and activities at your nonprofit until a certain time period. After that time, they become unrestricted funds.
    • Unrestricted funds. This is also known as your annual fund. It can be spent on whatever aspects of your organization require the greatest need.

    Understanding how funds are accounted for goes a long way in understanding the Statement of Financial Position, Statement of Activities and Statement of Functional Expense. And as a side note to all of these reports is the 990 (Return of Organization Exempt From Income Tax).

    Best practices for everyone that has a seat at the Board Table or in the organization on the Fiscal/Finance/Accounting/Fundraising Teams:

    1. Reference your budget frequently.

    2. Establish concrete internal controls

    3. Conduct regular audits whether or not the organization is required to or not (not meeting the threshold to trigger an audit

    4. Use specialized software designed for non-profits. And create links between software. This will streamline the process and give the accounting staff the ability to manage the data (reports and information).

    Best to you as you chart the vast territories of the non-profit world and most definitely the world of Board Members challenges.

  • norma

    June 1, 2023 at 2:57 pm

    We also struggle with this. We book the DAFs as individuals and put a note “Name of donor via Schwab or JP Morgan or XX Community foundation”. The development department does the same. However in our 990 for the question of major donors we do add the numbers of DAF via XX Community Foundation to that XX Community Foundation. I am not sure if that is right or not; or if in the 990 we should just add to the Community Foundation what comes from their own funds.

  • Wade_Rogers_Forum_Moderator

    June 2, 2023 at 8:33 am

    Hi Joseph and all who are participating in this forum discussion…thank you for posting this question which clearly so many of us struggle with! We appreciate the multitude of useful and thoughtful responses. I agree with the general consensus in this discussion that we need to look at the substance of the gift to determine its classification: does it smell like a grant (application process, reporting requirements) or a contribution (donor development and solicitation, directed by an individual)? Please keep up the dialogue and come back to our forums often!

  • Megan

    June 5, 2023 at 12:54 pm

    Finance and fundraising often find themselves with these kinds of confusions. It can help to look at it from the others perspective.

    Fundraisers think about contributions based on the way they approach the donor. They aren’t writing a grant for DAF (or small family foundation) gifts the way they would with a large foundation.

    I work with several nonprofits using QuickBooks, but whatever general ledger software you use will most likely have a similar functionality. We have a specific service item for donor-advised funds that points to a Donations Directed by Individuals account. By creating services that match the things the fundraising department tracks, while pointing them to accounts that are meaningful to finance, you can make everyone happy. You can even get in the habit of running Sales by Product/Service reports, filtered for the ones you use for Contributions, to tie out and reconcile between the two systems.

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