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Development vs. FinanceHealthy Friction
November 3 – 4, 2009Presented By Ben Aase and Jen Foley
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Learning Objectives
At the end of this session, you will be able to:
Combat the natural friction between your development and finance offices.
Understand the importance of your organization’s internal environment.
Better communicate financial information to your organization’s funders and supporters.
Try new ideas to integrate your financial and development systems to the benefit of both functions.
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Agenda
Myth: How We Sometimes See Each Other
Root Cause: Friction Between Departments
Reality: Our Respective Duties and Responsibilities
Moving Forward: What We Can Learn
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How We Sometimes See Each Other
How DevelopmentSees Finance
How Finance Sees Development
“Restrictive sticklers for detail who don’t appreciate
how hard it is to raise money for our organization.”
“Eternal optimists with no regard for the rules or
appreciation for those I’m accountable to.”
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Root Cause: Key Differences
Development Finance
Mission Procure Resources Account for Their Use
Measurement Incentive-Based Stewardship-Based
Stakeholders Donors IRS / Auditors / Public
Perspective Healthy Optimism“All pledges are collectible”
Healthy Skepticism“Show me the money”
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Less Balance = More Risk
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What are the Risks?
Potential for Fraud
Loss of donor confidence
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How Does Fraud Occur Risk Factors
– Opportunities– Pressures/Incentives– Rationalize
Opportunities:– Reconciliation of activity does not occur between departments
• Annual reports• Donor database
– Too much access to one database or another and access to cash
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How Does Fraud OccurPressures/Incentives:– Internal goals – annual and capital campaigns– Gambling addiction– Loss of spousal income– Medical bills– Upset with the organization
Rationalization:– I deserve it– I’m helping the organization– The donor will never know– This is a one time deal, won’t happen again– I’ll repay it
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A System of Checks and Balances
Five components:1. Control Environment2. Risk Assessment3. Information and Communication Systems4. Monitoring5. Control Activities
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A System of Checks and Balances
Objectives– Effectiveness and efficiency of operations– Reliability of financial reporting– Compliance with applicable laws and regulations
Can your committees and board state that they have reasonable assurance that:
– they understand the extent to which the entity’s operations objectives are being achieved
– Published financial statements are being prepared reliably– Applicable laws and regulations are being complied with
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Why Does this All Matter?
Reputation of the Organization– Front page of the paper
Do what’s right– The mission of the organization
Respect the Donor’s wishes– Donor’s perception
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Best Practices for Mutual Success Appoint independent directors with the intent of achieving an
independent majority Periodically evaluate executive compensation levels Require independent director approval of related-party
transactions Adoption of a Code of Ethics / Annual Conflict of Interest
Statements Strengthening Gift Acceptance and Investment Policies. Increased Financial Disclosures – Transparency Conduct periodic reviews of internal control over financial
reporting
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Best Practices for Mutual Success Require audited financial statements Disclose critical accounting policies and estimates Disclose off-balance sheet and contingent liabilities Open lines of communication
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Thank You
Ben AaseManaging Consultant612 / 397 – [email protected]
Jen Foley, CPA612 / 376 – [email protected]
