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A CPA's guide to starting a capital campaign

By:
Leah Pillsbury is a Staff Auditor at BerryDunn. Before joining the firm, Leah spent a decade working at not-for-profits, primarily as a fundraiser, specializing in capital campaigns. Leah’s time spent in the fundraising capacity has given her valuable perspective insight into the not-for-profit audit experience.
Leah Pillsbury
12.31.18

A capital campaign is a big undertaking. During the planning stage of a capital campaign you need to not only focus on your donor outreach strategy, but also on outreach materials. From an accounting standpoint, the language you use can have a big impact on how the funds will be tracked and ultimately used by the organization. We recommend our clients share their outreach materials with us early in the process so we can measure them against standard accounting practice and regulations. Here are a few things to consider and plan as you get started.

Three components to understand

1.

Pledges. Make sure you understand the difference between a pledge and an intention. From an accounting perspective, only an “unconditional promise to give” is recorded as revenue?an intention to give does not usually meet that criteria. It’s especially important to have this conversation if there is a planned giving element of the campaign, because accounting for bequests can be confusing at times. (You can learn more about intentions here).

2.

Matching Gifts. Matching gift drives can be very successful aspects of your campaign. Be aware that pledges to match gifts from other donors are not considered revenue for accounting purposes until those conditions have been met.

3.

Gift Restriction. For many donors, capital campaigns are particularly appealing, because they fund exciting and tangible projects. Donors who give for a specific building project or scholarship fund are imposing a restriction on how you can use that money. Restrictions can be explicit, as in the case when a gift is accompanied by a note describing the purpose of the gift. However, accounting guidelines also stipulate that restrictions can be implicit?arising from the circumstances surrounding the gift, not necessarily specific instructions from the donor. For example, if a campaign appeal for a new community building focuses just on that project, gifts in response to that appeal may be restricted to building expenses, and can’t be spent on other expenses of the organization. 

Not sure where to start? Here are three helpful tools to get the conversation going.

Three must-haves to build your campaign

1.

Gift Acceptance Policy. Hopefully, your not-for-profit has a written gift acceptance policy. If not, start there. A gift acceptance policy outlines guidelines for pledges, restrictions, and the full range of contribution types?from stocks and bonds to real estate and life insurance policies. A good policy serves as a guide for fundraisers and protects the organization from accepting gifts that may not be beneficial.

2.

Campaign Counting Policy. An essential part of campaign planning is the development of a counting policy, which outlines what gifts are counted toward the overall goal?and how. This is especially important because the campaign counting may differ from how your accounting team records the revenue of the campaign.

3. Pledge Form. Finally, there is the pledge form, where it all comes together. A campaign pledge form should align with the organization’s gift acceptance and counting policies and be written in a way that ensures pledges and gift restrictions are accounted for properly.


In developing each of these tools, be sure to involve your finance department, but also outside experts, such as your legal counsel or your auditing firm, as they can add extra support and knowledge. While launching a capital campaign can seem daunting, proper planning allows the rest of the campaign to run smoothly.  Have questions? Please contact Emily Parker or Sarah Belliveau.

Good fundraising and good accounting do not always seamlessly align. While they all feed the same mission, fundraisers work to meet revenue goals while accountants focus on recording transactions in compliance with accounting standards. We often see development department totals reported to boards that are not in line with annual financial statements, causing confusion and concern. To bridge this information gap, here are five accounting concepts every not-for-profit fundraiser should know:

1.

GAAP Accounting: Generally Accepted Accounting Principles (GAAP) refers to a common set of accounting standards and procedures. There are as many ways for a donor to structure a gift as there are donors?GAAP provides a common foundation for when and how you should record these gifts.

2.

Pledges: Under GAAP, if there is a true, unconditional “promise to give,” you should record the total pledge as revenue in the current year (with a little present value discounting thrown in the mix for payments expected in future periods). A conditional pledge relies on a specific event happening in the future (think matching gift) and is not considered revenue until that condition is met. (See more on pledges and matching gifts here.) 

3.

Intentions: We sometimes see donors indicating they “intend” to donate a certain amount in the future. An intention on its own is not considered a true unconditional promise under GAAP, and isn’t recorded as revenue. This has a big impact with planned giving as we often see bequests recorded as revenue by the development department in the year the organization is named in the will of the donor—while the accounting guidance specifically identifies bequests as intentions to give that would generally not be recorded by the finance team until the will has been declared valid by the probate court.

4.

Restrictions: Donors often impose restrictions on some contributions, limiting the use of that gift to a specific time, program, or purpose. Usually, a gift like this arrives with some explicit communication from donors, noting how they want to apply the gift. A gift can also be considered restricted to a specific project if it is made in direct response to a solicitation for that project. The donor restriction does not generally determine when to record the gift but how to record it, as these contributions are tracked separately.

5. Gifts vs. Exchange: New accounting guidance has been released that provides more clarity on when a gift or grant is truly a contribution and when it might be an exchange transaction. Contact us if you have any questions.


Understanding the differences in how the development department and finance department track these gifts will allow for better reporting to the board throughout the year—and fewer surprises when you present financial statements at the end of the year. Stay tuned for parts two and three of our contribution series. Have questions? Please contact Emily Parker of Sarah Belliveau.

 

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