They are also a powerful tool for grantmakers who want to quickly and easily tailor their grantmaking system to streamline their processes, save time and resources, and scale with their needs. In this blog post, we’ll explain what modern APIs are, how they work, and how they can help you improve your grantmaking.

What is a Modern API?

An API, or application programming interface, is a set of rules that define how two pieces of software can communicate with each other. It is a technical handshake that allows one system to request pre-determined data from another system and get a response in a standardized format. For example, when you use Google Maps to find directions, you’re using an API that connects your browser to Google’s database of maps, locations, and traffic information.

APIs have been around for a long time, but they have evolved significantly over the years. Modern APIs are based on web standards and protocols, such as HTTP and JSON, that make them easy to use, secure, and interoperable. They can handle complex queries, large amounts of data, and real-time updates. They also follow best practices of RESTful design, which means they are organized around resources, use consistent methods, and have self-descriptive endpoints. This makes it easier for low-code and no-code developers to understand and use the API without needing extensive documentation.

Many platforms you already use for your grantmaking processes have modern APIs built in, such as your grant management solution that surfaces due diligence data from third-party sources within your GMS. By using these systems that provide modern APIs, you can access and exchange data across different applications, without having to worry about compatibility, formats, or versions.

How Do APIs Help Grantmaking Organizations?

By using software with modern API endpoints, you can tailor your system to enhance your grantmaking processes and outcomes. Instead of relying on a single system that does everything okay but nothing well, you can choose the best solutions for each function and connect them seamlessly through APIs.

Here are some of the benefits of using modern APIs for grantmaking.

Get data faster

With APIs, you can get data from external sources, such as Candid’s database of nonprofits and foundations, into your system with a few clicks. You don’t have to download files, upload them to your system, or manually enter data. You can also get data from your system to other platforms, without having to export or email files. These integrations help ensure strong data management and internal controls.

Improve data accuracy

The automatic transfer of data with APIs reduces the risk of human error, duplication, or inconsistency in your data. You can ensure that the data you get from or send to other systems is accurate, complete, and up to date. You can also validate and verify data, such as organization names, addresses, or tax IDs, using APIs that connect to authoritative sources.

Analyze More Data

With APIs, you can access and aggregate data from multiple sources and analyze it in real time. You can use APIs to create dashboards, reports, and charts that show your grantmaking performance, impact, and trends. You can also use APIs to automate workflows, such as sending notifications, reminders, or approvals, based on data triggers or events.

Streamline processes

Working with other systems that have modern APIs, you can simplify and standardize your grantmaking processes and make them more efficient and user-friendly. You can use APIs to integrate with other tools, such as email, calendars, or messaging, that can help you communicate and collaborate with your team, partners, or stakeholders.

Examples of APIs in Grantmaking

Many philanthropic organizations are already using modern APIs to get data faster and simplify their grantmaking processes. Here are some examples of how APIs can be used in grantmaking.

• Grantee Research: Candid is a leading source of information and data on nonprofits and foundations. They offer a range of APIs that can help you find and research potential grantees, track grants and outcomes, and automatically monitor news and staff changes for your records. For example, you can use the GuideStar API to get detailed profiles of over 13 million nonprofits, including their mission, programs, finances, and impact. Some grant management systems provide these APIs natively in the software, pulling the data without any work on your part.
  
  If your organization re-grants funding, you can also use Candid’s Funding APIs to get comprehensive data on over 235,000 foundations, including their grants, assets, and giving priorities.

• Data Visualization Tools: Your grant management solution provides a variety of reports and dashboards, but when you want to compile your grantmaking data with other sources, it helps to use an API to plug into an external data visualization tool. For example, you could layer community demographic data over your impact data. These visualization tools can also make it easy to embed your charts and graphs into other applications, such as websites, portals, or presentations, and share them with your stakeholders.

• Grantmaking and fund accounting: Grantmaking and fund accounting are two essential functions of any grantmaking organization, but they often involve different systems and processes. You can use APIs to connect your grantmaking system with your fund accounting system and ensure that your financial data is consistent and accurate across both platforms.

Create a Flexible Grantmaking Ecosystem with Blackbaud Grantmaking

At Blackbaud, we understand the value of modern APIs for grantmaking organizations. That’s why we are committed to updating and enhancing our API endpoints and making them more accessible and user-friendly for our customers. We want to help you create a flexible grantmaking ecosystem that can meet your specific needs and support your mission and impact.

If you want to learn more about how Blackbaud Grantmaking can serve as the hub for your robust and flexible grantmaking organization, schedule a demo today. Check out our updated API documentation to see how you can improve data accuracy, analyze data faster, and streamline your processes.

The post The Power of APIs in Grantmaking: What You Need to Know first appeared on The ENGAGE Blog.

Your nonprofit’s accounts payable policies create easy-to-follow guidelines to help provide that consistency. These AP policies not only ensure the smooth operation of your organization but also provide a framework to scale as your technology evolves.

Here is why you need accounts payable policies for nonprofits and how you can design them to scale with your organization.

Why Your Nonprofit Needs Strong Accounts Payable Policies

A nonprofit’s success hinges on its ability to manage finances transparently and efficiently. Effective AP policies support financial compliance, scalability, and operational efficiency. Here are a few reasons why strong AP policies are essential for every nonprofit organization:

Timely Payments and Healthy Cash Flow

Efficiently managing your accounts payable helps your organization make timely payments, fostering good relationships with vendors and service providers. Clear guidelines on handling approvals, even when key staff are out of the office, keep the process moving without unnecessary delays. Timely payments—with no late fees—help maintain a healthy cash flow, which is crucial for the sustainability of any nonprofit.

Fraud Mitigation

AP policies establish clear standards and procedures, playing a vital role in deterring fraud. This includes measures such as requiring dual signatures on checks and ensuring the separation of duties. By dictating these standards, everyone is aware of the expectations so your organization can recognize and address outliers quickly and prevent bad actors from exploiting the system.

Streamlined Onboarding and Knowledge Sharing

With strong AP policies, everyone in the organization knows where to find information about your processes, what is required, and why. This makes onboarding new staff easier and prevents knowledge from being siloed with specific individuals.

What Your AP Policies Should Include

Good AP policies should remove confusion and provide consistency in how you manage expenses and pay your vendors. Here are some of the key elements that should be included in your AP policy document:

Receiving and Approving Invoices

Outline how invoices can be received and who should approve them, including backup approvers when staff are out of the office. This ensures that there is no bottleneck in the process and that invoices are processed promptly.

Adding Vendors to Your Master Vendor File

Specify who can add a vendor and what information is required for each vendor. Include guidelines on how often the Master Vendor File (MVF) is reviewed and updated, and when to request updated 1099 forms. Regular updates to the MVF help maintain accurate records and ensure compliance with tax regulations.

Adding Invoices to Accounting Software

Detail the documentation required for each invoice and the process for checking duplicates. This includes attaching copies for an easy audit trail. Clear documentation standards help maintain accuracy and facilitate audits.

Paying Invoices

Establish a schedule for when invoices are paid and when the AP subledger is posted to the general ledger (GL). Do you run your payments every Thursday or on specific days of the month? Consistent payment schedules help manage cash flow and provide a clear timeline for financial reporting.

Reconciling AP with Bank Transactions

Reconciliation of AP with bank transactions is crucial for smoothly closing the monthly books. This process ensures that all transactions are accurately recorded and you can promptly address any discrepancies and identify any possible fraud.

Handling Uncashed Checks

Different states have different rules for remittance to the state for unclaimed payments. Your AP policies should include guidelines on how to handle uncashed checks in compliance with state regulations.

Separation of Duties

Establish clear separation of duties across AP processes to prevent fraud and errors. For example, the staff entering invoices should not be the same as those approving payments. This internal control measure helps safeguard the organization’s assets.

Handling Discrepancies and Disputes with Vendors

Outline guidelines for addressing discrepancies and disputes with vendors. Clear procedures help resolve issues quickly and maintain good relationships with vendors. Knowing what to do in specific situations—and when they need to be escalated—gives your staff autonomy.

How Your AP Policies Should Evolve with Automated Payments

Nonprofits can benefit from automating many of the manual tasks associated with AP processes. Automated payments can increase efficiency, reduce errors, and provide better control over financial operations. Here’s how your AP policies should evolve with automated payments:

Understanding the Automated Payments System

Document how the automation is supposed to work. Ensure that your team understands the process and can spot-check the automation to make sure it’s working as intended. Regular reviews and testing help identify any issues early and ensure the system operates smoothly.

Recognizing Common Outliers

Include common outliers in your AP process document so your team can recognize them and address them quickly. Automated systems can sometimes produce anomalies, and your team should be equipped to identify and resolve these issues before they become major problems.

Clarifying Reconciliation with Automated Payments

Provide clear guidelines on what reconciliation looks like with automated payments. This includes understanding how automated transactions are recorded and cleared, ensuring they are accurately reflected in the financial statements.

Provide Continued Training for Your Staff

Continued training is essential to ensure that all staff understand and follow the AP policies and procedures. Here are a few ways to provide effective training:

• Conduct regular training sessions to keep staff updated on any changes to AP policies and procedures.
• Create accessible resources and documentation for quick reference. Link to them in your fund accounting system so everyone has access.
• Establish a support system for addressing questions and resolving issues promptly.

By investing in ongoing training, you can ensure that your team is well-equipped to handle AP processes efficiently and accurately.

Review Your Nonprofit’s AP Policies as You Scale

Strong accounts payable policies are essential for the smooth operation of any nonprofit organization. They provide a framework for managing expenses, ensuring timely payments, and maintaining good vendor relationships. As your nonprofit grows and technology evolves, it’s important to regularly update your AP policies to ensure they remain effective and scalable. Plan to review your AP policies annually, and any time you have a significant change to your processes, such as when you change your fund accounting system.

Ready to see how automated payments can help you increase efficiency and mitigate fraud in your AP processes? Check out the Guide to Understanding Automated Payments. By staying proactive and adapting to new technologies, your nonprofit can achieve greater financial stability and success.

The post How to Develop Scalable AP Policies for Your Nonprofit first appeared on The ENGAGE Blog.

This opportunity to connect directly and immediately with supporters has made texting a key channel year-round and especially during critical fundraising campaigns like Giving Tuesday, end-of-year fundraising, and rapid-response moments. Despite its increasing utilization, reliable fundraising data around nonprofit text messaging results have been limited until now.

Last month, Tatango and MissionWired released the Nonprofit Text Messaging Insights Report as a starting point for metrics on fundraising and engagement text messaging across the nonprofit industry. The report includes data on more than 200 million nonprofit text messages sent, 162,000 donations received, and $5.4 million raised from nonprofit text messaging in 2023. Here are six takeaways from the report:

1. Text Messaging Accounted for 4.5% of Online Revenue

In recent years, texting has become one of the fastest-growing channels for nonprofit direct response. While texting hasn’t caught up to email yet—email generates 16% of online revenue—nonprofits are developing multimillion dollar texting programs that continue to achieve strong growth.

For some nonprofits with robust texting programs and especially during critical moments, text messaging is starting to outpace email as their largest driver of revenue. MissionWired, co-author of the report, has run tests to ensure this shift doesn’t mean texting is detracting from email revenue: rather, we found that organizations running multichannel campaigns raise more money for their programs overall and they’re building up a highly valuable audience of multichannel donors while they’re at it.

2. Nonprofits Sent 46 Text Messages Annually

Nonprofits with established texting programs are using the channel for proactive, ongoing communications similar to how we traditionally have used email. Here is the cadence of texts sent by nonprofit organizations:

• December: 5.5 texts
• November: 5 texts 
• January to October: 3.5 texts each month

By establishing a regular messaging cadence, you can set an expectation among supporters that they’ll receive a few texts per month. Then you can increase that frequency during your biggest year-end campaigns, just like you would in other channels.

3. 52% of Texts Were Focused on Fundraising

Successful nonprofit programs are using text messaging to ask, steward, and engage donors. While 52% of texts were for fundraising, 48% were focused on sharing impact and telling stories, deepening engagement, and thanking donors, rather than relying on it only as a means for repeated fundraising appeals. For nonprofits that aren’t sending a mix of fundraising, cultivation, and engagement texts, consider the channel an important opportunity to focus on retention rates and provide additional surround-sound touchpoints for your audience throughout the year.

4. Fundraising Texts Sent After 6 PM Deliver 37% More Conversions

If, as we mentioned earlier, 90% of texts are opened within three minutes after they’re received, then timing really matters with texting. For the messages analyzed in this report, conversion rates increased later in the day. We broke down evening hours further, looking at send times between 6 p.m. and 9 p.m. We saw the highest conversion rate from fundraising texts sent between 8 p.m. and 9 p.m.: 0.205%, compared to 0.095% and 0.057% between the hours of 6 p.m. and 7 p.m. and between 7 p.m. and 8 p.m., respectively. We also saw opt-out rates lowest between 8 p.m. and 9 p.m., at 0.18%.

To account for this trend, it’s fair to theorize that during the week people tend to be more engaged with text messaging after work when they have free time. Whether they’re watching TV, reading a book, or scrolling through social media, it’s likely that smartphones are close by. This could easily contribute to nonprofits seeing higher conversion rates over text in the evenings.

5. Shocker: 25% Higher Conversions January–October vs. End of Year

With any good results report, the fun begins when some number takes us by surprise. In this report, that surprise was that fundraising texts had a 25% higher conversion rate from January to October compared to texts sent in November and December.

What does this mean for your texting strategy? For organizations hesitating to use texting as a core channel for a regular cadence of fundraising, engagement, and cultivation messages, this data points to text as a reliable channel for driving conversion throughout the year. There is no need to wait until November and December to expand your multichannel campaigns into text.

6. Nonprofits Sent 58% MMS Texts and 42% SMS Texts

While you’ll often hear “SMS” used synonymously with “texting,” text messages

can be sent either as SMS or as MMS texts, and nonprofits will leverage each text

message type for different purposes.

• SMS refers to text-only messages, with parts that are 160 characters long, which makes them resemble a tweet
• MMS is a text message with a 5,000-character limit that can include a picture, video, or GIF, which can make them look more similar to an email

The report authors found that fundraising texts were split evenly, 50% each MMS and SMS texts. However, engagement and cultivation texts more often used MMS (67%) than SMS (33%) texts.

While MMS can incur higher costs than SMS, the return on investment can be significant. The difference in creative opportunities to engage your audience can make MMS more effective in certain moments or cultivation efforts.

In our inaugural Text Messaging Insights Report, the teams at Tatango and MissionWired set out to establish a starting point for the nonprofit industry. Among our most meaningful takeaways is the evidence in this report that nonprofits are using texting as an ongoing communication tool to engage with supporters, connect, and fundraise.With unrivaled immediacy and engagement, text messaging has become an essential nonprofit channel for your core digital fundraising program alongside email, social, and digital ads.

To hear the report’s authors discuss the findings, watch our on-demand webinar, Introducing the Nonprofit Text Messaging Insights Report.

The post 6 Takeaways from the Nonprofit Text Messaging Insights Report first appeared on The ENGAGE Blog.

We conducted our annual Status of Fundraising research in Canada, the United Kingdom and Australia/New Zealand (ANZ). These regional research reports delve into the evolving dynamics of nonprofit fundraising in each region and give a comprehensive view of the social impact community in 2024, helping nonprofits understand and benchmark their performance.

In this article, we share a glimpse of what 1500+ participants globally told us about their recent performance, current fundraising strategies and opportunities, use of technology and CRMs, and attitudes and use of artificial intelligence (AI).

While these findings are not entirely comparable due to differences in the sample per region, they give excellent insights into the social impact sector and trends across the world.

Income

When asked to think about their performance in the last full financial year, most participants across regions shared that their income either increased or remained the same.

However, a big chunk of participants was unaware of their income changes—likely impacted by the increase in large nonprofits participating in the research. This is especially evident in Australia/New Zealand where 27% of participants didn’t know how their voluntary income changed, but where we also had a 72% increase in large nonprofits taking part in comparison to last year’s sample.

When focused on income streams, grants are ranked as the main income stream across all three regions. However, what’s also evident is that nonprofits who shared that their income decreased in the last full financial year are more reliant on grants. In turn, growing nonprofits have a more evenly spread income stream portfolio.

While these grant-related findings are similar globally, there are other differences when it comes to income sources. Legacies are a significantly more important income stream in the UK when compared to nonprofits in Australia/New Zealand or Canada.

Major donors, in contrast, are more important to nonprofits in Canada and Australia/New Zealand than in the UK, especially so in Canada.

Digital Maturity

A digitally mature nonprofit is one where digital is integrated across all areas, including fundraising, supporter experience, internal processes, and more. We asked participants to place their nonprofit on a digital maturity spectrum, ranging from 1 (lowest) to 10 (highest).

Individuals in Canada ranked their nonprofit as the most digitally mature:

The 2024 average score is lower in each region when compared to 2023 or 2022. While digital disruption has always impacted the sector, it’s likely that AI has had an influence on these results.

This was the first year that our Status of Fundraising research focused on AI, likely impacting how nonprofit organisations rate their current digital maturity. Only a few are prioritising and truly embracing AI—as we will explore later on in this article.

Digital Maturity and Performance

Interestingly, the research also shows a link between digital maturity and income increase, and these findings are evident globally.

In the UK, those with above-average digital maturity score are significantly more likely to say that their income is growing. In a similar manner, data from both Canada and Australia/New Zealand show that those with below-average digital maturity score are significantly more likely to say their income is declining.

These findings confirm that tech-savvy nonprofits are often better able to capitalize on opportunities that help them grow.

Fundraising Challenges

The current economic landscape—and subsequent fewer donations—continues to challenge the sector again this year. Participants in each region shared that it’s, by far, the main fundraising challenge the sector will face over the next three years.

Interestingly, public perceptions of the sector also concern significantly more than in 2023. Further regional qualitative research highlighted globally needed changes to the narrative around cost of fundraising and the impact of the nonprofit sector.

Social media, especially, took the spotlight as a challenge when it comes to public perceptions. While these platforms can help charities reach wider external audiences, they also give space for anonymous and polarized opinions around the deserving or undeserving beneficiaries.

Fundraising Opportunities

When asked what would bring the biggest value, participants in each region ranked improved data management the highest. It’s also evident that smaller nonprofits are more likely to see value in working with partners to reach new audiences, whereas larger nonprofits rank integrated technology solutions as the biggest value opportunities.

Artificial Intelligence

AI has taken the world by storm. Considering the recent AI-related innovations, we wanted to identify if AI is influencing the nonprofit sector. Attitudes towards AI differ significantly across participants, but most use AI in all regions:

While predictive and generative AI are the two types of artificial intelligence most relevant in fundraising, the data suggests that nonprofits globally are mainly using generative AI. Only 10% of participants in the UK and Canada shared that they use predictive AI. The figure is slightly higher in Australia/New Zealand at 14%.

Most participants also have concerns about the technology, mainly to do with misinformation, data security and bias. Despite this, very few say their nonprofit has an AI policy in place—at 5% in the UK, 5% in Canada, and 6% in Australia/New Zealand.

Considering the speed of AI adoption, it is vital that nonprofit-wide policy making is accelerated, especially when most participants say they, in fact, already use AI.

CRMs and Technology Ecosystems

We then focused on the CRMs and technology ecosystems nonprofits have in place. Most participants shared that their nonprofit has a CRM solution.

Attitudes towards CRMs are also similar across regions. The vast majority agree that their data is secure, and many also think that their CRM improves overall performance, helps to build stronger relationships with supporters and is easy to use.

However, the data also reveals that nonprofits globally struggle to get the most out of their CRM:

Interestingly, even though most say that they are not getting the most out of their system, none of the regions rank technology training as a key opportunity that would bring the most value.

Despite this mismatch, most are satisfied with their CRM:

• In the UK, 43% are moderately or very satisfied, and a further 23% are neither satisfied nor dissatisfied.
• In Canada, 52% are moderately or very satisfied, and a further 19% are neither satisfied nor dissatisfied.
• In Australia/New Zealand, 48% are moderately or very satisfied, and a further 25% are neither satisfied nor dissatisfied.

When looking into technology ecosystems, it’s clear that integrated solutions are a rare thing in the sector. Only a handful of respondents said their tech stack is perfectly integrated, rounding down to 0% in all three regions.

Unsurprisingly, tech-savvy nonprofits are more likely to say their tech stack is either reasonably or well integrated.

In the UK and Australia/New Zealand, email marketing is the most popular solution for CRMs to integrate with. In the UK, this is followed by reporting and analytics and payment processing, whereas donation forms take the third spot in Australia/New Zealand. In Canada, payment processing was rated as the most popular integration, followed by donation forms and email marketing systems.

Global Takeaways on Fundraising in 2024

Naturally, fundraising and the nonprofit sector look different in each region—impacted by the differences in local political landscape, geography, history, demographics, culture and more. Nonetheless, our 2024 research revealed various globally relevant findings that give nonprofits across the world excellent insights on current trends, opportunities, and successful strategies.

While it’s evident that the economic challenges have had a big impact on the sector, there are many encouraging trends. From income stream diversification to early tech-adoption and exploring innovations like AI, these findings propose that nonprofits of all sizes can seek to take agency over how they approach innovation to boost their growth.

New or ongoing external factors are always going to come into play, but it’s encouraging that being more intentional about trying new fundraising activities or strategies can lead to success.

Eager to learn more? Download each regional report for free to explore these findings in more detail.

The post The Status of Fundraising 2024: Global Research Highlights first appeared on The ENGAGE Blog.

But change management must also include the people side of change. Good change management processes help employees embrace and champion these transitions and help facilitate higher adoption rates to improve long-term change efficiency.

When there is a transition in leadership or a switch to new fund accounting software, change can be slow and create anxiety among your team. With the right tools and approaches to change management, you can reduce the anxiety that can come with innovation and increase the success rate of your projects.   

Here are four ways leveraging change management strategies can help you build a sustainable transformation for your nonprofit finance team.

1. Creating a Strategic Vision  

A successful change management approach should start with developing a long-term strategic vision. This vision is especially essential for nonprofit organizations operating with limited resources. This vision serves as the linchpin, aligning the nonprofit’s mission with the day-to-day operations that sustain it. It’s a means to unify everyone around the nonprofit’s purpose and its plans for achieving its mission today, tomorrow, and in the years to come.   

Before jumping into any actual changes, you need to take the time to develop a desired future state of the organization. Your future state will explain the “why” behind all the changes going forward. If your team is aware of and aligned with the desired future state and strategic mission of the organization, it’s much easier for them to understand the necessary changes to achieve that desired future state.   

2. Adopting New Technologies  

You’ve likely heard the term “digital transformation” dozens of times, especially in the past few years. Organizations that were fully in person and relying on manual processes before the pandemic suddenly had to pivot into new systems, often in a matter of days or weeks, to accommodate remote work. These systems were often set up piecemeal, and many nonprofits just grabbed onto the first system they saw. Organizations simply didn’t have the time to perform due diligence for system selection.   

And now, four years later, those systems aren’t working anymore. In most cases, the current systems are inefficient or have caused employees to build out workarounds to fit their needs. In the worst cases, companies are hardly using the systems they’re paying for. This is a great time to employ change management strategies to envision a future system that is informed by staff and organizational needs, and then create a roadmap to get there.   

3. Improving the Employee Experience  

One of the most pressing concerns for nonprofits is avoiding burnout and attracting and retaining employees. This is a golden opportunity for nonprofits to develop long-term people strategies that meet the needs of a changing workforce.  

Nonprofits are rarely going to be able to provide compensation that matches their for-profit counterparts. But with a well-developed people strategy, nonprofits can provide flexible and remote work arrangements, strong benefit packages, and a sense of purpose that you can leverage to attract talented individuals. However, pivoting people strategies is an organization-wide lift that involves input from various stakeholder groups. It can be made significantly easier and more effective with the help of change management.   

4. Reducing Costs  

It’s not uncommon for nonprofits to implement organizational changes that promise to lower costs. Take a new fund accounting system, for example. It can promise all the automation and efficiencies under the sun, but if the staff aren’t willing to change, it’s likely your costs will stay the same, or even increase as you’re paying for a system that isn’t being used.   

Change management focuses on people, helping nonprofits streamline projects, reduce turnover, create an agile workforce, and approach change positively, all contributing to reduced costs within the organization. Nonprofits that build change management capacity or utilize change management services will get to their desired future state while reducing costs along the way.   

Setting the Foundation for Growth with Change Management

While change can be scary for nonprofits (and any organization for that matter) change management practices can help to align strategic objectives with internal transformations, increasing project success and adoption rates. Investing in and building change management capabilities within your organization can create a positive internal and external reputation for your nonprofit and position it to continue to fulfill its mission now and into the future.   

Looking to lead your finance team through a transition? Check out the webinar, How to Be a Nonprofit CFO Who Takes Your Org from Tech Laggards to Tech Leaders. It’s part of the Ultimate Nonprofit CFO Series: How-tos and Upskilling for the Modern Nonprofit CFO.  

This blog post was co-authored by Megan Bierwirth with Forvis Mazars.

The post The Crucial Role of Change Management for CFOs: Driving Sustainable Success in Nonprofit Finance first appeared on The ENGAGE Blog.

“We are honored to receive three WebAwards again this year,” said Mark Davis, Vice President of Education Products, Blackbaud. “One of Blackbaud’s company values is ‘powered by purpose’ and we are motivated by more than creating great software. We’ve been collaborating with school leaders for more than 40 years, and delivering exceptional websites is one way we help them grow enrollment and further their missions. The WebAwards are a testament to our partnerships, and the passion private and independent schools bring to work every day.”

Independent expert judges from around the world evaluated websites in 97 industry categories. They determine the winners by scoring based on seven criteria: design, innovation, content, technology, interactivity, copywriting, and ease of use. They selected three Blackbaud websites for honors:

2024 Outstanding Websites

Vermont Academy is a private, co-educational, college preparatory boarding and day school in Saxtons River, Vermont, serving students from ninth through twelfth grade, as well as postgraduates.

Saint Ignatius College Prep is a private, coeducational, college preparatory Jesuit Catholic school established in the heart of Chicago in 1869.

2024 Education Standard of Excellence

St. Catherine’s School is an independent Episcopal diocesan school in Richmond, Virginia. It is the oldest private, all-girls school in Richmond and the only independent all-girls school in Virginia for age 3 to grade 12.

The winning Blackbaud websites excelled in the Education category, competing against other K–12 school, college, university, and education-themed websites. These award-winning websites leverage Blackbaud’s professional-level design and strategic consulting services, powered by our content management solution for school districts and schools, Blackbaud School Website System

Congratulations to the school webmasters and the Blackbaud web developers who worked on these projects! School websites are just one of the essential software solutions we build to drive impact for K–12 schools, and we are honored to be recognized.

The post Blackbaud School Websites Honored with WebAwards for the 7th Year in a Row first appeared on The ENGAGE Blog.

The quandary that faces every nonprofit management team is how to communicate the difference in GAAP to non-GAAP operating results. In many respects, it is the same challenge our for-profit friends face when they eliminate stock-based compensation from their financial statements, except in nonprofit accounting our challenges are on the revenue side of the equation.

With good training, clear reporting, and a little patience, you can help your nonprofit Board members understand the difference between the GAAP results your accounting team needs and the non-GAAP results presented by other areas of the organization.

What is GAAP and Why Is It Important for Nonprofits?

GAAP stands for generally accepted accounting principles. These 10 standards become a framework for tracking and reporting on your financial data. The GAAP framework helps ensure transparency and consistency across organizations.

Created in the wake of the stock market crash of 1929 and the resulting Great Depression, GAAP was developed and continues to be maintained by the Financial Accounting Standards Board (FASB), the SEC, and the American Institute of Certified Public Accountants (AICPA).

The principles apply to all accounting professionals but are especially important for nonprofits because they emphasize transparency and building credibility.

GAAP requires the accrual method of accounting, which matches the transaction to the time period when the activity occurs, not when it is paid. So, while bequests, insurance policies and planned gifts are exciting for the organization, those donations won’t be reflected in the GAAP reporting. Kudos to your development team for getting the payout from an insurance policy of a 45-year-old. But hopefully that person still has a long and fruitful life ahead of them, so your organization won’t see those funds for many years.

These standards also require restricted funds to be tracked separately, ensuring donor intent. Organizations cannot use restricted funds unless it aligns with what the grant or major donor wanted. Grant dollars earned specifically for one program cannot be used for a different program without the grantor’s consent.

Educating Your Board on GAAP for Nonprofits

My first couple of board meetings as a CFO were spent going down the rabbit hole of explaining why my development partners reported these great multi-million-dollar quarters, and I would show the board just how little cash came into the door and how much of that could actually be spent on the operations of the organization.

So, what can you do to eliminate these uncomfortable conversations?

Educate, educate, educate.  Do you have board members who are members of the business community or are they from other disciplines that never have the need to understand a financial statement? Depending on their comfort discussing financial statements, craft a workshop that helps them not only understand the differences in not-for-profit versus for-profit accounting, but also what is considered a gift by your development staff versus what hits your financial statements.

• Does development count expectancies and bequests at face value or a discounted rate—do they record them at all?
• Do your development partners count conditional pledges?
• How do you explain the discount rate on multi-year pledges?

These are all areas that impact the variance between what you’re reporting and what the development office reports out.

Create a Simple Reconciliation Schedule

The simplest solution I found (after educating my board on the above issues) was to create a simple schedule that reconciled the non-GAAP development numbers back to what was reported in the financial statements.

The top of the schedule listed all GAAP revenue, including pledges, cash gifts, non-cash gifts, and irrevocable trusts. The report would show the subtotal of this revenue, and list the non-GAAP gifts below, such as bequests and revocable trusts. The total of the schedule then matched the numbers reported by the development team. Use clear labeling so your board members can easily see what is GAAP and what is non-GAAP.

By creating a simple, easy to follow reconciliation schedule, my development partner and I were able to clearly communicate the organization’s financial progress to our board.

Adhere to GAAP Standards with Fund Accounting Software

When you are focused on transparency and stewardship, you need to be able to track your revenue by fund and create reports to clearly show your financial data. Nonprofit accounting software allows you to track and report on your different funds, grants, programs, and projects in real time. It also integrates with your fundraising tools and automates the reconciliation process. With nonprofit accounting software, you can save time, reduce errors, and communicate your financial results clearly and confidently to your board and stakeholders.

How Development and Finance Can Get Along (Really!)Does your organization need a fund accounting system that makes it easy to adhere to GAAP reporting standards? Check out our buyer’s guide to help you make an informed decision about your accounting software.

The post GAAP for Nonprofits: How to Reconcile GAAP and Non-GAAP Results first appeared on The ENGAGE Blog.

[FADE IN ON A BOARD MEETING]

DEVELOPMENT DIRECTOR: As of June 30, we’ve raised $9.2 million.

FINANCE DIRECTOR: Fiscal year-end numbers have not been fully reviewed yet, but recognized revenue from fundraising will be close to $7 million

DEVELOPMENT DIRECTOR: What?!?

EXECUTIVE DIRECTOR: Ugh.

[Executive Director throws head in hands. FADE OUT.]

Directors of Development and Directors of Finance often find themselves working in a love/hate relationship. Not with each other, typically, but rather with the key metrics they are each responsible for.

Development and Finance both love when fundraising reports and financial statements show increases over last year, over targets, and over budgets. Similarly, neither enjoys reporting that revenues are down. But even when fundraising is routinely exceeding targets and the gifts cannot be processed—nor the donors thanked—fast enough, Development and Finance both hate it when their numbers don’t match.

The Executive Director also hates it when the numbers don’t match, because ultimately, the buck stops with them.

Change the Scene with a Connected Fundraising and Fund Accounting System

Regardless of which team you’re on (and I’ve been on both), you want to love your numbers whether they’re up or down, knowing that you can confidently get them to reconcile with those of the other team.

And neither team wants to spend countless, unnecessary hours searching for reconciling items, or reformatting financial data generated by the fundraising system so that it can be pushed into the finance system without exceptions.

You can change the scenario—including the dramatic scene above—by effectively integrating data from your fundraising CRM and your accounting system. Incorporating technology solutions that act as bridges between your systems can ensure that nobody on either team is required to format transactions, add or delete rows or columns, or convert files to a different format.

So, let’s look at the top seven reasons to integrate your fundraising CRM with your general ledger:

1. Reducing Errors
2. Reducing Effort
3. Maintaining Proper Control Over Data
4. Reducing Clutter
5. Easier Ongoing Reconciliation
6. Common Understanding of ‘The Numbers’
7. Promoting Collaboration Across Functions and Teams

1. Reducing Errors

When systems are integrated, you only need to enter data one time and in one place, whether manually keying or through an import. It follows then, that if transactions are only entered once, it cuts the opportunity for errors in half. If transactions are entered accurately the first time into an integrated system, there should be no concern about accuracy when they are posted, because no further human hand will touch them.

Even if your fundraising CRM generates a file to be imported into the accounting system, that output typically must be manually formatted by one team or both to ensure that it contains the proper columns, headers, and summarization. Plus, the fundraising output file often must be converted to another format before it can be brought into the accounting system. All of this presents the potential for errors.

Finally, integration can enforce some accounting internal controls that will further reduce the likelihood of errors. For example, an integrated posting process can mark transactions as ‘posted’ in the fundraising CRM so they can’t be inadvertently posted again. This locks a posted gift transaction so that it cannot be edited without generating adjusted journal entries.

2. Reducing Effort

Reducing effort means reducing the time, energy, and stress involved in getting fundraising financial data into the general ledger. There are several ways that integrating your systems can reduce effort overall:

• Entering data (manually or through an import) into only one system instead of into two systems reduces the overall amount of data entry, saving time.
• Not having to manipulate output files, manually summarize transactions, or convert files to another format will also reduce the time spent on the posting process and will make posting transactions from the fundraising CRM more efficient overall.
• When there are few or no errors, team members need to spend very little time on detective work, and the resulting corrective action. And your team can save even more time by not having to investigate and remediate hard-to-identify items that hinder reconciliation.

3. Maintaining Proper Control Over Data

One less obvious reason to integrate systems is to ensure that each team continues to maintain control over their own data—the data necessary to run their department of the organization.

When systems are integrated, each team can be confident that they don’t need to be over-involved in the other team’s work, or that the other team will need to be overly involved in theirs.

Development remains in charge of fundraising recording and reporting, while Finance continues to oversee accounting recording and reporting. But, with internal controls in place, everyone is confident that systems can easily align with each other.

4. Reducing Clutter

Reducing clutter goes to the concept of the integrated fundraising CRM serving as a true subsidiary ledger to the general ledger—the same way that Accounts Payable or Payroll is structured. In that case, most if not all fundraising transactional details remain in the fundraising system. From there, only summary transactions are posted from the CRM to the general ledger so that the latter does not become unnecessarily cluttered.

The caveat in this scenario is that it’s critical to ensure that the detail in the fundraising CRM always agrees with totals in the general ledger. At any time, a fundraising system report of transaction detail and totals by account or fund for a particular date (or date range) should always be able to tie to the corresponding account totals or balances in the general ledger for the same period.

5. Easier Ongoing Reconciliation

Everything discussed so far informs easier ongoing reconciliation between systems. As a standard rule-of-thumb, there should be a three-way-match between the fundraising system gift or revenue entry, the posting to the general ledger, and the deposit to the bank.

Integrated systems can ensure error-free and low-effort posting from the CRM to the general ledger corresponding to each bank deposit, whether that occurs daily, several times each week, or even several times each day. If every CRM gift batch can link back to what’s posted to the general ledger and to what’s deposited in the bank for that batch, end-of-period reconciliations should be a snap.

Even for non-depositable revenue—think pledges and gifts-in-kind—integrated systems make it easy to post and reconcile daily, or as often as is needed.

6. Common Understanding of ‘the Numbers’

In the dramatic scene at the beginning of this article, there was obviously no common understanding of the numbers between Development and Finance. Integrated systems force that common understanding because they support and encourage ongoing reconciliation—and common understanding when numbers don’t correspond.

In that scenario, the reason that the numbers were off was because some of the larger campaign pledges were conditional, and therefore not immediately recognizable as revenue. In addition, low-dollar one-time pledges were only recorded as revenue when they were paid, not pledged.

An integrated posting process and routine reconciliation would have not only identified these items on both sides, but also would have prompted proper internal communication to ensure that both teams reported consistently. Flexibility, efficiency, and accuracy are all key supporters of effective reconciliation, and internal communication is the pathway to ensure these three essential elements are top of mind.

Free download from the Blackbaud Institute: Your Guide to Creating a Cohesive Constituent Experience

7. Promoting Collaboration Across Functions and Team

Some of these top reasons for integrating systems are more tactical and others more strategic—or, perhaps, some quantitative and some qualitative. Long term, the qualitative cannot be ignored.

On the surface, integration resolves a tactical issue: accurately and efficiently getting revenue transactional data from the source system into the organization’s financial system of record. The outcome of successful integration is more time, less stress, and more confidence and trust, both in the process and in the numbers.

It goes back to that love/hate relationship. When you can consistently trust process and love the numbers, stronger cross-functional collaboration will naturally evolve. Team members will be happy to cooperate in the rare instances where something has to be investigated on one side or the other. Each will be inclined to be sure data are aligned and coordinated when communicating with executive or external stakeholders.

Integrated Systems and Better Transparency

Let’s see how that scenario would play out with an integrated fundraising CRM and general ledger.

[FADE IN ON A BOARD MEETING]

DEVELOPMENT DIRECTOR: As you can see, as of June 30, we’ve raised $6.9 million in cash and short-term pledges and another $2 million in conditional and long-term pledges. We’ve also recorded about $300,000 in smaller telemarketing pledges that, historically, we don’t count as gift revenue until they’re paid.

FINANCE DIRECTOR: That’s right. As you can see on the June 30 income statement, fundraising revenue for the year is just a hair over $6.9 million.

EXECUTIVE DIRECTOR: Thank you. Any questions from the Board?

[Executive Director smiles as a board member begins to make an innocuous statement – FADE OUT.]

Integrating your fundraising CRM and general ledger with purpose-built software will ensure that funds recorded as raised properly correspond with the money recorded as revenue from fundraising on financial statements—or reasonably explain when they don’t.

But along the way, you’ll save time, be more accurate, remove clutter, and build trust and confidence among the teams and their leadership. And, a fully aligned pair of integrated systems will drive improved transparency, insights, operations, and, ultimately, accountability to both leaders and donors for delivering your mission.

Ready to see an integrated CRM and fund accounting system in action? Check out our on-demand product tour with Blackbaud Raiser’s Edge NXT and Blackbaud Financial Edge NXT.

The post 7 Reasons to Integrate Your Fundraising CRM and General Ledger first appeared on The ENGAGE Blog.

After charitable giving hit a record high of $516 billion in 2021, momentum stalled in 2022. Inflation, higher interest rates, and economic uncertainty, combined with a shrinking pool of donors, resulted in the first contraction in giving in more than a decade (down 13%, adjusted for inflation.) Giving USA reported that charitable giving was down another 2% in 2024, when adjusted for inflation.

The pullback in cash giving is forcing fundraisers to seek new ways to diversify and grow revenue. At the top of the list is a renewed focus on non-cash giving, and within this asset class, stock represents the biggest opportunity.

Why Stock Donations?

Gallup recently reported that 61% of Americans now own stock, including 66% of those over 50 and 84% of households earning $100,000 and above. Combined, this group owns $40 trillion in stocks, exchange-traded funds (ETFs), and mutual funds.  The top 10% of investors represent $50-$75 billion in potential annual funding for nonprofits.

Gifts of stock offer benefits to both the recipient organization and the donor.

1. Tax savings: Appreciated stock represents tax advantages for donors who support nonprofits.
2. Donors can avoid capital gains tax and deduct the current value of stock held for more than 12 months. 
3. Pre-tax stock gifts allow the recipient organization to keep the proceeds that would have been paid in taxes had the donor sold the stock before donating the proceeds.
4. Increased size of gifts: Stock donations tend to be larger gifts than cash donations, averaging more than $6,000 in 2023 and more than $7,000 in 2024.

The implications for organizations: most (if not all) midlevel and major donors own appreciated stock and donating stock versus cash offers substantial savings for donors. For these reasons, stock gifting should be a fundraising priority for organizations of all sizes.

Why Now?

After its amazing resurgence, the stock market is at or near all-time highs. In just the past 10 years, the S&P 500 has almost tripled while the NASDAQ 100 has almost quadrupled, representing trillions in unrealized gains held by donors. 

When the markets soar, millions of investors seek to harvest gains, mitigate risk, and reduce concentration in stocks that have had outsized gains over the past 5-10 years. Investors generally have two options:

1. Sell the stocks and pay a tax on the gains
2. Share their gains tax-free with the causes they support

Those in the know are taking advantage of the tax benefits to donate stock to the causes they love. But not all your major and midlevel donors are aware of the benefits of donating stock. Here’s how to get started:

• Start by promoting stock gifting on your Ways to Give page and Donate page, letting supporters know you’re now accepting stock donations.
• Then, create an email marketing campaign to encourage and inform donors about the benefits of donating stock to charity, with special emphasis at the end of the year to remind them of the tax advantages.
• To make it even easier, check out the list of the best stocks to donate and share with your donors the reasons why these stocks are particularly ripe for gifting.

Is This Your Year for Stock Donations?

There might never have been a bigger moment than now for fundraisers seeking to diversify and grow via non-cash giving. As the charts below show, nonprofits, healthcare foundations, and higher education institutions are starting to get the message.

At the midpoint of 2024, stock gifts on the DonateStock platform (representing thousands of organizations) were up 65% while proceeds from stock gifting were up 285% vs. 2023.

A New Way to Grow Stock Gifting

While the donation of stocks used to be a painstaking, manual process for donors and the charitable organizations receiving the proceeds, it’s now accessible and easy for everyone. Gone are the days of sharing your brokerage details with strangers, requiring donors to complete paperwork, and manually processing, reconciling, and acknowledging stock gifts. Several tools can help you, including software from my company, DonateStock. When your donor submits a gift via online donation form, they can initiate an online gift of stock in minutes at no cost.  From there, it’s effortless for your donor and for your gift processing team:

1. Your donor selects their organization of choice on the online donation form provided by a stock donation tool integrated into your donor management system, such as Blackbaud Raiser’s Edge NXT®
2. The stock donation tool, such as DonateStock, automatically and securely sends instructions to the donor’s broker and notifies the donor and the charitable organization
3. The donor’s broker transfers the stock to the recipient’s account
4. The stock is received, reconciled, converted to cash, and the proceeds are distributed to your organization
5. Your donor is notified the stock was received and is sent a receipt for the gift

Also consider donor satisfaction. Stock gifting results in almost 25% of stock donors making repeat gifts. In 2023, stock donors made an average of 3.7 gifts each, indicated in the chart below.

For organizations that are Blackbaud customers, it couldn’t be easier to get started. It takes just a few minutes for your organization to automatically process and acknowledge stock gifts efficiently and transparently. Activate DonateStock in minutes one of two ways:

• Within Raiser’s Edge NXT® with a simple-to-implement extension
• Directly, by finding and claiming your page at https://donatestock.com/for-nonprofits

To learn more or to get started with fast, safe stock donations, please visit the DonateStock page in the Blackbaud marketplace. 

The post Unlock Millions in New Funding via Stock Donations first appeared on The ENGAGE Blog.

In some cases, the Statement of Activities may also be referred to as the “income statement” or “statement of revenues and expenses,” though “Statement of Activities” is the most common term among nonprofits.

The SOA details the revenue earned and expenses incurred during that period, as well as the resulting net position. For nonprofits, this net position is known as “net assets,” in contrast to the “net income” or “net profit” used by for-profit entities. While functionally similar, the terminology reflects the unique goals and nature of nonprofit organizations.

What’s included in a Statement of Activities?

While the complexity and detail of a Statement of Activities (SOA) can vary, every report will always include three key elements: Revenue, Expenses, and Net Assets. Let’s take a closer look at each of these components and some examples of what you can expect to find in each.

Revenue

Revenues represent the total income a nonprofit organization receives from various sources, such as donations, grants, program fees, and investment returns, during a specific period.

Examples of Revenue line-items within a nonprofit Statement of Activities:

• Donations and/or Contributions: These include money, goods, or services received from donors. Monetary donations can be categorized as either restricted (earmarked for a specific cause or use) or unrestricted (available for general use at the discretion of the nonprofit). Nonprofits may differentiate between restricted and unrestricted funds in the Statement of Activities depending on the intent of the report. Additionally, donations may come in the form of professional services or goods, which should also be accounted for.
• Grants Received: Funds provided by government agencies, corporate sponsors, or other foundations. Nonprofits may choose to specify the source (e.g., federal, state, or local government) and whether the grants are restricted or unrestricted, similar to donations.
• Investment Revenue: Income earned from investments, which may include profits from the sale of securities, interest, or dividends.
• Program Service Revenue: Revenue generated from services directly related to the nonprofit’s mission. This could include income from providing services, membership fees or dues, or sponsorships.
• Sales: If the nonprofit sells goods, the revenue from these sales would be recorded here, similar to program service revenue.
• Special Events: If separating revenue from specific events is useful, the organization may include a line item for “Special Events.” This section might further break down into subcategories, such as revenue from gifts, donations, auctions, etc.

Expenses

Expenses are the costs incurred by a nonprofit in carrying out its activities, including program delivery, administrative operations, and fundraising efforts.

Examples of Expenses line-items within a nonprofit Statement of Activities:

• Salaries and Compensation: This includes the costs associated with paying staff and other workers, as well as related expenses such as benefits and taxes (e.g., 401(k) contributions, payroll taxes, paid time off, workers’ compensation, etc.).
• Contract Services: Expenses related to payments for services provided by contractors who are not on the regular payroll. This can include one-time costs for services like building repairs or recurring costs for professional services such as accounting, IT, legal, marketing, etc.
• Facility and Real Estate Expenses: Costs associated with the upkeep and operation of facilities or real estate owned or leased by the nonprofit. This may include rent, utilities, repairs, and maintenance.
• Physical, Materials, Supplies, and other Operating Expenses: Funds used to purchase raw materials necessary for the nonprofit’s mission. This could include office supplies, equipment, software subscriptions, and other operational costs such as telephone or internet bills.
• Travel Expenses: Costs incurred for travel related to the nonprofit’s mission. This may include expenses for hotels, airfare, vehicle rentals, meals, and other travel-related costs.

Net Assets

Net Assets, or the “change in net assets,” represents the difference between total revenues and total expenses for a given period. This figure indicates whether the organization has gained or lost resources during that time, directly impacting its overall financial position.

To calculate Net Assets, you start by summing all sources of revenue, including donations, grants, investment income, service revenue, sales, special event income, and any other revenue streams. This gives you the total revenue line.

Next, you add together all expense items, such as salaries, facility costs, supplies, and other operational costs, to get the total expenses line.

For example, if total revenues for the fiscal year are $2,200,000 and total expenses are $1,850,000, you subtract the expenses from the revenue to determine the net assets.

In this case, the net assets for the year would be $350,000. This $350,000 can then be used to further the organization’s mission through planning activities for the upcoming years.

Statement of Activities Example

Let’s look at a real example to put everything together. Below is a sample Statement of Activities for a nonprofit organization using Blackbaud’s Financial Edge NXT software (FENXT):

How do SOAs Help Organizations?

An SOA helps nonprofits analyze their financial health by showing how revenues are generated and how funds are allocated. By comparing revenues to expenses, organizations can assess operational efficiency, ensure they’re “living within their means”, and make informed decisions about resource allocation, future programs, and fundraising strategies.

• Analysis and Accountability: The SOA is essential for demonstrating transparency to stakeholders, including donors, grantors, board members, and the public. Accurate financial reporting reassures these stakeholders that their contributions are being used responsibly and in alignment with the organization’s goals.
• Compliance: The SOA is often required for nonprofit financial reporting, especially for those tax-exempt under Section 501(c)(3) of the U.S. Internal Revenue Code. Nonprofits must submit financial statements, including the SOA, as part of their annual Form 990 filing with the IRS. These filings ensure regulatory compliance and help maintain tax-exempt status. Additionally, many grant applications and reports require audited financial statements, including the SOA.
• Format and Variability: While the  SOAs content and format may vary depending on the organization’s size, mission, and funding sources, its fundamental purpose remains the same: to provide a transparent and accurate record of financial activities. Larger nonprofits may have more detailed statements, while smaller ones might have simpler versions, but the  SOAs role in transparency is consistent.

To put simply, the Statement of Activities is a cornerstone of financial transparency, helping nonprofits build and maintain trust with supporters and regulators.

How are SOAs Different from an Income Statement?

So, what is the difference between a “Statement of Activities” used by nonprofits and an “Income Statement” used by a for-profit company?

The short answer: they are functionally the same. However, the language used in both the title and within the report differs, influencing how they are perceived and used.

For nonprofit entities, this summary document is a tool to assess their financial standing and make informed decisions on how to further their mission in the coming months or years. While a for-profit company may also use this information to make critical decisions about the future, their focus is more geared toward generating income rather than advancing a mission.

For example, many nonprofits use terms like “revenue” and “net assets” instead of the for-profit equivalents “income” and “net income.”

SOAs are One of Four Main Nonprofit Financial Statements

A Statement of Activities becomes even more valuable when analyzed alongside three other key nonprofit financial documents: the Statement of Financial Position, the Statement of Functional Expenses, and the Statement of Cash Flows.

Together, these documents provide a comprehensive view of the organization’s financial health from different perspectives, equipping nonprofit leaders with the insights needed to take action and bring their mission to life.

To learn even more about nonprofit financial reporting basics, as well as other fund accounting tips, check out our Accounting Fundamentals Revisited webinar series.

Summary FAQs

What are Common Statement of Activities Mistakes?

While mistakes can be made on any financial document, common mistakes on an SOA include:

1. Misclassifying Revenues and Expenses: A common mistake is incorrectly categorizing revenues or expenses, such as recording a restricted grant as unrestricted or misallocating administrative costs to program expenses. Accurate classification is crucial for reflecting the true financial health of the organization.
2. Failing to Separate Restricted and Unrestricted Funds: Nonprofits sometimes neglect to distinguish between restricted and unrestricted funds in their SOA, leading to confusion and misrepresentation of the organization’s financial position. Properly differentiating these funds ensures that financial statements accurately reflect donor intentions and fund usage.
3. Omitting In-Kind Contributions: Failing to include in-kind donations, such as donated goods or services, can lead to an incomplete financial picture. In-kind contributions should be recorded at their fair market value to accurately reflect the organization’s total resources and expenses.
4. Inconsistent Reporting Periods: Another common error is inconsistently reporting financial data, such as mixing up fiscal years or not aligning the reporting period with other financial statements. Consistent and accurate reporting periods are essential for clear and comparable financial analysis.

To learn more about potential pitfalls and how to avoid them, check out our article on the most common SOA mistakes!

What is the Most Common Reporting Period for a Statement of Activities?

While the fiscal year is the most common choice for a Statement of Activities (SOA), it’s not the only option. The fiscal year usually makes sense because it lines up with other key financial documents, making it easier for managers and stakeholders to analyze and compare the numbers.

That said, nonprofits can choose other reporting periods, like the calendar year, depending on their needs or any specific regulations they have to follow. The main thing is to stick with the same reporting period consistently, so the financial analysis stays accurate and easy to compare over time.

Why Should you Distinguish Between Restricted and Unrestricted Revenue in the Statement of Activities?

Distinguishing between restricted and unrestricted revenue is important because it reflects the donor’s intentions and how funds can be used:

• Restricted Revenue: These funds come with specific conditions set by the donor, meaning they must be used for designated purposes or projects.

• Unrestricted Revenue: These funds are available for general use and can be applied to any area of need within the organization.

This distinction helps organizations track and report how they are meeting donor expectations, ensuring transparency in how funds are allocated and spent. By clearly separating these categories in the Statement of Activities, nonprofits can demonstrate their commitment to honoring donor intent and maintaining financial integrity.

The post Statement of Activities (SOA): A Nonprofit’s Income Statement Equivalent first appeared on The ENGAGE Blog.