Fundraising and finance – Oil and Water or Yin and Yang?

Charities and fundraisers are operating with increasing risks, regulations and responsibilities. In this environment, fundraisers and finance teams need to work effectively together.

However, in many charities, the two functions are like oil and water and often can appear to have different perspectives.
Finance teams can get frustrated by the optimistic forecasts from fundraisers and finance often viewed by fundraising as overly prudent and risk averse.

Judith Miller and Arlene Clapham of Sayer Vincent are marking this year’s Fundraising Week (21st -25th May) by offering tips on how these very different functions can work together harmoniously.

Here are their tips:

1. While fundraisers don’t have to become accountants, they need to be able to read and understand the annual report and accounts. They should meet with finance regularly and ask questions about the accounts. They need a level of understanding that will enable them to be able to explain the accounts to donors and the outside world.

2. Fundraisers and finance teams need to agree on what constitutes restricted funds, which can only lawfully be used for a specific charitable purpose and unrestricted funds, which can be spent for any charitable purposes of a charity and fundraisers need to ensure they comply with any restrictions. As well as being on the same page on the definitions, fundraisers need to be clear what type of funds the charity most needs to generate.

3. Getting finance on board before any campaign starts and engaging them in the planning stage, rather than informing them later when money comes in, is also recommended. A common mistake made by fundraisers when budgeting is to focus on direct costs and not factor indirect costs such as their time. Involving finance from the outset not only adds credibility, it ensures campaigns are budgeted effectively and costed realistically.

4. Equally, fundraisers should involve finance in their fundraising strategy. They need to understand that finance’s role is to challenge target income and the fact they will scrutinise their plans. While this can seem like a pain, it can add real value.

5. Cash flow forecasts should be included in the fundraising planning process and the finance team can help with this. If there are big upfront costs in the campaign, this will have cash flow consequences – all of which need to be communicated from the outset. There should be no surprises. Exchange rates should be factored in too; with recognition there may be some losses.

6. To ensure initiatives are tax efficient, fundraisers also need to understand tax issues and any implications. This should include how Gift Aid works and whether any fundraising activity is exempt from VAT.

7. Amendments to the Code of Fundraising Practice will come into effect on 25 May 2018 to coincide with the implementation of GDPR. It is essential that fundraisers work closely with the board, finance and comms to ensure everyone understands the regulations to mitigate risks and ensure compliance. The updates to the code feature three new sections on personal information, fundraising and content of fundraising communications and mail.

8. Lastly, the finance team should be considered a critical friend for fundraisers and a good sounding board. For example, a fundraiser might have a gem of an idea for a new campaign but by discussing it with their colleagues in finance discover there are major tax implications which make it unfeasible. Finding this out at the start can save a great deal of time and money.

By working together, the finance and fundraising can complement each other and ensure that fundraising is designed in the most tax efficient and cost-effective way.