We get a lot of questions from our not-for-profit (NFP) clients, and we thought it would be valuable to publish our answers. Reach out to us if you would like to see a question in a future newsletter.
Our organization recently began a capital campaign. Is there anything I should consider or be doing differently?
A capital campaign can be an exciting time, one of change and growth but also one that can be stressful if not planned properly. Contributions with donor restrictions are required to be carefully tracked to ensure that funds are not used outside of donor restrictions. As time and plans change, so do the capital project goals and budgets. When soliciting donor contributions, how donor funds will ultimately be used should be kept in mind to ensure restrictions are met even if plans change. This can often be accomplished with uniform pledge forms that will help establish donor intent. In addition, in the event that capital campaign contributions exceed the anticipated capital project costs, you will still want to be able to use the excess funds for future operations or projects.
Under generally accepted accounting principles, pledges should be recorded when there is written documentation and the contribution is unconditional. Verbal pledges or conditional gifts may be counted toward the campaign, but should not be recorded in the accounting records until the written confirmation is received or the condition is met. Pledges due over one year should be recorded at fair market value. This can be accomplished by adjusting expected future cash flows for any risks of non-collection and discounting to a net present value. A common question is what discount rate to use – generally, the U.S. Treasury yield over a similar length of time should be applied.
Another item that should be considered is the potential impact of large gifts on your organization’s public support test, which if not met, can affect the organization’s exempt status. Gifts that pose the largest threat are large contributions from board members, officers, or substantial donors. If these instances do arise, they can often be avoided by having the donors make the contribution through a donor-advised fund or private foundation. However, this method has its drawbacks.
There are many other things to consider as well, such as gift acceptance policy, time tracking and cost allocations. Contact a CSH representative today for more information.