Vested ideas (vendor column) – Donor funds face challenges

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By Christopher Seal

Increasing financial accountability ranks among the most critical concerns for foundations today. In the wake of corporate accounting scandals and the perceived failure of large charities to make financial operations adequately transparent to donors and regulatory entities, the government and the public have trained a keener eye on the financial operations of charitable organizations.

Donor advised funds, in particular, are subject to both increasing regulatory scrutiny and growing competitive pressures as commercially backed donor-advised-fund programs, with the resources to offer advanced donor services and increased financial transparency, continue to enter the market. As a result, traditional donor-advised-fund programs face urgent and complex technological and administrative challenges in efficiently maintaining financial transparency on an on-going basis.

From a purely financial perspective, “accountability” is the capture of financial information and the speed and accuracy with which it can be aggregated, processed and logically presented to donors, board members and regulatory entities to ensure full transparency of an organization’s financial operations.

To optimize this level of transparency and reporting speed, organizations must know, at any given point in time, how individual donors, contributions and grants relate to their finances. If an organization cannot maintain a constant real-time view of these relationships, then it simply will not be able to meet the accountability capabilities of financial services organizations and their respective donor-advised-fund programs.

The problem with accomplishing this is a technology problem. Most organizations use multiple systems that cannot “talk” to one another. For example they may use separate systems for fundraising, accounting and grants management. There is no ability for data to flow between these systems. Data must be keyed from one system to another manually rather than flowing seamlessly (with no human intervention) from its point of origin (a contribution entry for example) to all the other parts of the system it may affect (the donors account history, investments and the organizations accounting).

Seamless integration solves this and results in a philanthropic system that affords donors, staff, board members and regulatory entities an on-demand “snapshot” of the organization as it exists right now, at this moment. Not as of 45 days ago.

If donor-advised-fund programs are to become serious and competitive in their attitude towards financial accountability, they must take initiative to develop information-technology programs that proactively pursue the development of real time, seamlessly integrated solutions that afford these levels of transparency.

Chris Seal is manager of business development at Stellar Financial, Inc., a philanthropic software and services firm serving foundations and financial services donor-advised-fund and endowment programs.

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