For Small Foundations:

Adopting a Fund Accounting System

1. How Important Can It Be?

There is a reason that the above title uses the word “adopting” to describe a foundation’s choice of accounting platform: a foundation will “live with” this system as a member of the family.  It will perform mission critical transactions and be the centerpiece of internal controls.  When faced with staff turnover, the hardcopy files and the accounting system become the assets to preserve business knowledge through the transition.

Not to stretch the analogy too far, but any blended family can tell you that living with new faces is a challenge.  Will a new system fit in?  Will it be a high maintenance partnership?  Will staff have the skills to run with it?

2. How to Approach the Decision?

If there were a simple choice of fund accounting system, this article would not be necessary.  There are several choices, and different foundations of the same apparent size will find each the right choice for their circumstance. The purpose here is to help you understand how to make that choice.

• Haste: resist the temptation to go out and start looking, but rather sit down and figure out what you want.  People that go out casually shopping for cars or homes end up making serious decisions on impulse.  Bad idea.
• Due Diligence: before you kick the tires, write down the kind of criteria that are important to you about a provider.  These are not so much nuanced decision factors as they are filters:  is the provider a start-up? Does the solution integrate with other systems? A sample criteria list is provided in the appendix.  It does not have to be long, but it will prevent you from making a mistake.
• Feasibility: It would be easy to over simplify a “feasibility assessment” as the process of figuring out how to pay for a new solution.  Hard numbers tend to trump narrative, and it is easy to fall into a trap where explicit costs, (such as a software license and/or cost of a new server), get plugged into a budget and never questioned.  But to really understand the resources needed for a new system, tough questions need to be asked. (see Appendix B)
  • Why are you doing this? What problems are being solved? What opportunities are being gained?
  • What are the effects of doing this? What new activities are anticipated? What existing work processes will be changed?
  • What sort of organizational capacity do we have to undertake this project? Who will be its champion? What project management capabilities to do we have?  Does our staff have the skills needed to operate this platform?
• Budgeting: Too often technology costs are equated with the simple cost of the software license.  Nothing could be further from the truth – license costs in today’s market make up 20% of your total costs. The of expenses to be included in technology planning are the following:
  • Licensing:  direct costs to the provider of acquiring and using a software platform. This cost could be a traditional up front fee or an annual pay-as-you-go model, and could include hosting costs or not depending on the provider.  The model should break out first year costs and a total three year cost.
  • Technical Services: these professional service costs are directly related to implementation and are typically paid to the provider.
  • Professional Services: these costs bring needed skill sets into the organization to make the transition to a new system possible.
  • Internal Resources: these “soft” costs reflect the extra effort to be required of staff in implementing a new solution.

The astute reader will notice that a detailed list of functions is not on this list.  The due diligence includes a factor for the “substance” of a product, and another for the “business fit” of the vendor, but it does not call for the exhaustive request-for-proposal laundry list of features. As a small enterprise, you do not have the resources or expertise to undertake such a process, and frankly as small as your account will be a vendor would be crazy to spend the resources to answer it.

All finalists will be asked to provide a demonstration of the product. This is really your opportunity to reach a “gut” impression of functionality and user experience. 

3. What are the Options?

What vendors are on the short list? The most important constraint in the life of a small foundation is staffing and expertise.  It is hard to find people that know the business. The choice of provider is an opportunity to mitigate this risk and to find a vendor that not only knows the technology, but also knows the business. 

Three providers in the foundation space know the business well enough to be able to answer the business questions that often lurk behind technical support requests: [1]

• Bromelkamp Community Pearl (http://www.bromelkamp.com/)
• MicroEdge FIMS (http://www.microedge.com/)
• Stellar’s NorthStar 500 (http://www.stellarfinancial.com)

Different foundations will be drawn to the different styles of these three platforms.  All of them will get the job done. Foundations that want a simpler environment may prefer Pearl, with FIMS offering more built in features and reporting, and NorthStar the more sophisticated of the group.

Pricing comparisons are difficult, partially because the actual licensing is now a lesser aspect to the total cost of ownership it once was.  Since a big part of the price tag is going to be the amount of time the vendor spends with you, this time element will likely depend more on your internal capacity (and need for hand holding) than the overhead of the software.

One final note: where the actual program lives (whether on your network or out somewhere on the internet) is a major difference between these packages.  Some organizations like the control of having their own servers while others would prefer to outsource the systems administration and security function.  MicroEdge has a service to provide FIMS on a hosted basis, and the NorthStar 500 platform is built from the ground up to work over the internet.

4. Appendix:  Sample Criteria

The following criteria will drive the decision process. One objective of these criteria should be the clear elimination of second-tier candidates as early as possible (to avoid wasting your time and theirs).  Many of the provider characteristics will be collected through reference checks, while the proposal content will be collected through product materials, demonstrations and vendor responses to specific questions.

A. Provider Characteristics:

a.    Longevity: Provider will be established (e.g. years in the business).  (New ventures are to be avoided).

b.    Subject Matter Resources: Provider will provide background information on proposed staffing

c.    Business Fit: Provider will state significance of the Community Foundation marketplace to the provider, and relevance of overall provider product line to the marketplace.

d.    Collaboration: Provider will demonstrate a collaborative style (e.g., successful experience in using partnerships).

e.    Capitalization: Provider will make available financial statements as needed to demonstrate viability.

f.     Due Diligence: Other information may be collected concerning the provider that would affect their profile (e.g. outstanding judgments).

B. Proposal Content:

a.    Substance: The solution will address core functional requirements.

b.    Technical Approach: Solutions must demonstrate compliance with current technology standards.

c.    Quality and Flexibility: Proposals will show mechanisms used to achieve Correctness, Robustness, Extensibility, Reusability, and Compatibility.

d.    Threats & Weaknesses: Proposals will identify the top threats to the successful completion of the project, and how these are to be addressed.

e.    Cost & Time Estimation: Cost and time estimates will be specific.

f.     Compatibility: Solutions will be compatible with the installed base or will show how it will recognize and work with the current systems and processes of the field.

g.    Deliverability:  The solution will be available for immediate delivery (without risk of special programming).