Is your nonprofit ready for a CFO?
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The health and integrity of your not-for-profit can be a significant factor when it comes to pursuing its mission. When your nonprofit grows, you may find your executives are experiencing difficulties juggling financial responsibilities. If this sounds familiar, it might be a good time to hire a chief financial officer (CFO).
A senior-level position, a nonprofit CFO is tasked with oversight of accounting and finances. They work closely with the executive director, finance committee and treasurer, and serves as a business partner to your program heads. Additionally, he or she reports to the executive director or board of directors on the organization’s financial position, banking relationships, internal controls around accounting, pending contracts (including leases, government or other grants, etc.) and the status of the ongoing audits (or selection of auditors). The CFO develops budgets and devises financial strategies by analyzing investments and capital.
The CFO’s role and responsibilities vary significantly based on the organization’s size, as well as the complexity of its revenue sources. In smaller nonprofits, CFOs often have wide responsibilities – possibly for accounting, treasury function, human resources, facilities, legal affairs, administration, and IT. In larger nonprofits, CFOs usually have a narrower focus. They hone in on accounting and finance issues, including risk management, investments, and financial reporting.
Making the decision
How do you know if you need a CFO? Weigh the following factors:
- Size of your organization
- Complexity and types of revenue sources,
- Number of programs that require funding, and
- Strategic growth plans.
Some organizations, such as static organizations, maybe not share the same need for a CFO as not-for-profits with evolving programs and long-term plans that rely on investment growth, financing, and major capital expenditures.
The Right Candidate
At a minimum, you want a CFO with in-depth knowledge of the finance, accounting and tax rules particular to nonprofits. Someone who has worked only in the for-profit sector may find the differences difficult to navigate. Nonprofit CFOs also need a familiarity with funding sources, grant management and, if you’re nonprofit expends $750,000 or more of federal assistance, single audit requirements. Ideally, the candidate should be a certified public accountant (CPA), chartered global managerial accountant (CGMA) and, optimally, have an advanced degree such as a master in business administration or in accounting itself.
In addition, the position requires strong communication skills, strategic thinking, financial reporting expertise and creativity to deal with resource restraints. Finally, you’d probably like the CFO to have a genuine passion for your mission – nothing motivates employees like a belief in the cause.
Adding a CFO to the mix would alleviate your troubles when it comes to your growing budget. If not, maybe consider outsourcing CFO responsibilities to a CPA firm. One of our partners, James Dougherty, CPA, CGMA, has served many nonprofit organizations and was recently awarded the Not For Profit CFO of the year by the Los Angeles Business Journal. We’d love to discuss your options. Contact us at 818-334-8623 or click here, and we will contact you.