Your Organization Might Benefit from a CFO
SEE ALSO >>> Nonprofit Organizations
As a nonprofit leader, you’re used to overseeing all aspects of your organization. However, you might think, at times, that having a financial expert run that side of the operation could be a plus. This might be true, but hiring a chief financial officer (CFO) is a weighty decision that can have a large impact on your organization.
Examining CFO Duties
Generally, the nonprofit CFO (or “director of finance”) is a senior-level position charged with oversight of the organization’s accounting and finances. He or she works closely with the executive director, finance committee and treasurer and serves as a business partner to your program heads. The CFO reports to the executive director and board of directors on the organization’s finances, analyzes investments and capital, develops budgets, and devises financial strategies.
The CFO’s role and responsibilities will vary significantly based on the organization’s size, as well as the complexity of its revenue sources. In smaller nonprofits with budgets of $1.5 million to $10 million, CFOs often have wide responsibilities — possibly for accounting, human resources, facilities, legal affairs, administration and IT. Midsize organizations, with budgets running up to $40 million and fairly simple funding and programming, also may require their CFOs to cover such diverse areas.
In larger nonprofits, though, CFOs usually have a narrower focus. They train their attention on accounting and finance issues, including risk management, investments and financial reporting. CFOs of midsize organizations with diverse programs (for instance, several programs that generate revenue) or governmental funding may have a similar focus.
Factoring in your Size
Nonprofits with small budgets and straightforward operations probably assign these responsibilities to the executive director or choose a more affordable option. As your organization grows and its financial matters become more complex, though, a CFO can help guide you along.
Experts suggest weighing the following factors when determining whether to bring a CFO on board: 1) size of the organization, 2) complexity and types of revenue sources, 3) number of programs that require funding and 4) strategic growth plans. Static organizations are less likely to need CFOs than nonprofits with evolving programs and long-term plans that rely on investment growth, financing and major capital expenditures.
With a CFO playing such an essential role, your nonprofit should devote considerable effort and time to hire someone with the right qualifications. At a minimum, you want a person with in-depth knowledge of the finance and accounting rules for nonprofits. A CFO who has only worked 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 your nonprofit expends $750,000 or more of federal assistance, single audit requirements.
What about educational and professional credentials? The ideal candidate should have a certified public accountant (CPA) designation and, optimally, an MBA.
In addition, the position requires strong communication skills, strategic thinking, financial reporting expertise and the creativity to deal with resource restraints. It’s useful when CFOs have experience in organizations with a wide range of functions — for example, human resources and IT — so that they can identify when outside professional expertise is vital to the success of their nonprofits.
Finally, you’d probably like your CFO (and every employee, for that matter) to have a genuine passion for your mission. Nothing motivates employees like dedication to the cause. And, in the case of a CFO, this makes it easier to understand that success for a nonprofit isn’t only about the bottom line.
The Outsourcing Alternative
Does your organization lack the size or complexity to warrant having a full-time CFO on staff, but desire the financial peace of mind the position can provide? You might consider outsourcing CFO responsibilities to a CPA firm. Outsourcing can produce several benefits at far less cost.
With outsourcing, you can obtain cost-efficient access to top-notch expertise. Nonprofits often look to their existing staff when filling the CFO position, but your in-house accountant may not possess the requisite financial expertise. Outsourcing will likely cost far less than hiring someone new with the appropriate background.