Magazine article The CPA Journal

Nonprofit CFOs

Magazine article The CPA Journal

Nonprofit CFOs

Article excerpt

Visionary Protectors of the Bottom Line, or Myopic Bean Counters?

The advent of the Sarbanes-Oxley (SOX) era in nonprofit governance is often interpreted to mean a phalanx of bookkeepers accurately accounting for every organizational penny, and keeping all interested parties informed in a timely manner. Unfortunately, if that performance measurement determines whether new legislation or organizational financial oversight is successful, then an interesting opportunity will have been missed. Viewed more broadly, the ultimate goal of a SOX-like focus on nonprofit organizations' financial function could be to take advantage of a key organizational resource capable of making a larger contribution. Creating stronger, more-efficient, missionfocused nonprofits requires an exploration of the relationship between the financial function, embodied by the CFO, and the programmatic function.

The 'Big Picture' Outcome

Nonprofit organizations want to fulfill their financial and programmatic potential. That requires self-awareness, an efficient use of resources, and an effective decision-making capability. The financial function, embodied by the CFO, is part of that equation, but too often works in "big picture" isolation, if included at all. This deprives the organization of critical analytical capability and a unique perspective. When the CFO and the financial function move beyond the bean-counter role, and understand the organization's programmatic structure and mission, they contribute by being an organizational strategist, the potential architect of a successful business plan, and a lightning rod for new ideas and growth. The CFO can serve as the long-term thinker who makes sure that the most important financial and programmatic decisions are made with sufficient information and analysis, and that the impact of decision making is understood over time.

The finance department not only serves to advise but also to drive programmatic decision-making, whether out of necessity, curiosity, or longterm planning considerations. Based on close cooperation with the programming side, the finance department can provide organizational focus by identifying the opportunities for investment and new business creation, and can also identify current and potential resources to support those efforts.

For an organization's key decisions to be successful requires sound financial understanding, discipline, and flexibility, with the vision and pursuit of the programmatic and mission-related goals. Even if the upside is discounted, the downside of bad decision-making, non-decision-making, or decisionmaking based on incomplete analysis or data, can be dramatic. This is especially true in very competitive nonprofits. Infrastructure decisions such as moving, acquiring new space, increasing or decreasing support staff, and investing in new programs, depend upon understanding long-term potential revenue streams that will cover additional liabilities. The finance function must rely on the program staff to fully understand the competitive nature of the organization's business, and make realistic assessments and forecasts of potential revenue streams.

This symbiotic relationship furthers the opportunity for change if the finance area has effectively communicated a strategic or business imperative to the program area. Likewise, if program staff have not been trained to take advantage of opportunities or leverage their successes, then key organizational opportunities are being missed. This is much to the chagrin of the finance department, which knows that if the revenue side doesn't produce, it will be under increased pressure to reduce costs, often by reducing administrative support. Avoiding this unpleasant situation requires a close relationship with the program side.

The Souped-Up' CFO

The CFO is in a unique position to contribute to the organizational big picture. The CFO may be the only person, other than the executive director, who makes decisions, forms perspectives, or analyzes data based on information from the entire organization. …

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