By Tim Thaney on Thursday, 19 October 2017
Category: Uncategorized

Challenges Facing the Not-for-Profit CFO of the Future

The role of CFO in not-for-profit organizations (NFPs) is evolving and becoming increasingly complex. Especially in smaller NFPs, the CFO is now expected to assume key managerial responsibilities (in addition to traditional fiscal ones), and to thoroughly understand issues of strategic planning, compliance, communications, governance and information technology (IT), among others.

What Unique Challenges Do Not-for-Profit CFOs Face?

The Bridgespan Group sought to answer this question by interviewing 25 CFOs serving NFPs of varying sizes and representing a broad representation of subsectors. Although specific challenges differed somewhat based on size and subsector, there was consensus regarding the increased complexity of the challenges they face and roles they fill:

"The responsibilities of nonprofit CFOs in our sample spanned a variety of functional areas - only one of these being finance. Other functions included human resources (HR), information technology (IT), facilities, administration, risk management, legal affairs, and at times, responsibility for a key program area." 

What Is Today's CFO Expected to Know?

Today, CFOs serving nonprofits must know a great deal more than simply how to crunch numbers. Among their new areas of responsibility are the following five:

1. Strategic Planning

Increasingly, the nonprofit CFO serves as a principal strategist, second only to the CEO. According to CPA Journal, today's nonprofit CFO is "80% strategist and 20% number cruncher." They are expected to identify efficiencies, as well as steps necessary to take the organization to the next level. A key challenge for today's CFO is achieving an appropriate balance between traditional responsibilities and this enhanced strategic role.

2. Organizational Communications

Given his enhanced prominence and managerial responsibilities, the CFO must be able to explain complex financial concepts in ways that non-financial stakeholders can easily understand and trust. Those stakeholder groups include NFP boards, attorneys, insurance advisors, funders, donors and vendors. Because the news he or she communicates is not always positive, the CFO in addition increasingly serves a diplomatic function. As CGMA Magazine notes:

"CFOs are increasingly pressured to become world-class communicators. They are challenged by the need to communicate complex issues to a variety of audiences - investors, financial analysts, customers, partners and employees - as stakeholders demand accurate information and transparency in real-time."

3. Governance

NFPs face complex oversight responsibilities, with the need to report to a wide range of internal factions, including boards, regulatory agencies, clients, the public and the press. As the role of audit and finance committees has grown, CFOs are assuming a greater role in governance. They are also increasingly responsible to educate stakeholders, especially the board, on issues regarding conflicts of interest, record retention and executive compensation.

4. Compliance and Regulations

The NFP compliance and regulatory landscape is both complex and continually shifting, creating a substantial challenge for CFOs. The increased workload that compliance issues create frequently conflicts with the demands of strategic planning, among the more significant challenges today's CFO must navigate. Adding to this challenge is the fact that new regulatory requirements are typically unfunded mandates that task CFOs with updating policies, communicating new regulations and effectively working through compliance audits.

5. Information Technology (IT)

Even in nonprofits which maintain a separate CIO position, CFOs are expected to understand and participate in infrastructure upgrades and software purchases and implementation. They must also contribute to the integrity of organizational data, as well as to risk management regarding cyber security, social media management and press relations. Finally, the CFO must ensure internal controls to prevent employee fraud.

The role of the CFO within nonprofit organizations has expanded dramatically in recent years, creating unprecedented challenges and an increased workload. At the same time, however, these changes reflect new opportunities to increase their knowledge base and impact to help the NFP they serve achieve its key objectives.

Our Philosophy

Not-for-profits are operating in a modernized world where donors view themselves as investors, looking for proof of an organizations effectiveness, before they are willing to contribute.  As the modernized world will continue to create challenges for CFO’s it will also create opportunities for success.  At DKB, we help our clients to identify and act on these opportunities.  When we work with not-for-profit organizations we understand that as a CFO’s expectations and responsibilities continue to evolve, so do ours.   The audit and tax return is one piece of the puzzle, but of greater importance is our ability to communicate industry best standards, opportunities for improvement, and concerns.  This allows our clients to give a clear and transparent picture of their organization to the communities they serve. 

Learn more about DeJoy, Knauf & Blood’s not-for-profit and other tax-exempt services here DeJoy, Knauf & Blood Not-For-Profit Team and Services

Resources:

The Bridgespan Group: The Nonprofit Chief Financial Officer
CPA Journal: 10 Challenges Facing Not-for-Profit CFOs
CGMA Magazine: As role evolves, CFOs must brush up on communication skills and strategic thinking

Leave Comments