Monday, December 14, 2015
Elevating the Role of the Nonprofit CFO: Board Governance
Posted by Dean Quiambao
Nonprofit industry veteran Marilyn Gardner recently shared her thoughts with us on the changing role of the Chief Financial Officer at a recent Armanino webinar, A CFO’s Model for Nonprofit Board Governance. Marilyn is the former CFO of De La Salle High School and is a current board member of John Muir Health, where she serves on the Audit and Compliance Committee.
The role of the Chief Financial Officer is evolving. As nonprofits face increasing risks—from cyber-attacks to litigation risk to natural disasters—CFOs are taking on a much more strategic role within the organization.
Nonprofit leaders interested in elevating the role the CFO plays in their organization might do well to consider how today’s more-engaged CFOs are approaching their responsibilities:
- They attend all board meetings. As leaders in senior management, CFOs need to be at the table when strategic decisions are made. Board decisions often have very real financial implications, so it’s incredibly important that the CFO is there to emphasize key points and explain the risks associated with a particular course of action.
- They communicate effectively with the CEO. The CFO and CEO should be in complete harmony when it comes to reporting to the board. That means the CFO provides the CEO with drafts of any reports before they go to the board. It also means keeping the CEO informed of any contact by the board. So, if the board is asking for some specific information, the CFO should be transparent with the CEO about what is being provided.
- They are having the right conversations. The CFO needs to be meeting on a regular basis with the Audit Committee Chair and the Compliance Committee chair, and making sure that they are current with any new accounting pronouncements that will affect the organization. Likewise, they should be sharing any developments within the organization or any disclosures that will be coming out. That could be anything from a new contract to pending litigation.
- They avoid surprises. The CFO should also be in regular contact with the organization’s external auditors. The CFO’s job is to provide a realistic view of where the organization is, so there are no surprises down the road. For example, that means keeping your auditors apprised of any collections issues with pledges, acquisition of new debt for expansion, or strategically entering new ventures for your organization. Of course, the CFO also needs to be actively communicating with auditors during audit planning, during the onsite audit, and at the time of the financial statement and management letter disclosures.
Ultimately, executive leadership—and the organization itself—gets more out of the CFO when he or she is able to strategically focus on the financial direction of the organization, rather than getting lost in the day-to-day debit and credits.
That said, if your CFO is going to play less of an accounting role, someone will need to step in and handle the accounting. For a lot of organizations, bringing a controller on board makes sense. Consider starting with a part-time controller if your budget can’t handle the bite, and then ease into a full-time position as the growth and expansion of your nonprofit comes to fruition.
Dean is a Business Development partner with Armanino. After spending 12 years as an auditor in Armanino’s audit department, Dean transitioned to “Chief Relationship Builder” for the firm. Dean helps numerous private companies, as well as private schools and social service, performing/fine arts and faith-based organizations address their tax, audit and outsourced accounting needs. Boards and finance and audit committees appreciate his laser focus on bringing to life the audit items that matter most, including his proven method of benchmarking data and key financial operating ratios.