The role of a CFO goes beyond monitoring and caring for financials. Chief financial officers often are involved, out of necessity, with other areas of a nonprofit, such as technology and overall strategy.
A panel of former CFOs of the Year discussed their recent challenges along these lines at the Greater Washington Society of CPAs Nonprofit Symposium, this week at the Omni Shoreham in DC.
The three-day event attracted about 900 registrants and featured speakers such as Tiffany Smith, tax counsel to Chairman Max Baucus (D-Mont.) of the U.S. Senate finance committee, who gave an off-the-record luncheon discussion on nonprofit tax issues on Capitol Hill; and Marcus Owens of Caplin & Drysdale, and who also is the former director of the Exempt Organizations division of the IRS, who spoke of the state of the IRS.
The session CFO Challenges Faced and Solutions Discovered featured Andrew S. Lang, CPA, Lang CPA Consulting and a past TRENDS contributor who moderated a panel of former Nonprofit CFOs of the Year: Eileen Frazier, COO, Jewish Federation of Greater Washington DC; Brenda Hargett, CPA, CAE, CFO, American Academy of Otolaryngology-Head & Neck Surgery Foundation; and Stanley Berman, CPA, CFO Global Impact.
Faced with challenges in their technology and also changes in her IT department, Hargett conducted a review of her association's technology. She found that by moving the group's technology to the cloud, she was able to reduce IT staff while creating a system that functioned properly on a daily basis, including standard back-ups. Some tips:
- IT doesn't have to be complicated. If you don't feel right about your IT, listen to your gut.
- IT benchmarks are very helpful, she said. if your IT department is very far off benchmarks of similar organizations, ask if there is a reason you have to be out of the norm. You can find benchmarks in the books Race for Relevance, Road to to Relevance and on the ASAE listserv.
Berman discussed the lessons learned from the experience of Global Impact, a nonprofit that delivers grants to other nonprofits, when it determined that it needed to change to stay relevant in these times.
- The decision to change must involve the board, so they understand the risk being taken and are on board with it. Always communicate with the board on progress.
- Determine when it will be financially viable to begin the change, but also determine the point at when to stop should things not go as projected.
- Get your attorney involved, who in the case of Global Impact, was charged to identify if their new setvice would be considered UBIT, something the nonprofit never had to deal with previously.
- Does your current accounting system handle your new venture, will it need to be revised?
- Be prepared to be flexible. You might find that the direction will change, whether organically or by necessity.
Frazier gave solid advice on financing and refinancing. When dealing with banks, she said CFOs need to realize they are more in the driver's seat than they think.
- Financing business is more valuable to banks than banking activity.
- Even though you might not need it currently, talk to your bank about a line of credit, for security.
- Ask your bank what is your capacity to borrow money.
- Keep your bank informed of your circumstances. If a bank feels they know you, they'll be more understanding of your risk.
Lang advised that gap statements are not the best way to communicate finances to a board. Use charts, graphs and dashboards, with board's approval. Also, don't present cash flow statements to the board. Such reports are really meant for bankers, Lang said.