Our team is used to discussing what’s included in a CFO’s job description. But this type of conversation usually centers around the commonalities that unite all CFO roles, not the nuanced differences for a specific industry or type of organization. But when talking about what a CFO for a nonprofit does, there are some unique elements to the role that are important to understand.Generally speaking, a CFO is responsible for overseeing the entirety of an organization’s financial operations. They will guide its financial strategy, oversee its planning, and work to maintain its fiscal stability. Additionally, the CFO will also collaborate with the rest of the executive management team to establish long-term goals, strategies, plans, and policies. Their key duties include:
- Financial management
- Strategic planning
- Financial policies and procedures
- Legal and regulatory compliance
- Accounting/finance team leadership
However, a nonprofit CFO role will look different for two reasons:
- Nonprofit organizations need money to operate, but their primary goal is to further their mission, not generate revenue. (Put in other words, cash is a means to an end for nonprofits, not the end itself.)
- Nonprofits have boards with management oversight responsibilities that get a say in the organization’s financial decision-making as well.
As a result, a nonprofit organization’s CFO will have somewhat different duties and responsibilities than a CFO at a for-profit company will. So, with that in mind, let’s answer the question, “What do nonprofit CFOs do?”
Own Financial Management
A nonprofit CFO will manage the organization’s financial cycle from transactions to financial reporting and even audits. Much like a corporate CFO, their financial management duties will cover strategic decision-making across risk management, financial planning and analysis (FP&A), compliance, and internal controls. However, a nonprofit CFO will also be responsible for nonprofit-specific financial areas like grant management.
The key decisions that a nonprofit CFO makes will need to be worked on in conjunction with not only the CEO/ED but also the board of directors and any other key stakeholders (like partnering organizations or corporate sponsors) as well. Additionally, strategic financial decision making will need to be done with an eye on the organization’s grant terms to ensure compliance. In these ways, the role of a nonprofit CFO is distinctly different from that of an industry CFO.
Manage Funding Sources
Before they are even awarded, grant applications require an effective calculation of overhead costs as part of the application process. Nonprofit CFOs need to oversee this budgeting process because if overhead costs are not accounted for correctly, the organization will not be fully compensated for the costs that they incur to run their programs, which can jeopardize their sustainability. Once grants are awarded to the organization, the CFO will be responsible for grant management as well. This means not only accounting for spending against individual grants, but also ensuring that grant dollars are being used in accordance with their specific terms.
And grants are only one area where nonprofit CFOs play a critically unique role! Nonprofit revenue can be generated from a wide array of sources. A nonprofit CFO will be responsible for financial oversight over the entirety of an organization’s funding sources, including donor funds, in-kind giving, corporate donations/sponsorships, fundraising events, earned income through the sale of merchandise, and membership fees. Nonprofit CFOs will use this funding information throughout the budgeting process to make informed spending decisions around things like launching new programs, expanding operations, hiring additional staff, investing in technology, and developing additional resources.
Handle Outside Relationships
All CFOs will manage relationships with outside partners and vendors, such as CPA firms, banks, and investment advisors. However, nonprofit CFOs will also be responsible for stakeholder communication and relationship management. This includes communicating with the board of directors, investors, corporate sponsors, major donors, and the staff. For this reason, a nonprofit CFO will need to have strong interpersonal skills because they will likely be the sole external face of the organization for all things financial in nature.
Participate in Board and Committee Meetings
Because the CFO of a nonprofit organization is tasked with managing outside relationships for all financial matters, they will be expected to participate in board and committee meetings as well. The relevant information they get from these internal sources will inform the conversations they have externally. And, in reverse, the strategic knowledge that they have acquired in working with their external contacts will give nonprofit CFOs deeper perspective that they can potentially share internally with the board and special committees to inform the work that they are doing.
Lead Finance Staff
While all CFOs will lead (and hopefully mentor) the accounting and finance staff under them, this is an even more critical part of the role for nonprofit CFOs because smaller nonprofit organizations tend to have people with less experience in these types of roles than their corporate finance counterparts. Whether this is due to immaturity in the role, a lack of funds to hire top talent, or frequent turnover, coming alongside existing staff to help them thrive in their roles is crucial for maintaining continuity, improving accuracy, and promoting long-term growth – both theirs and the organization’s.
When you need an experienced nonprofit CFO, please reach out to us! We offer outsourced CFO services to provide nonprofits with the kind of executive-level strategic leadership support that they need to grow their organizations. Find out more about how our fractional nonprofit CFOs can help you make better decisions, focus on your mission and core competencies, and get control over your finances.
