Let’s face it: Most not-for-profits are founded on a passionate belief in service. This does not always include a passion for numbers. To fill this gap in financial expertise, not-for-profits often hire chief financial officers (CFOs). However, do all not-for-profits — including small organizations — need one?

CFO defined

Generally, the CFO (or “director of finance”) is a senior-level position charged with oversight of an organization’s accounting and finances. This person works closely with the executive director, audit/finance committee and treasurer and serves as a business partner to program heads. In general, the CFO reports to the executive director and board of directors on the organization’s finances, analyzes investments and capital, develops budgets, and devises financial strategies.

The CFO’s role and responsibilities vary significantly depending on the organization’s size, as well as the complexity of the organization’s revenue sources. In smaller not-for-profits with budgets of $1 million to $10 million, CFOs often have wide responsibilities — which may include accounting, human resources, facilities, legal affairs, administration and IT. Midsize organizations, with budgets running up to $50 million and fairly simple funding and programming, also may require their CFOs to cover such diverse areas.

In larger not-for-profits, though, CFOs usually have a narrower focus. Their focus is on accounting and finance issues, including risk management, investments and financial reporting. CFOs of midsize organizations with diverse programs (for instance, several programs that generate revenue) or governmental funding may have a similar (narrower) focus.

not-for-profit size

Not-for-profits with small budgets and straightforward operations usually assign the accounting and finance responsibilities to their executive director or outsource such functions. As your organization grows and its financial matters become more complex, a CFO may be the right answer.

Experts suggest weighing the following factors when determining whether to bring a CFO on board:

• The size of your organization;
• The complexity and types of revenue sources;
• The number of programs that require funding; and
• Your strategic growth plans

Static organizations are less likely to need CFOs than not-for-profits with evolving programs and long-term plans that rely on investment growth, financing and major capital expenditures.

Candidate qualifications

Your not-for-profit should devote considerable effort and time to hiring a CFO with the right qualifications. At a minimum, you will want a person with in-depth knowledge of the reporting and accounting rules for not-for-profits. A CFO who has worked only in the for-profit sector may find the differences difficult to navigate. Not-for-profit CFOs also need a familiarity with funding sources, grants management and, possibly, single audit requirements.

The ideal candidate should have a certified public accountant (CPA) designation and, optimally, an MBA. In addition, the position requires strong communication skills, strategic thinking, financial reporting expertise and the creativity to deal with resource restraints. It is useful when CFOs have experience with a wide range of functions — for example, human resources and IT — so that they can identify when outside professional expertise is needed.

Finally, you would probably like a CFO (and every employee, for that matter) to have a genuine passion for your organization’s mission. Nothing motivates employees like dedication to the cause. And, in the case of a CFO, this makes it easier to understand that success for a not-for-profit is not only about the bottom line.

Outsourcing alternative

Does your organization lack the size or complexity to warrant having a full-time CFO on staff, but desire the financial peace of mind the position can provide? You might consider outsourcing CFO responsibilities to an accounting firm or other service provider. Outsourcing can produce several benefits.

Specifically, outsourcing allows you to obtain cost-efficient access to top-notch expertise. Not-for-profits often look to their existing staff when filling the CFO position, but your in-house accountant may not possess the requisite financial knowledge you and your organization need.

Should you find that to be the case, explore our outsourced CFO services and how they can offer the financial insight you are looking for.

Deciding to hire a CFO

Although founders and executive directors often try to oversee all aspects of their organization, hiring a CFO to manage your not-for-profit’s financials may be a better option. 

For more information, contact Jeff Chiles at [email protected] or 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.