 If yesterday’s nonprofit financial department was a comfortable two-lane highway, today’s financial operation is beginning to look more like the intersection of several highways and train routes with an explosion of city streets thrown in for good measure.
Standing at the center of those new patterns of demand is the chief financial officer. Looking on and often feeling equal amounts alarm, pride, and amusement, is the CEO.
How does the person responsible for managing a nonprofit’s finances put together all of the various demands for knowledge based on the independent streams of information? What are the ways that today’s nonprofit financial managers, no matter the organization’s size, can put together such multifaceted elements of their responsibility areas?
Mr. McLaughlin began the conversation by noting: “One of the subtle effects of the recent spade of corporate fraud trials is the position of the CFO and the CEO in almost the same footing related to corporate accountability. Do you feel any sense of increased expectations from the outside world, directly or indirectly, in your role as a person responsible for the financial operations of your organization?”
What developed in the conversation was an awareness that expectations both internal and external with regards to accountability and transparency are greater than ever before. There has always been scrutiny around issues like restricted grants and contributions; however, this focus is much more stringent today and placing increased burdens on the CFO for documentation and reporting. Funders at all levels want to know exactly how a gift is spent; this creates additional burdens on staff in almost every department to provide information at a very detailed level.
While Sarbanes-Oxley legislation does not currently apply, there is the widespread expectation that some type of similar regulations will soon apply to nonprofits. The “silver lining” is that this issue has forced nonprofits to re-examine their internal structure and processes to ensure the proper controls are in place.
While the processes are critical, the supporting technologies become the next issue. Most nonprofits begin with “point systems," which are separate, stand-alone systems built for a specific purpose. These systems do not talk to each other and over time, create silos of information. Typically, the finance area of a nonprofit is the first to implement technology to manage the accounting and operations of the organization.
One of the first areas management considers for integration is development. It’s been noted that often, development and finance do not speak the same language. While development is under constant pressure to meet ever growing fundraising goals, finance is now under the microscope to report every detail of every financial transaction. This is where the conflict can occur as finance attempts to confirm and reconcile the figures generated by development. Without truly integrated systems, this can be a very labor intensive and frustrating process.
In addition to integrated systems, organizations must also develop integrated processes to support this effort. One example might be the constant demand on development to quantify the impact of a gift. For many organizations, such representations are now being made in conjunction with finance to ensure there is no misrepresentation or to avoid accidentally creating a situation where a gift could be construed as restricted. One example noted was, “if you donate here, it will buy 45 meals.” Does this representation create what should be considered a restricted gift? In some instances, it depends on whom you ask.
The moderator, Mr. McLaughlin noted a convergence of themes among the participants. As systems, processes, and procedures become more integrated, so too do your operations. This creates opportunities for both groups to share information and be a part of the decisions that affect the entire organization, not just one's own department. This common view is enabled by enhanced communications and the sharing of information. Most organizations are not there today, but recognizing the issue is half the battle.
Click here to read the entire article and all of the comments from the panel participants.
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