Finding ways for executive directors and CFOs to effectively work together.
In the capacity of CFO for the past 25 years, I have partnered with seven executive directors in four different nonprofits. I have worked with an athletic director, an artist, and a number of social workers, and I have found nothing more satisfying than the give and take of a mutually respectful relationship with my ED.
The chemistry was different with each relationship, but I was always able to demonstrate that I had a lot to offer as an educator in the ways of GAAP (generally accepted accounting principles) and the IRS, as well as acting as a partner in executive level decision-making.
A college degree in accounting is usually required by larger organizations, but most of the observations that I offer here come from my training on the job, often through painful trial and error.
The way to the executive director’s heart
Over time, I learned what the ED needed from me. Whether she admits it or not, the ED, first and foremost, needs peace of mind. Financial successes and failures are ultimately her responsibility. So how can the CFO lessen the ED’s burden?
Safeguard agency assets
The CFO is responsible for assuring that all transactions (both money-in and money-out) are carried out with an adequate system of authorization, approval, and account coding. This includes safeguards against fraudulent electronic withdrawals and counterfeit checks.
Compliance with laws, regulations, and contracts
Nothing will ease the ED’s mind more than a partner who is committed to keeping her out of jail. The CFO assures that IRS laws are followed, grant stipulations are met, and best practices are followed for capital purchasing.
Clear financial reporting
The ED and the board always ask, “How are we doing?” The CFO develops and maintains reporting systems that provide high-quality information to enable decision-making. This may include cash flow projections and year-end forecasts in addition to budget-to-actual reporting and special purpose reports.
The ED’s performance evaluation and compensation are often tied to the results of the annual audit. The audit is essentially a report card. The ED will always be grateful for an unqualified opinion, no internal control comments, and no complaints about the condition of the records or the competence of the finance department. By educating the ED on the more complex features of GAAP, the CFO can help the ED in communications with auditors.
As CFO, you earn your ED’s trust by demonstrating your commitment to these critical priorities. I know that you have many competing demands on your time, which often include overseeing other functions.
I recommend, however, that you always keep on top of mind that the core functions you perform happen to be the ones that enable the ED to sleep at night.
What does the CFO need?
In a perfect partnership, the ED will appreciate the CFO’s efforts and attempt to understand and meet her needs. The CFO can help the relationship along by identifying those needs and communicating them clearly.
Priority access to the ED for regular meetings and emergencies
If I were to boil this article down to two words they would be: Meet regularly! Frequent one-on-one meetings lead to strong relationships and mutual support. The ED and the CFO share the sense of the gravity of their financial responsibilities.
It is worth the time and effort to develop a mutually supportive partnership.
If your offices are next to each other and you talk every day, great. But if not, try to insist on weekly meetings, accept bi-weekly if you must, and keep a running list of agenda items so you can make the most of the meetings.
Regular contact allows you to keep each other informed. It may take time for the ED to realize that just about everything on her radar has a financial component that you can help with. Examples of conversation topics include:
Tax law relating to donations.
Say donations are received to help a family who has lost everything in a fire. The ED might not be aware that these are not tax deductible to the donor.
Say the ED plans to give out gift cards to recognize milestone anniversaries. She may not be aware that this violates IRS law.
Say one of the programs is looking at a new grant funding opportunity. You may have information about the program’s funding structure that can help with the deliberations.
Communication between development and finance.
Say the ED and development director are planning a fundraiser. You can ask some questions: How will cash be handled? Is the wording in the marketing materials clear as to whether the proceeds are restricted or unrestricted?
Say the ED is considering closing a program that has been experiencing deficits. She may not realize that management and general costs will have to be spread to other programs. This may also be true for occupancy and program administration costs.
Say the ED is planning a new project that may require formation of an LLC. There is a whole host of discussions that the CFO needs to participate in from day one, including EIN number, general ledger architecture, management or general allocations, and program administration allocations (I could go on). The CFO should be given the opportunity to help steer the ED in these decisions.
Interest in learning the essentials of the finance function
Every time the CFO, an auditor, or a board member talks about current ratios, third-party liabilities, or capitalization of assets, many EDs think, “Why didn’t I take an accounting class before I took this job?!” The ED often finds herself in the uncomfortable position of being unqualified to supervise the CFO on a technical level.
Some EDs will live with the discomfort and just glaze over when you get technical. Others will diligently try to broaden their financial horizons.
Regardless of the ED’s comfort level with the language of finance, you will have to use financial language on occasion. When things are going wrong, the ED needs to know, whether she’s able to understand your explanations or not. Over time, you can help a less-experienced ED learn the basics. Chances are she has a talent for administration and might even be grateful for the help.
Your partnership will flourish if you can converse in the same language.
The activities that the ED expects the CFO to carry out are no easy matter. Smooth operations, timely and useful reporting, and clean audits (among other things) require people and technology. The ED who works collaboratively with the CFO is sensitive to this. The public, staff, and board all count on the ED and CFO to lead in a manner that is ethically and fiscally responsible while maximizing the value of available resources.
In the best-case scenario, the chemistry to achieve the perfect partnership will be there. Either way, the efforts you make to meet the ED’s needs and assert your needs will pay off for both the ED and the CFO as well as the community with which you’ve partnered.
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About the Author
Mary Diegert is a recently retired CFO with 25 years’ experience in the nonprofit human services sector. She earned a master’s degree in accounting and her CPA license (now lapsed) in the 80s. Her most recent experience is fifteen years with a $20 million Catholic charities agency in upstate New York. Her focus is on sharing with nonprofit leaders her lessons learned from 25 years of on-the-job training.
Mary’s writings on non-profit financial management can be found at marymightknow.com
Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. Views represented in Blue Avocado do not necessarily express the opinion of the publication or its publisher.