Nonprofit CEOs & Board Directors: How Expert Is Your CFO?
By: Eugene Fram
When hiring a chief financial officer (CFO), nonprofit organizations often find themselves with a major challenge, since many financial and accounting functions are identical. To compete, the organization may need to offer higher salaries that are somewhat competitive with for-profit organizations. Consequently, some trim the level of expertise required to fill the position. This is a dangerous move, especially if the organization is growing. Also the current CFO, if hired five or ten years ago, may not be up to date and make a major error that will harm the organization’s reputation, leading to a board restructuring and/or firing the CEO.
Both the nonprofit CEO and the board need to assess the CFO’s expertise annually by:
- Asking knowledgeable board members if they are receiving financial data and analysis in a format helpful for decision-making.
- Having an executive session with the external auditors yearly to obtain the firm’s assessment of the expertise of all financial personnel.
- Keeping track of reports that are frequently submitted late. Something might be radically wrong. (I know of one case where the board and CEO were receiving a subsidiary report intermittently. Problem was the data on it involved old accounts that should have been written off months ago. The organization had to hire forensic accountants to determine what needed to be done to resolve the situation. The board terminated the CEO.)
- Making certain all financial personnel take two weeks vacation each year, so that a substitute needs to handle the duties.
- Having the CEO review the CFO’s expertise annually with knowledgeable board members.