CFO Quick Hits

When it comes to the financial wellbeing of your nonprofit, thoughts normally turn to balancing books and bringing in funding. But some obligations aren’t quite as apparent, and they could fly under the radar until an issue pops up. While a chief financial officer (CFO) often takes care of these matters, they sometimes have to fall to other personnel.

James Moore partner Corinne LaRoche and director Tiffany Edwards discuss a potpourri of CFO-centric responsibilities — and how to handle them when they arise. Both are members of the firm’s Nonprofit Services team.

Navigating procurement

Federally-funded nonprofit organizations are required to have written procurement procedures that align with guidance from the Office of Management and Budget. Such guidance is important to avoid fraudulent activity such as preferential treatment for certain vendors or collusion between bidders for work.

To better comply with regulations, it’s important to know how procurement works as a CFO would. There are four methods of procurement that dictate how your organization handles this process.

• Micro-purchase is an informal procurement method meant for smaller transactions. The purchase threshold is generally $35,000, but it can be raised up to $50,000 with permission. You can spend any amount under this threshold without obtaining a certain number of vendor quotes, sending out a Request for Proposals or completing a specific method of procurement to get approval of your purchase.
• Simplified acquisition is similar in that it’s also an informal method. However, the simplified acquisition price threshold is $250,000 and you must obtain price quotes. Exactly how many quotes taken is determined by the funding entity. “I would advise you to look at the uniform guidance and also specific guidance from your particular cognizant agency,” Corinne said. (Your cognizant agency is the agency that provides the highest percentage of your funding.)
• Sealed bid, a formal method of procurement, is most commonly used with large construction projects (for example, a new million-dollar building). A sealed bid has to be a fixed price contract. A time and materials contract is only possible if it is the only option.
• Single source: If you are unable to find more than one organization that is capable of fulfilling a specific need, you can use this method of procurement.

Here are some of the most common questions we get from nonprofits regarding their procurement process:

• What if no one responds to my RFP? This can happen. Corinne recommends ensuring your request is reaching the right contact person at organizations. You can also expand the area across which you’re distributing your RFP. Finally, double-check whether the needs and requirements listed in your RFP are reasonable.
• What if only one person responds to my RFP? You are allowed to contract with that person. However, consider a second round of requests if you have time.
• Do I have to choose the lowest price provider? OMB guidance simply requires you to choose someone with the skills and experience necessary to complete the contract.
• What if my organization’s financial policies and procedures manual has different procurement standards than OMB? Micro-purchases and simplified acquisitions allow you some leeway. But for higher-end situations, be sure to follow OMB guidance. You can get written up if you don’t follow the proper methods of procurement.

If you have further questions, consult CFR 200, section 318.

Strategizing on governance

Much of your success hinges on governance of your organization. And regardless of whether you have a CFO, you can start on the right foot by selecting the right leadership. Consider these tips for choosing and training your board of directors and executive director.

Give careful consideration to who sits on your board.

At a minimum, ensure your board includes members with a legal background, an HR background and a financial background.

“A lot of times we see nonprofits take any and all people as board members and end up with a very mismatched group of people that does not give them the expertise they need,” Tiffany said. “Reach out to your CPA or your attorney or your banker. Usually, they can give you good referrals of people who can perform that work and fill those vacancies on your board.”

Plan your board transitions in advance. Make sure there’s overlap between leadership and other key positions so people stepping into new roles get the training they need.

Encourage board financial literacy training.

Be sure board members understand how you operate and how your grants and other funding sources work. They should be able to comprehend audited financial statements and your 990. Give them these documents before board meetings so they are prepared to engage and ask good questions.

Set up your executive director/CEO for successful financial decisions.

Fiscal responsibility doesn’t just fall to the CFO and finance team. Your executive director also has a fiduciary duty to your nonprofit. A good understanding of financial operations leads to better decision-making for the organization.

“As the CFO, you need to take time to review financials with them regularly,” Tiffany said. “If they don’t understand, map it out in a way that’s simpler. Go program by program, or grant by grant, until they get it.”

How to hire an excellent finance team

Whether it’s a basic accounting opening or a CFO-level positions, finding experienced finance personnel can be a challenge. Nonprofit financials are complex, and it is difficult to compete with the pay offered by for-profit businesses.

How can you make sure a candidate who looks great on paper has the skills for the job? Corinne recommends giving them a bookkeeping test as part of the interview process.

“If we’re hiring anybody who’s going to be an accounting clerk or working on any of our CFO or controllership clients, we give them a bookkeeping test to see how well they do, just to make sure that they even know the basics,” she said.

Ask candidates specific questions about their experience with nonprofit accounting, including which software programs they’ve used. If they’re facing a steep learning curve, ask how comfortable they are with researching on the job.

If you still can’t find the right personnel, consider contracting with an outsourced accounting services provider. This can connect you with professionals who have a wealth of expertise working with the nonprofit sector, even at the CFO level. Contracting also sidesteps HR hiring and onboarding processes and turnover issues. It can also present an opportunity to save on employee benefit expenses.

Consider the pros and cons of outsourced accounting, and determine whether the timing is right for your nonprofit to hire a firm.

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