Ryan Malabanan Describe what you believe to be the typical day of the CFO of a $1 million nonprofit organization that

provides temporary housing to the families of hospitalized children. Assume that it is the last week of the month in the final quarter of the fiscal year. The chief financial officer of a nonprofit organization centers his day on ensuring its financial stability and usage of funds in the fulfillment of its mission. The CFO fulfills this main duty by providing analysis anything and everything that deals with the organizations finances. These include financial statements, financial policies, being able to finance the strategic plan, the operations and business of the organization, ensure compliance to government and IRS regulations and to involve and educate the board members of the financial situation in the organization. In this small organization, the CFO also may have other duties, such as overseeing fundraising, reporting to different donors and institutions and oversee daily operations. First, check the budget and make sure all numbers are up to date. This makes the budget operational, living and breathing as the daily climate of the organization changes. Since it is the last week of the month in the final quarter of the fiscal year, this would be a great head start when preparing the annual report. In this part, might as well check the organization by checking the cash flow statements and forecasts. The income statements and balance sheets also provide vital information when determining the liquidity of the organization. Now, check for enough cash on hand to get the organization through rainy days, bills, operation costs and emergencies. After getting the financial statements in order, the CFO should work to create a report for the entire quarter and fiscal year to show the board of members where the organization stands.

Then, check the different assets and programs the organization possesses. IF the assets are invested, the money markets are important to not forget. Ensure the safety and maturity of the investments. If the assets are physical and planted in the ground, do a check of their status. Checking assets are important because these give the organization quality. Since it is the end of fiscal year, evaluate program spending through the financial statements. Be sure program spending is effective to fulfilling the mission of the organization. The CFO can determine which programs are most effective and where the organization needs to cut their losses. After those things are checked, the CFO needs to start preparing for compliance to government reports and compliance to the financial procedures in place for the organization. The CFO might as well work on both things since it deals with governance of the finances. Since it is a relatively small organization, the CFO and his small or shorthanded staff need to work on this as soon as possible to reach deadlines. Review the organizations policies and be certain that all individuals of the organization abide by them. Then, the CFO should monitor the progress of fundraising and donorship. Earned revenue from the organization is never enough to keep it afloat. Fundraising is important to fulfilling the mission so the CFO should be sure to include this in their daily efforts. At the end of the fiscal year, summarize who is eligible to be knocked on for more money, be warned on those who are ready to pull out of your project and always on the look for new donors. Monitor the progress of the organization and plan strategically for a more financially stable future. This includes effective program spending, enough liquidity in the assets evaluation of the systems and policies placed in the organization and finishing all the

required reports. The CFO should be included in the strategic planning of the organization because they should have the most knowledge in what the organization can deliver based on their current net assets. In the strategic planning, initiatives on how to become more financially secure how the allocation of funds is focused, growth in the organization as a whole and how to stay open for more years to come. Thinking about this at the end of the year will help deliver a more successful year to come. Discuss what questions you would want to ask about a nonprofit organizations finances before joining their board, and why are those questions important to ask? What is the current financial status in terms of liquidity, program spending and effective budgeting for the organization? Are there financial policies in place? What financial commitment do board members have? Does the organization currently use directors and officers insurance? How does the organization produce revenue (earned, gifts, donations, grants, etc.)? What major assets does the organization care for? What were the results of the last audit and does the organization comply with IRS standards? Accurate assessment of a nonprofit organizations finances is important when deciding to join the board. Liquidity and cash flow are important because these two components determine the daily operations such as paying the bills, salaries and emergencies. If an organization does not manage their liquidity well, the outlook is grim. Cash on hand indicates if the doors of an organization will stay open and a prospective board members time and monetary investment will not go to waste. Program spending indicates the amount of money spent on deliverable services by the organization. Low percentages are warning signs of ineffective budgeting and overall planning of the

organization. Prospective board members should watch out for pitfalls in the budget, such as deficit spending, inaccurate calculations and cash flow. Financial policies are crucial to the survival of an organization. They should reflect the mission, vision, and the deliverable services of the organization. Broad and ambiguous policies for the sake of having them are unacceptable. When the financial policies are in place, prospective board members should scope out the organization and make certain the organization is applying them in their daily operations. In conjunction with financial policies, the organization benefits from a strategic plan that incorporates financial growth by including various financial aspects. For any organization, adequate planning on strategy and finances determine its outlook for keeping the doors open for business. This helps a new board member decide if his investments are worthwhile. Financial commitment by a board member determines the functional aspect and dedication to the organization. Prospective board members need to understand what the organization expects of them. It allows them to gauge their capacity in becoming a board member for that organization. Financial commitment includes obligatory giving by a board member and recruiting funders for the organization. D&O insurance is important to have for any organization. It financially secures directors and officers against costs incurred by lawsuits and judgments that negatively reflect the organization, not including criminal charges. A safe investment is in a secured organization where their time is valued and within their capacity. Knowing the sources of revenue also helps board members determine if there are enough funders, enough incoming cash and acknowledge the greater contributors are and where to seek for prospective sources of money. The big money givers tend to establish a

closer relationship to the organization and board members should not have a problem in catering to their wishes, if reasonable. New board members can also bring a fresh perspective in finding gifts, donations, endowments and so on. If an organization has major assets, board members should know how the organization is caring for them and how the asset continues to contribute the organizational mission. Last but not the least, compliance to the IRS and auditing should be in tiptop shape. If an organization is not operating under the mandates of the government, then it really is not a good idea to jump on that board. Compliance issues with the government on the non profit status need not to exist. Forms 990 should reflect accurately with the financial statements and readily available to share. This shows the organization is transparent and is not trying to hide any skeletons in the closet. Gauge the last audit completed for the organization and discern the soundness of its financial status. Audits also inform prospective board members of the organizations sustainability. You are the ED of a medium-sized nonprofit organization that is relatively well funded, but does have occasional timing issues related to grant receipts and routine expenses. Discuss what you would like your board Treasurer, who has a corporate background, to know/be aware of and why you believe those things are important. Substantial funding on the books is very important, however, if a portion of those funds are unavailable as cash in hand, then the organization begins to face problems. In the nonprofit sector, financial management solely based on the amount of incoming revenue will lead to organizational failure. Financial security is a means to the end, not the end in itself. Monetary funds are a conduit for an organization to carry out its mission. Remind the treasurer hailing from the corporate world that his role is to address the financial concern of the organization in terms of mission fulfillment. This is important because the rest of the board and impacted employees probably think in terms of mission fulfillment and not

financially centered point of view. This will help whatever suggestions stemmed from the executive director can easily translate to the rest of the board to better the organizations financial situation. The first point to explain is how restrictions cause timing issues. While the organization may have reserved money, their assets may not be too liquid. Depending on the money that is coming in, there may be certain restrictions attached to it, which is different from the private sector where money is money to spend. For the nonprofit sector, endowments are restricted funds, but still show up as a part of the organizations funding. What is spendable is the interest earned from an endowment fund, of so placed in a money market for growth. Gifts and donations can also be restricted to spend later or used for specific programs or projects. This eliminates the usage of those funds for the present, especially with expenditures and emergencies of the organizations. Another reason for timing issues is the release of grants and influx of pledges. Grants are given to nonprofit organizations from the government of other giving organizations. The complexity of grants lies in the disbursement of those funds. The entire sum may not be granted all at once and it depends on the procedures of the giving institution or organization. This incoming revenue is present in the financial statements, but the usage of the funds to help in daily operations may not be there. The ED should inform the treasurer when the disbursements will occur. Pledges of gifts and money work kind of the same way. The organization may be promised money from a certain benefactor, but the money might not come in time for operational expenses to be met. The ED should educate the treasurer on all these dates of released funding. The ED should also help advise the treasurer on which months consume more money, due to program, overhead and

operational costs. That way, they can plan effectively for when cash on hand is most convenient. The ED can advise the Treasurer to communicate to the other board members the needy months so when the seek for future donors, they can negotiate those dates when shortfall happens. Moreover, liquidity management and cash flow projection is important. The ED needs to educate the treasurer the current liquidity status of the organization. They should work together and devise a plan to have cash ready to spend. Part of this is forecasting and using an operating budget. The ED should help the treasurer and the board members understand the crucial months where cash is needed most and understand the forecasting of where the organization will be based on current liquidity. Then, the board and treasurer can effectively oversee the terms of funding from different sources as well as program spending throughout the year. Effectively relay this information in connection to the fulfillment of the mission. If the organization cannot pay bills due to lack of financial planning, then all the money in reservations would go to waste. Lastly, the treasurer should be made aware of options in taking out loans and lines of credit. This should be done wisely. If the shortfall in timing continues to be detrimental in the fulfillment of the organizations mission, short-term loans can be taken out. There should be funding to help back up the organizations credibility.