The Right CFO Makes a Big Difference!

By | Accounting, CPA, Grant Management, Nonprofit | No Comments

Finding a CFO with the right skills, experience and chemistry with the organization’s leaders is critical. A CFO is more than an accountant. He or she is also a strategist. The CFO creates budgets, analyzes financial statements, provides strategic direction, and helps others in the company understand the plethora of data provided by the accounting and finance department.

When Should You Hire a CFO?

As your organization grows beyond its original size and begins to make a larger impact among its constituents, it’s natural to wonder when you should hire a CFO.  A few signs that indicate it is time to hire a CFO include:

  • The Executive Director, CEO or President is wearing too many hats. As a result, critical financial tasks aren’t getting done on time simply because the leader is too busy to handle them.
  • The organization’s finances have grown to be complex, requiring someone in the leadership chair who understands nonprofit accounting.
  • The Board of Directors feels a layer of oversight and leadership is needed to manage the accounting needs of the organization.

The right CFO will use their expertise to:

  • Bring a strategic, high-level perspective to the organization’s finance and accounting needs.
  • Build the organization’s capacity to manage its finances as it grows in size and complexity.
  • Reduce excessive workloads in the areas of finance, administration, real estate, technology or legal for the Executive Director (ED) and/or the Chief Operating Officer (COO).
  • Balance or supplement the skills of the controller or other finance team members.
  • Partner with the ED and COO to make decisions that benefit the organization from a financial perspective.

How to Find “CFO Right”

You may need to allow several weeks or months to search for the right CFO candidate.

The first task is to create a job description outlining the desired characteristics of the CFO. Focus on the necessary core capabilities, strengths, and experiences. It’s imperative that a non-profit CFO has experience with nonprofit financial management. Other core characteristics to look for among candidates include:

  • Understands non-profit budget models, contracts, and regulatory requirements
  • Knows and demonstrates passion about the organization’s mission
  • Produces detailed and precise work
  • Exemplifies strong listening and perspective-assessment skills
  • Communicates well, in a transparent fashion
  • Exercises good judgment in the midst of ambiguity

We mentioned it before, but the right CFO also has a certain chemistry with the leadership team. That’s not as an ambiguous term as you may think. Chemistry is essential to a calm, orderly, and productive relationship with the organization’s top leaders. The better they work together, the more work they can get done.

It’s difficult to assess chemistry, but allow all your top leaders to meet and interact with potential candidates. Give them time to get to know one another during the interview process. Ask them how they feel about each candidate. If you have several equally qualified candidates, you may need to rely upon the team’s judgment about compatibility as the deciding factor.

Can You Afford a CFO? Options

While hiring a full-time CFO is a great solution for many mid-sized and all large non-profit organizations, many are too small to afford or need a full-time CFO. If your organization falls into that category, there are several things you can do to afford to hire a CFO.

One idea is to hire an interim or temporary CFO. No one earns the title of CFO without building an extensive body of knowledge and experience. Bringing someone into the role on an interim or fractional basis gives the Executive Director and the organization immediate access to the many lessons learned over the course of their career, at significant cost savings.

If you’re interested in finding your next CFO or placing an interim CFO in your organization, Welter Consulting can help. Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

The Skills Nonprofits Need in 2018 – and Beyond

By | HR, Nonprofit | No Comments

As you start thinking about the year ahead, it’s time to think about the skills your team needs to move your nonprofit forward. Whether you already have team members with these skills or you’ll need to hire new employees with them, the fact remains that these are the skills most sought-after among employers.

The Top 5 Skills Nonprofits Need Now – and Why

  1. Cloud and Distributed Computing: So much of our software is moving to the cloud we predict that site-based software and support is going to be hard to obtain in the future. For these and other reasons, it just makes sense to move things to the cloud. Not only can you save money on your software, hosting, and security, but it also enables better data sharing, storage, and updates. If you don’t have someone on your staff knowledgeable about cloud computing, consider adding it to an IT job description or finding a consulting firm to assist with cloud migration.
  2. SEO and SEM: Search Engine Optimization and Search Engine Marketing refer to specific tactics your website utilizes to boost its visibility and hence its clicks and interactions. Adding these skills to your nonprofit will be invaluable in the upcoming months and years as competition for clicks increases.
  3. Business Intelligence: Business intelligence refers to the ability to gather data and information from one or more computer systems and distill it into usable facts. BI system can synthesize financial, accounting, sales, marketing, donation, grants and other information into one report that your nonprofit can use for better business management. Without BI systems in place, your organization runs the risk of having to export multiple data files or reports and manually extract data from each to get the big picture of the organization.
  4. Network and Information Security: You may think that your nonprofit is safe from cyber attack, but in many cases it’s not. Cybersecurity is critical for nonprofits, many of whom rely on small teams and volunteers for assistance. And while many security breaches are preventable, you still need someone in your organization to advise your teams while troubleshooting and fixing your systems.
  5. Corporate and Nonprofit Law and Governance: Corporate laws, including laws that apply to nonprofit organizations, continually change. It’s important to have someone in your organization who understands their application to the nonprofit world and who can help you adhere to all laws pertaining to corporate management and governance. It’s also helpful to have an accounting team member who understands the nuances of pending FASB changes as they pertain to financial reporting, such as FASB 606 changes, which will impact grants and contracts.

Hiring or Outsourcing to Get the Skills You Need

To find the skills you need on your team, you’ll need to hire new employees, train current employees, or outsource the needs to a consulting firm.

Network security and high-level accounting are both examples of skillsets that can be outsourced to a consulting firm. In both areas, consultants may actually be a better choice, because they regularly interact with numerous organizations and work hard to stay abreast of the latest developments in their field.

Training is available through local colleges/universities and professional organizations. This may be sufficient for current staff members who need a refresher or update on specific skills.

As the new year approaches, make a commitment that you’ll work to ensure your team has the right skills to meet the challenges the future brings. To serve members, constituents, and others, you need to be on the cutting-edge of many areas that the corporate world emphasizes, too.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

FASB Seeks Comments on Revenue and Grant Recognition Reporting

By | Accounting, FASB, Grant Management | No Comments

The Financial Accounting Standards Board (FASB) is looking for input. The group wishes to improve, clarify, and enhance revenue recognition standards for grants and contracts by nonprofits. They are seeking comments on the topic, and nonprofit organizations are welcome to respond.

Currently, many nonprofit stakeholders indicated confusion about when to report grant and contract revenue or how to consistently report revenue in these areas.  This difficulty is compounded in the area of government grants and contracts.

The comment period for the proposed Accounting Standards Update (ASU), titled Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made, ends November 1.

Proposed ASU Changes

The big changes proposed in the standards include distinguishing between contributions (nonreciprocal transactions) and exchange (reciprocal) transactions. If the proposed ASU changes proceed, more grants and contracts will be counted as contributions.

The proposed framework indicates that if a grant is an exchange transaction, revenues should be recorded in accordance with Revenue from Contracts with Customers. Details on this may be found in Topic 606 or other applicable topics.

Grants, on the other hand, are determined to be contributions and should be recognized as revenue for not for profit entities under Revenue Recognition Subtopic 958-605.

There are no sweeping generalities for grants. Each one must be evaluated and categorized individually. Grants can be considered exchanges if the value received is commensurate with the services rendered Then it is categorized as an exchange or reciprocal transactions.

The good news is that the ASU includes plenty of examples to help nonprofits determine whether grants are nonreciprocal or reciprocal transactions.

Conditional Contributions

If a grant does not have either a barrier or a right of return, it may be considered a conditional contribution. A conditional contribution is a grant that comes with strings attached – conditions that must be met in order for the grant to be considered fully received.

Some conditions include:

  • Measurable performance goals such as matching grants, levels of service, or other items that can be measured or quantified;
  • A stipulation that specific conditions must be met for the grant;
  • Something limiting how the funds can be spent;
  • Additional actions that would be required to be taken by the recipient organization in addition to the activities that it would normally pursue

For those fuzzy gray areas, the ASU states that donations requiring stipulations can be presumed to be conditional.

Some grants may be considered contracts with a customer. In that case, the specifications in Topic 606 take priority.

When Does This Go into Effect?

The new recommendations will go into effect on or around December 31, 2019, for the fiscal year ending in 2020. That may seem like a long way off, but for nonprofits dealing with a lot of grants that fit these categories and descriptions, it may be prudent to take steps now to conform to the new guidelines. Of course, changes may be made to the recommendations based on feedback received by FASB.

The good news is that the changes do not affect prior quarters in any way, so you don’t need to change anything prior to 2019. For more details, please visit FASB.

About Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Internal Controls & Abila MIP Fund Accounting™

By | Accounting, Audit, CPA, Internal Controls, Nonprofit, Uncategorized | No Comments

Internal controls provide safeguards against losses, thefts and mistakes. An old-fashioned way of keeping internal controls may be to have one staff member count out the petty cash box while another watches the process. The watcher in this case is the internal control. An extra set of eyes on the counting process keeps the person holding the cash in hand from making “mistakes”, whether intentional or not, when it’s handed over for counting.

Implementing internal controls can be easy! Our “Internal Controls for Nonprofits: Best Practice Resource Guide” can help your nonprofit establish best practice principles, policies, and procedures.

In larger, automated accounting systems for nonprofits, such as those that run Abila MIP, internal controls are built into the system. By automating many of the financial processes, it becomes more difficult for someone to circumvent the system and steal from your nonprofit.

A publication from the Virginia Society of Certified Public Accountants brings home the point that good internal controls, through the use of Abila MIP fund accounting and processes around them, can help prevent loss and “keep honest people honest.”

Safeguards Against Loss: Simple Internal Controls

The first and best internal control is to avoid handling cash when at all possible. It’s not that cash is bad, it’s just that it can be “lost” more easily than money that is already in the bank account and tallied in Abila MIP fund accounting.

A system of checks and balances keeps careful watch over your finances. A few internal controls to keep losses to a minimum:

  1. Lock checks and cash in a safe or drawer both during business hours and afterwards.
  2. Monitor access to the keys.
  3. Make it a rule that all employees, regardless of their job title or function, must have another employee present when opening the safe or cash drawer, and counting out money.
  4. Don’t let checks and cash pile up in the office. Make a bank deposit when the threshold reaches a certain amount.
  5. Use timecards to monitor hourly workers’ wages.
  6. Have a manager review timecard information regularly to ensure no one is ‘padding’ the hours.
  7. Do not let anyone borrow funds from the organization’s accounts for personal reasons, or use business credit cards for personal reasons.

Acting Swiftly

It is important to have written policies in place regarding fraud and theft so that you can take the appropriate steps to document, correct, and if necessary, terminate employees who circumvent or ignore internal controls. Depending on the circumstances, your organization may also have a zero-tolerance policy for theft, and a written policy regarding grounds for termination should include such information.

Take steps to create policies and internal controls for your staff. Train and teach them their expectations. Set in termination policies in place. Know who is handling your accounts, who has access to cash and checks, and how such resources are handled. Keeping track of your finances using good fund accounting software is a way to detect fraud and act swiftly.

Abila MIP Fund Accounting

Abila MIP Fund Accounting includes fraud protection and analysis within the system, so you can use the data within it to detect patterns of losses, analyze data, and prevent fraud.

Most losses do not occur in isolation. People find that if they can get away with one theft, they return and try again. This leaves a footprint or a recognizable pattern. Data ran from your fund accounting system may be able to display such patterns so that you can take immediate, corrective action.

At Welter Consulting, we want to help our nonprofit customers prevent losses and fraud. By utilizing good nonprofit fund accounting software, such as Abila MIP, you can keep careful track of all of your accounts and detect suspicious activity quickly.  Click to learn more about Abila MIP fund accounting.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.