Top Challenges Facing Not-for-Profit CFOs Today

Much has been written over the past several years, and especially in the last few months, about the evolving role of the CFO in the business community. This article focuses specifically on the CFO in the not-for-profit (NFP) world, since some key elements of this role are unique to this sector and deserve recognition. It also emphasizes the opportunities that this position affords the right individual.

Today’s NFP chief financial officer is no longer defined solely by fiscal or financial expertise, but more often by organizational and managerial responsibilities. Obviously, the full scope of any CFO’s role within an organization’s c-suite depends upon the size, scope, and depth of an NFP’s operations, staff, and management talent. The CFO’s role within a small organization may include a broader array of responsibilities, while in a large organization it may be more traditional, since other management functions are provided by management personnel. Today’s business and operating environment requires any CFO to have a broad knowledge of most management areas and certainly an in-depth understanding of the organization’s specific mission, industry-specific areas of funding, program needs, and support operations to help manage a successful organization.

The main challenges facing the modern NFP CFO are:

  • overseeing many functional areas;
  • juggling strategy and operations;
  • carrying the c-suite;
  • communication;
  • governance;
  • information technology;
  • managing personnel;
  • funding;
  • compliance, regulations, and unfunded mandates; and
  • mitigating and managing risks, including reputational risk.

An analysis of each of these areas follows.

Overseeing Many Functional Areas

Many who support NFP organizations as service providers, volunteers (including board members), and staff and management personnel view the CFO as the key role in the c-suite of executive management. Again, the depth of this role is dependent on the organization’s size and key attributes. Often, the CEO is the marketing/mission/culture head, while the CFO is often the go-to management/administrative/fiscal operations head. Thus, the CFO often wears many hats. CFOs are required to have a comprehensive understanding of multiple disciplines at a time when there is increased scrutiny and greater regulatory complexity. In addition to accounting, budgeting, treasury management, and investments, CFOs frequently oversee some or all of information technology, human resources and employee benefits, real property and facilities, insurance, contracts, and legal.

Juggling Strategy and Operations

Gone are the days when CFOs were merely number crunchers. Today, the CFO’s knowledge of the business is more important than the technical skills required to oversee the multiple functional areas defined above. Strategic know-how and implementation for the future have become paramount.

Today’s NFP CFO must be 80% strategist and 20% number cruncher. The CFO needs to evaluate ways to do things more efficiently, keep the organization relevant, and define what must be done to bring the organization to the next level (transformative work) while also getting the day-to-day work done, meeting deadlines, and satisfying reporting requirements (transactional work). Achieving a balance between the two requires different skill sets, prioritization, and the ability to delegate operational activities to competent staff.

Carrying the C-Suite

In addition to serving as the trusted counselor to the CEO, especially in light of the diminishing role of the COO, the NFP CFO functions as consultant to the senior leadership team and is increasingly asked to provide expert advice to support programmatic decisions. The CFO is in an optimal position to do so given the ability to gather information from all parts of the organization. In this expanded role, it is imperative that the CFO understand all aspects of an NFP organization.


One of the key attributes of an effective CFO is the ability to take complex information and communicate it so that non-financial professionals can easily understand it. The sharing of information is a critical part of building trust; in order to be effective, it is imperative that the CFO be trusted. As such, the CFO does not always deliver good news, but must deliver the news nonetheless. CFOs must also take advantage of new modes of communication, including social media. The use of metrics and dashboards is now common and a clear, concise, and visual way to provide information.

Historically, CFOs have fostered strong business relationships with auditors, bankers, and investment advisors; today, they also broker relationships with attorneys, insurance advisors, significant vendors, funders, and donors. This makes sense, given that modern funders and donors require more information in different forms and the CFO is in an ideal position to measure tangible outcomes and provide in-depth financial data.


All kinds of businesses have elements of oversight within their operating culture; however, the NFP culture contains several unique factions, including active boards, funders, the public and press, and regulatory agencies, not to mention clients and suppliers. The pressure on governance is tremendous for today’s NFP organization.

Overall, there is a greater requirement for transparency throughout the NFP sector. CFOs have experienced greater involvement in governance in conjunction with the broadened role of audit and finance committees and following the enactment of the New York Nonprofit Revitalization Act. There is also a greater need for strategic planning and performance measures that assist boards in understanding tradeoffs and associated costs. The CFO is also in a good position to educate the board about the governance section of Form 990, especially as it relates to monitoring conflict-of-interest, whistle-blower, record retention, and executive compensation policies and procedures.

Information Technology

The increasing need to acquire, maintain, and continuously upgrade one’s knowledge in information technology must be part of an NFP CFO’s ongoing responsibilities if management is to maintain its infrastructure at acceptable levels. This applies regardless of whether the organization maintains a separate CIO position, and includes the ability to gauge the success of an organization using program outcome measures and organizational metrics.

The CFO also plays a key role in keeping an organization’s IT infrastructure relevant and modern in an ever-changing technological environment. Many nonprofits are challenged by their lack of an IT strategy, are often several software versions behind, and have customized their internal systems to the extent that software upgrades are nearly impossible. Data integrity is another major issue; metrics can be very informative, but lose meaning if the data lacks integrity.

The CFO’s role as risk manager is also important, as technology has brought about new and pervasive internal and external risks. These risks entail not only cyber attacks, but also the need to manage social media, as negative stories about an organization can spread quickly. Protecting confidential information is also a challenge given the broad use of smartphones and flash drives. Furthermore, the ubiquitous dependency on email means that productivity screeches to a halt when email fails. Finally, new internal controls are required: it has become much easier to produce fraudulent checks and requests for bogus wire transfers have become common.

Managing Personnel

One key aspect of a CFO’s role is personnel management. Proper recruitment, knowledge retention, and appropriate succession plans are important facets of helping to manage, train, and motivate all staff and talent within the areas the CFO manages (which, as noted above, can be extensive). These factors, although required steps for all who report to the CFO, should also be maintained for the CFO as well, particularly the succession planning.


Depending upon an organization’s activity and mission, an NFP entity may have unique revenue sources. These include public support by individuals, corporations, and foundations; government support from local, state, and federal authorities; and other NFP entities that share in mission or are part of a common coalition. All of these sources are grouped under the term funding, and the level and type of such revenue and support depend upon an organization’s success.

Many attributes make funding a major challenge for CFOs today. While funding is not disappearing, it is being made available in greater amounts to those organizations that can prove desired outcomes. Many NFPs struggle to develop meaningful measurements of mission impact; while great strides have been made in dispelling the overhead myth, there is still little or no funding for administrative overhead or infrastructure. Furthermore, most funding is accompanied by restrictions and onerous reporting requirements.

Many NFPs continue to have inadequate financial reserves and to be heavily reliant on one or a few funding sources. Organizations continue to believe that some funding is better than no funding and to refuse to reject funding even when it does not support the organization’s core mission or cover administrative overhead. In addition, nonprofits continue to be unable or unwilling to exit programs that consistently operate at a loss. It is the CFO’s job to fight these counterproductive instincts.

Compliance, Regulations, and Unfunded Mandates

Compliance and regulatory demands on NFP organizations are tremendous. The ever-changing compliance and regulatory landscape challenges business operations and increases workload. Compliance is a tremendous challenge for the CFO, as it makes focusing on strategic initiatives almost impossible. In fact, the only thing more time consuming than compliance is noncompliance.

In addition, changes in compliance and regulatory requirements are often unfunded mandates, which require organizations to update policies and procedures, consult with outside experts, communicate new regulations to staff, set up monitoring processes, and undergo compliance audits.

Risk Mitigation

The primary responsibility of every management team is the proper management and efficient achievement of its organizational objectives. Today’s NFP environment entails considerable economic, political, and cultural risks to any organization. In the past, the CFO’s risk mitigation responsibility was limited to ensuring that an organization’s insurance portfolio covered the activities performed by the organization. Continual risk assessment is now viewed as an essential part of the CFO’s role. The CFO’s expertise in audit and compliance make her the natural candidate to assess and manage risk across an NFP entity.

It is said that next to staff, reputation is an NFP’s greatest asset. The speed by which information and (often unverified) negative publicity can be disseminated puts that reputation at risk. Scandals, financial crises, data breaches, and regulatory reform have further driven home the need to think beyond just financial reporting and internal controls over financial reporting when of dealing with risk.

Strategies for Success

The job of the CFO has expanded tremendously over the past several years, as the role of management has demanded more expertise in various disciplines. The list of challenges above should also be viewed as opportunities for those willing to take on an important role within an NFP organization. The following are meant to assist these individuals in self-evaluation and assessment of the areas that require both professional and personal judgment and dedication.

Time management is critical to any CFO’s success. CFOs must be able to effectively manage distractions such as email, seemingly immediate needs for information, and staff drop-ins while still maintaining an open-door policy and avoiding unnecessary meetings. Prioritizing one’s tasks and analyzing them on a cost/benefit basis are also important.

A CFO must also be able to delegate operational activities to competent staff. Formal recruitment and retention strategies are instrumental to this; NFP organizations should involve their marketing team in recruitment efforts if possible, as marketing is already the go-to department for managing public perception. Recruitment and retention strategies also entail understanding the workforce and offering competitive compensation packages (both salary and benefits). Other important aspects of recruitment and retention include investment in staff training and obtaining a comprehensive understanding of the factors behind turnover. A CFO should always be recruiting and should take succession planning seriously. Organizations should consider including recruiting and retention as line items in the operating budget.

CFOs must stay in front of issues impacting the NFP industry. With respect to funding, policies and procedures should be developed as to when to exit programs that consistently operate at a loss and when to say no to funding that does not support an organization’s core mission or does not cover a portion of administrative costs. To help manage the ever-changing compliance landscape, organizations should extensively document compliance, maintain a compliance diary, develop a compliance program, and fully integrate it into an enterprise risk management program.

Above all, CFOs should control what they can control, leverage technology wherever possible, and engage the board where appropriate. It is also important for CFOs to invest in their own professional development, and remember the importance of work/life balance. Remaining adaptable to change and maintaining a sense of humor are also critical to a CFO’s success.

Amy West, CPA is the chief financial officer of AHRC New York City, New York, N.Y.
Ronald Ries, CPA, CGMA is a retired partner at WeiserMazars LLP, New York, N.Y.