Hiring a chief financial officer for your nonprofit and hiring the right CFO are two very different things. While some accountants get their start at for-profit businesses, nonprofits have specific accounting and tax needs that differ from how accounting is done at private businesses. This means nonprofit CFOs need special training and expertise outside of the standard for-profit accounting and tax environment.
When hiring a new CFO for your nonprofit consider the following:
1. Do They Have the Experience?
Carefully review the applicant’s employment history. Because nonprofit accounting has a number of nuances, you need a person who understands and can operate under these specific rules.
Following are just a few things a nonprofit CFO candidate should know:
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When to recognize contributions
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Donor restrictions and how to account for them
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Donor conditions and the impact on revenue recognition
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Special event accounting
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Proper nonprofit financial statement presentation and disclosures
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Endowment fund accounting and reporting
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Allocation of expenses for grant reporting
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Impact of receipt of federal funds even if passed through from a non-federal entity
2. Do They Know the Software?
There are a number of specialized accounting software packages nonprofits use. These may be general accounting packages with nonprofit add-ins or more sophisticated industry software that has fundraising, retail store operation and grant accounting modules. The more experience a CFO has with specific nonprofit accounting software, the better the fit.
3. How Often Have They Changed Jobs?
Years ago, employees stayed with one company and rose through the ranks. However, today people change jobs and careers frequently. Changing jobs alone isn’t an issue, but when someone is changing jobs every two or three years, that can be a red flag.
In the commercial world, people change jobs for many reasons, like to advance their career or salary. However, in the nonprofit space, many employees work at a particular nonprofit due to their passion for the mission of that organization. When the passion is there it’s less likely that a person will change jobs as frequently. Typically, when nonprofits hire people with a history of changing jobs every few years, that person doesn’t stick around much longer than they have at past positions.
4. Can They Wear Multiple Hats?
CFOs in the nonprofit world wear multiple hats out of necessity. While this does happen at for-profit companies, it’s much more common at nonprofits due to budgetary restrictions. For example, it’s not unheard of for a nonprofit CFO to also serve as the head of human resources or the chief operating officer. Candidates must be prepared to handle a whole new set of responsibilities and the training and education required for those responsibilities.
5. What Does Their Last Employer Have to Say About Them?
Do not hesitate to check references and do background checks on a candidate. Chances are that your ideal candidate will have a squeaky clean record, but a thorough reference check will uncover skeletons in the closet.
The last thing you want to do, for example, is bring in someone who has been suspected of fraud.
Doing a formal background check as well as calling a few of a candidate’s prior employers is imperative to making sure inappropriate financial behavior was not an issue at any prior position.
Need Help?
Contact our Nonprofit Group online or call at 800.899.4623.
