You Can't Hide from Sarbox
In general, CFOs say there is more government oversight and regulation at a nonprofit, especially since the passage of the Sarbanes-Oxley Act in 2002. Although the law governs only public corporations, the increased disclosure and control requirements have become best practices for filing Form 990s, the income tax statement of nonprofits that are part of the public record.
Despite the differences between the two sectors, certain corporate finance skills are transferable, including building spreadsheets, return-on-investment analysis, cash-management, budgeting, and short-term investing. Scherer claims that she uses all of the skills she honed in Corporate America, but notes that her focus has changed to a broader look at the businesses, with a tighter focus on accounting. "I really enjoy being [directly] involved in [accounting] and seeing how all the puzzle pieces fit together to make the whole picture," she says.
Most nonprofit CFOs use certified nonprofit accounting principles (CNAP), while a handful stick to generally accepted accounting principles (GAAP). Either way, the bookkeeping includes accounting for how the organization uses grant money and other donations, which is reported in the Form 990.
Similar to the private sector, the Financial Accounting Standards Board is the main standard-setter for nonprofits, but its guidance remains limited. Meanwhile, the American Institute of Certified Public Accountants publishes what is considered the primary guide to GAAP for nonprofits, and the U.S. Federal Office of Management and Budget provides its own standards and guidelines for nonprofits that receive federal grants. A relatively quick training course in nonprofit accounting — usually through a continuing education program—is all that is necessary to make the transition, said several sources.
The approach to nonprofit finance may seem unusual to private-sector CFOs because perpetual money-losing project are tolerated, and sometimes nurtured. That's because fulfilling the mission is as important as breaking even, and in some cases the organization subsidizes a loss leader because the program is valuable to clients. "You’re always weighing financial decisions with the organization's mission," says Mike Dunn, vice president and CFO of Outward Bound.
For example, the programs run by Hartford Children's Theatre are subsidized by grants, as well as private and corporate donations. However, some programs, such as those serving inner-city children, lose money in spite of outside support. Campbell says he'll continue to run those programs and cover the loss with excess revenue from another projects because they are an investment in the community—and the theater. Invariably, the children in the audience become participants in the programs, and their parents become volunteers or donors. "I'll do that at a loss and make up for it another way, just because of the impact it's going to have on children's lives," asserts Campbell.
Some non-profit CFOs say that a focus beyond the bottom line is a refreshing change. Lueders, from the YMCA, regularly visits programs. "You can go out and spend an hour and get that warm fuzzy [feeling] about why you're doing what you do," she says.
Not Much Brass in Pocket
The extra gratification is important, as salaries tend to be 5 percent to 20 percent less than comparable positions at for-profits. But CFOs say that the lower stress level compensates for the salary drop. "You do have the stress of making everything work, trying to do a lot with a very lean staff ... [but] it's the kind of stress where it's still invigorating and you feel like you're doing some good," explains Lueders.
The salary cut doesn't come with a shortened work week, however. CFOs entering the non-profit sector should anticipate being on the job between 45 hours and 60 hours a week, on average, with seasonal peaks. Further, nonprofits may not offer executives the same workplace flexibility as their for-profit counterparts, notes The Conference Board report. However, that doesn't seem to always hold true. Dunn, the father of two, says he enjoys being able to leave early to attend his kids' soccer games. "I may work on the weekends, but I'm working at home at my dining room table," insists the Outward Bound finance chief.
Benefits aren't standard across non-profits either. Health and retirement benefits are all over the map, depending on the organization. Some CFOs report receiving benefits that are comparable to the private sector, while other say they loose in the benefits arena.
Melinda Tuan, a special advisor with Bridgestar, thinks it takes a resilient finance chief to make the jump to the non-profit sector. She co-wrote Bridgestar's new research report, "CFO Fitness Quiz: Are You Tough Enough for the Caring Sector?" which is a survey based on interviews with 25 nonprofit CFOs and 15 nonprofit executives. "It's not just the shareholder report that's at stake here," says Tuan. "It's lives. It's the environment. It's things that really matter."
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