The many hats of nonprofit finance
A strong grasp on different nonprofit financial roles is crucial to ensure full coverage of functions, defined responsibilities for various roles, and sufficient capacity for internal controls.
When considering positions and new hires, examine the skills and experiences a candidate has before placing them in a role. Language and terms aren’t consistent across organizations, so job titles or even certifications — such as Certified Public Accountant (CPA) — may not tell you everything you need to know about a candidate’s experience. For example, if your organization is heavily funded by government grants, you will need someone skilled in fund management and grant allocation, which is more specific than an average CPA’s skills.
Consider this parallel: If you hire an attorney who specializes in environmental law to defend you against criminal charges, your day in court will probably not go well.
Primary Financial Roles
A bookkeeper provides an accurate record of the organization’s financial activity. They process basic transactional and accounting paperwork such as accounts payable, accounts receivable, inventory accounts, and payroll. They may also produce basic financial reports. Common responsibilities include:
Manage accounts receivable and payable; print checks
Enter transactions into accounting system
Reconcile bank and balance sheet accounts
Track and manage grant designation of costs
Process and maintain payroll
Maintain financial records; prepare standard accounting reports
Assist in budget preparations
An accountant reviews financial statements prepared by the bookkeeper to ensure accuracy, then takes the next step to analyze and interpret financial information for the organization. Accountants give the management team financial advice on budgeting, proper staffing levels, expense controls, internal controls to protect against fraud, tax strategy, regulatory compliance, and more. In larger organizations, controller is the chief accountant, supervising other accountants and bookkeepers.
Recommend and monitor budgets (for an organization, project, department, grant, etc.)
Corporate reporting and compliance
Prepare the annual IRS Form 990
Tax advice and planning
Auditing
Financial management advice
Recommend policies and procedures
A Chief Financial Officer (CFO), typically only seen in a large organization, is responsible for overseeing all financial functions of the organization. As one of the highest positions in the org chart, they should have extensive experience in accounting, financial management, and fiscal strategy so they can advise on the overall direction of the organization.
Manage investments
Negotiate major contracts
Strategic financial planning
Guide and facilitate the budgeting process
Develop accounting policies and procedures
Establish lines of credit or loans
Oversee compliance
The Treasurer is an officer of the Board of Directors and often serves as the chair of the Finance Committee. The primary responsibilities of the Treasurer are to act as the financial intermediary between the staff and the Board of Directors and to ensure the rest of the board understands important financial issues. The nonprofit board ultimately has fiduciary responsibility of the nonprofit organization, but many board members have little understanding of nonprofit finances. The Treasurer should understand and monitor the organization's finances in order to report back to the board.
Serve as financial liaison to the board
Facilitate completion of financial forms (i.e., 990)
Oversee management of finances
Ensure creation and review of appropriate financial policies and procedures
Facilitate completion of financial audit and presentation of audit report to the board
Present budget proposals to the board for approval
A grant manager can mean so many different things, and describing roles related to grants opens a whole other can of worms. Functions may be divided and subdivided across the entire grant management process:
Solicitation functions such as researching opportunities, cultivating relationships with grantors, preparing grant proposals, and managing or assisting with budget preparation.
Project Management such as monitoring grant-funded projects, preparing grant reports, and stewarding grantors.
Financial Management such as developing grant policies and procedures, ensuring compliance with grant restrictions, tracking grant spending, determining and monitoring organization-wide grant allocations, and preparing grant budget reports.
With both finance and fundraising rolled into the grant process, it’s not uncommon for a grant manager to take on the more development-type functions and rely on another position to contribute the financial pieces.
Finance Roles IRL
Small nonprofits can’t afford having different positions fulfilling each of these roles. Functions will need to be divided thoughtfully among fewer roles, with each person wearing multiple financial hats.
Example 1: The administrative staff of a small human services nonprofit organization includes the Executive Director, a Finance Coordinator, and an Administrative Assistant.
The Finance Coordinator fills the role of bookkeeper and some responsibilities of the accountant with minor support from the Administrative Assistant.
An external CPA firm is hired to conduct an annual independent audit, filling some responsibilities of the accountant.
The Executive Director fills the role of CFO.
The board’s Treasurer fills the role of treasurer.
Example 2: The administrative staff of an environmental advocacy group includes the Executive Director, Associate Director, and Office Manager.
The Office Manager processes payroll and some other simple bookkeeping tasks, but the rest of the bookkeeper and accountant tasks are outsourced to an external CPA firm.
A second external CPA firm is hired to conduct an annual independent audit, filling some responsibilities of the accountant.
The Associate Director manages the organization’s extensive grants so is heavily involved in finances and fills the role of CFO, with support from the Executive Director (who has years of nonprofit management experience) and the Treasurer (who is skilled in financial management and investing).
The board’s Treasurer fills the role of treasurer, with significant support from the Executive Director.
The roles and responsibilities within the nonprofit finance world — and each organization’s needs — can vary widely. So if someone tells you they have a background in “nonprofit financial management,” make sure to ask questions so you understand what they really have experience with. You don’t want a bookkeeper who’s only ever worked on basic income/expense tracking to manage complex grant allocations, just as you don’t want an environmental law attorney defending you in court. In both cases, you want someone with relevant experience to get the job done well.
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