Be Your Nonprofit’s Chief Financial Educator

by Michael F. Cade, CPA, CGMA | Sep 04, 2018

The nonprofit CPA is one of a very few financial experts in a typical nonprofit organization. As a result, it often falls to the CPA to take on the role of financial educator to the board and executive leadership team. The task is to provide a solid level of understanding of financial topics to nonfinancial folks.

The nonprofit CPA must go beyond the numbers and explain how financial data impacts the organization and why it is important for the board and leaders to understand those impacts. Ultimately, this education helps ensure the financial viability of the organization.

Financial statements are an important piece, but they rarely tell the whole story. This column identifies several important nonprofit finance topics that are generally unfamiliar to board members and nonfinancial leaders.

Key Financial Education Topics

Cash – Surveys repeatedly identify a lack of cash reserves as one of the most pressing issues facing nonprofits. New liquidity disclosures will make cash flow concerns more visible and move them up your board’s priority list, so be ready.

Cash-related education for your board and leadership should include a general understanding of liquidity. It is also important to have periodic discussions on available operating funds, reserves, and bank instruments that are available in the event of a cash flow crisis.

Leadership and the board should understand working capital requirements, including any significant cyclical variations between spending and available funding. Present a cash forecast on a regular basis with leadership and the board.

Discuss general banking relationships with leadership and the board at least annually. Provide a quick brief that includes the types of accounts, accessibility, and the quality of services and new services being offered. This discussion can alert leaders to potential issues or identify possible opportunities to explore.

Fixed assets – Most of the financial information provided to nonprofit leaders and the board is operational and current. Longer-term assets are generally viewed as a series of numbers on a capital budget that receive attention only when there is a fund-raising campaign.

While leadership and the board do not need to understand the minute details of all fixed assets held by the nonprofit, they do need to be aware of the level of usefulness and the efficiency of those assets, as well as the plan for replacement or upgrade of the assets over time.

Leaders also need to understand how the costs of these assets are allocated or associated to programs, as well as how the nonprofit protects its assets both physically and via insurance coverage.

Technology – Systems technology is constantly changing and developing, so it is hard for any organization to keep current. It may fall to you to educate leaders on the potential for efficiency and cost savings that may be realized by improving the nonprofit’s systems.

Look for ways to advance the organization’s mission beyond finance. Many new systems offer integrated functionality that can improve billing, fund-raising, grant and program management, and donor relations. In addition, cloud-based and software-as-a-service systems can offer increased capabilities with cost savings opportunities.

Be a technology advocate by educating leaders and board members on the value associated with new solutions.

Cost trends – As a nonprofit CPA, you have a view of the full range of organizational costs. More than likely, you are also involved in the preparation of the annual operating budget and in assessing alternatives in the procurement process. You may also have benchmarking information via your professional and industry networks.

Transform cost data into usable information by highlighting cost trends and benchmarking spend efficiency in relation to other organizations in your sector. Discuss what you observe during the budgeting process, and apply your knowledge when helping to assess sourcing alternatives.

Margins – Program performance is not just about service delivery. It includes an assessment of the programs’ sustainable value to the organization by matching revenues with all direct and allocated costs. This full-cost approach provides a clearer picture of current and planned performance for decision-making.

Work closely with program managers to understand margin expectations across all programs and to learn the interrelationships. This will allow you to build a portfolio assessment of all programs. Once you understand the true financial results and projections associated with the programs, you can provide input on efficiencies or underperformance issues, either individually or in a broader context.

Financial impact of regulations/FASB changes – Changes that impact the finances of the organization, such as new FASB pronouncements and changes in tax law, must be interpreted and explained to leadership and the board. Only the nonprofit CPA has the knowledge and experience to assess the impacts resulting from regulatory changes.

Don’t wait until proposed changes are finalized to communicate with leadership and the board. Discuss them once the general direction of any change becomes clear. Some changes can have far-reaching effects that need to be assessed for strategic planning and longer-term initiatives.

Storytelling – One of the most important facets of financial education is helping the organization transform financial data into information that supports the nonprofit’s storytelling. In the nonprofit sector, it is not enough to do good work; you must also be able to communicate clearly and concisely why donors and funders should provide money to your cause. A large part of that is showing that the organization is financially sound and that it uses the funds it receives efficiently and effectively.

As a nonprofit CPA, part of your job is producing evidence for the organization to provide to its funders. So, it is important that you build a relationship with the development and communications teams. Go beyond supplying financial reports, and ask what story they are trying to tell and learn about what motivates your nonprofit’s funders.

Once you understand the story and the needs of the funders, get creative by finding connections between financial and nonfinancial metrics. Reach out to folks in your network, attend sector-related events, and find sector-sponsored education opportunities so that you learn best practices.

You have the expertise and skills that can help grow and improve your organization. Engage with leaders, coworkers, and peers in the sector to understand critical topics important to your organization, and build your own financial education program. Be your organization’s chief financial educator, and add value by transforming financial data into useful financial information.

Michael F. Cade, CPA, CGMA, is a strategy consultant and executive coach for MFCCoach LLC in Morrisville. He is a member of PICPA Council, the Pennsylvania CPA Journal Editorial Board, and the PICPA Not for Profit Technical Issues Committee. He can be reached at or on Twitter @mfccoach.

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