Last week well over 1,500 financial professionals, CPAs, and leaders from the nonprofit sector gathered in Washington, D.C., for the annual AICPA Not-for-Profit Conference. It was my second year in a row attending, and I noticed the crowd had significantly grown – likely attracted by expanded themes with new topics. In total, there were 85 sessions across four main conference tracks. Below are snippets from memorable sessions I attended and tweeted about during #AICPAnfp …
“Unlock the Power of Generations to Grow”
This conference kickoff contained the usual vibrant energy of a keynote speaker, but also came with some fascinating data points courtesy of Jason Dorsey. He is from the Center for Generational Kinetics, which is studying the dynamics of generations within America. Jason noted that right now – for the first time ever – we have five generations of Americans in the workforce and job market: Gen Zers (<21), Millennials (22-40), Gen Xers (41-52), Boomers (53-71), and Traditionalists (72+). Naturally the topic of Millennials was at center stage.
It’s the fastest growing generation globally, and unlocking the key to engaging Millennials provides nonprofits with a tremendous opportunity. Millennials offer the largest lifetime donor value, and are most likely to refer friends and their networks to a nonprofit brand. They’re not just tech savvy, but actually tech dependent. Jason astutely noted that, “Technology is only new if you remember how it used to be,” which is a key to understanding each generation’s relationship to technology.
“The Evolving Role of the CFO”
The theme of technology within nonprofits continued with a great session hosted by a trio of CFOs: Amy West, of AHRC NYC; Johanna Richman, from the Queens Library; and Ron Ries, formerly of the Jewish Board of Family and Children’s Services. They discussed how today’s CFOs are not just overseeing traditional accounting, budgeting, and treasury, but also HR/Benefits, IT, property/facilities, and legal matters.
It’s much more than a transactional role focused on daily activities and reporting requirements, and is becoming the trusted, true “second in command” role in the nonprofit sector that focuses on propelling organizational growth going forward.
To do this, the modern nonprofit CFO must understand all aspects of the organization, then articulate an achievable vision that’s supported by financial data. This extends into areas that are typically associated with innovation: new business models, advanced analytics with predictive modeling, and deploying new technology solutions across departments.
“How to Tell My Org’s Story Through the Financial Statements”
Partners Dennis Morrone from Grant Thornton and John Mattie from PWC collaborated to showcase how financial reporting can better align with the strategic plans of nonprofit organizations and help drive constituent engagement. There’s clearly a shift toward “proactive transparency” occurring within the sector. Stakeholders want to support what they understand, which starts with clear, objective financial data.
Most stakeholders are familiar with the classic IRS 990 tax form for NPOs, which is very accessible via services like Guidestar. Financial statements that are audited are not typically provided by NPOs, when in fact, they could be much more valuable since they’re shorter and more comparable.
Dennis and John advised that you’ve got to first really consider your audience(s) to ensure you not only meet, but can exceed your stakeholders’ expectations when it comes to financial transparency. Telling your story must extend beyond the required (for example, audited financial statements, uniform guidance acts, and Form 990s) to published strategic plans, press releases, annual reports, and your website. NPOs should ideally define and provide updates on their mission-based metrics, such as outcomes, program expense ratios, and geographical presence and breadth.
Building trust can take time, as stakeholders don’t easily absorb or even trust materials that provide too much data without context. You must engage further, help explain the story better, and develop a true two-way communication channel.
“Staying Ahead of Financial Fraud for Nonprofits”
John Mulvaney, a certified fraud examiner (CFE) and former FBI special agent, covered what is often a challenging subject in the nonprofit sector – the risk and devastation of fraud. In the most recent Global Fraud Study from the Association of Certified Fraud Examiners, the median loss due to fraud was $145,000, with billing schemes and corruption posing the greatest risk in terms of frequency. In 92 percent of all cases, there were red flags reported, which underscores the single most effective tool against fraud – whistleblowers. Fraud often involves senior or middle management within nonprofit finance and accounting teams, and John led the attendees through multiple case studies.
In these cases, the frauds were perpetrated by trusting, “nice” individuals who gained trust and developed elaborate schemes. Most of these involved lack of internal controls, off-book transactions, and lack of oversight, or in some cases collusion from multiple executives. While the fraud itself is financially painful, those that become public can erode the trust of key funding stakeholders and lead to irreparable harm to the organization.
John recommends that every NPO focus on establishing whistleblower programs, developing strong internal controls, and focusing on the area of vendor payments and expense reimbursements to catch the most common forms of fraud.
Abila was a proud Platinum Sponsor of AICPA’s NFP conference this year! Dan Murphy from Abila presented on our recent nonprofit finance study which can be downloaded here.