Nonprofit CFOs Are in High Demand and Short Supply
For nonprofits, the role of Chief Financial Officers (CFOs) has become increasingly critical. However, a concerning trend has emerged – a significant shortage of financially-savvy professionals willing to pursue careers within the nonprofit sector.
This shortage poses a substantial challenge for nonprofits striving to navigate complex financial environments while fulfilling their missions effectively. In this blog, we will discuss factors contributing to the talent shortage and how outsourced accounting can fill the gap for nonprofit organizations.
Identifying the Root Causes: Factors Contributing to the Talent Shortage
Last fall, the University of California’s Berkeley campus took a proactive step to address this pain point by launching an initiative aimed at tackling the shortage of financially-savvy professionals within the nonprofit sector. Nora Silver, founder and faculty director of the Center for Social Sector Leadership at Berkeley, along with colleagues and students, conducted interviews with 70 chief financial officers working at nonprofits.
The consensus was clear – there is a dire need for finance expertise within the nonprofit world. In February 2023 alone, nearly 7,000 finance positions were available across the U.S. at nonprofits and foundations with budgets exceeding $10 million. This scarcity of talent is not limited to senior roles; many organizations struggle to fill junior finance positions as well.
Why are nonprofit organizations struggling to fill these positions? The staffing crisis facing the nonprofit sector is exacerbated by several factors.
Nonprofits typically offer lower pay levels than their for-profit counterparts, making them less attractive to prospective candidates. Additionally, there is a pervasive lack of awareness about the opportunities available within nonprofit finance careers. As a result, the pool of financial talent attracted to the sector remains relatively small. It’s also exacerbated by the wave of openings created by retiring baby boomers, many of whom have had long tenures in these roles.
Salary Concerns: A Barrier to Attracting Talent
Nonprofit CFO compensation packages often fall short of those offered by their for-profit counterparts. While base salaries may be comparable, for-profit organizations have the advantage of offering performance-based bonuses or equity, such as company stock. This discrepancy in compensation poses a significant challenge for nonprofits, particularly small and midsize organizations with limited budgetary constraints.
Omri Even-Tov, an assistant professor of accounting at Berkeley, acknowledges the trade-offs involved in nonprofit finance careers. While the financial rewards may not match those of Wall Street, nonprofits offer strong benefits packages and better work-life balance. Moreover, working in the nonprofit sector allows individuals to make a tangible difference in society, contributing to meaningful causes and driving positive social change.
Lack of Awareness: A Barrier to Entry
Despite the rewarding nature of nonprofit finance careers, there remains a pervasive lack of awareness about the opportunities available within the sector. Ken Jones, Chief Operating Officer at the John D. and Catherine T. MacArthur Foundation, attributes this lack of awareness to a failure of grant makers to engage with college campuses effectively. Many individuals simply do not realize the potential for impactful careers within nonprofit finance.
Jayson Wang, a class of 2024 MBA candidate at the Haas School, emphasizes the importance of bridging this awareness gap. Drawing from his own experiences transitioning from economics to finance roles within the nonprofit sector, Wang underscores the need for greater exposure to nonprofit finance careers in educational settings.
Addressing the Talent Gap
As the demand for top financial talent continues to outstrip supply, it is imperative for nonprofits to take proactive steps to attract and retain skilled professionals. Programs like the Impact CFO initiative at Berkeley aim to expose students to the diverse career paths available within nonprofit finance, helping to cultivate the next generation of financial leaders.
Moreover, organizations can leverage partnerships with executive recruitment firms like Isaacson, Miller, and educational institutions like the Haas School to identify and nurture talent pipelines. By investing in awareness-building efforts and offering competitive compensation packages, nonprofits can position themselves as attractive destinations for finance professionals seeking to make a meaningful impact.
How Fractional and Outsourced Accounting Models Can Step into Fill the Gap for Nonprofits
Amidst the talent shortage crisis, fractional and outsourced accounting models have emerged as invaluable solutions for nonprofits grappling with their accounting needs. These models present opportunities for nonprofits to access experienced accounting professionals and specialized expertise without the necessity for full-time hires.
At Signature Analytics, we recognize the distinct challenges nonprofits face and offer tailored solutions to effectively address their accounting needs. Our approach is collaborative, working hand in hand with existing teams to ensure seamless integration and deliver high-value outcomes. With our outsourced accounting teams, nonprofits can rest assured that the highest quality accounting standards are implemented, empowering them to make informed financial decisions and achieve their mission-driven goals.
Navigating Challenges with Fractional and Outsourced Accounting
Sophisticated Reporting Demands: Nonprofit Boards of Directors (BODs) often demand sophisticated reporting, placing additional pressure on already stretched accounting teams. Outsourced accounting models provide access to professionals capable of meeting these demands while alleviating the burden on internal staff.
Resource Limitations: Many nonprofit accounting teams struggle with limited staff and resources, hindering their ability to fulfill their responsibilities effectively. Fractional and outsourced accounting services offer a cost-effective solution, ensuring that every dollar counts toward furthering the organization’s mission.
Overcoming Talent Shortages: With an aging population of CPA holders and a decline in accounting students, finding skilled accounting professionals has become increasingly challenging. Outsourced accounting providers like Signature Analytics offer access to a pool of experienced talent, mitigating the impact of talent shortages on nonprofits.
Elevating Nonprofit Capabilities: Elevated nonprofits require best-in-class reporting, flexible support, and technology implementation to thrive. Outsourced accounting services are equipped to provide the necessary expertise and resources to meet these demands effectively.
Professional Service Disparities: Nonprofits often find themselves at a disadvantage when it comes to accessing professional services. Outsourced accounting models level the playing field, ensuring that nonprofits receive the same quality of support as their for-profit counterparts.
Learning from Past Challenges: Learning from past challenges, such as struggles faced by organizations like LA 84 and Diversity in Health DHTI with outsourced teams, allows nonprofits to make informed decisions when selecting accounting partners.
Addressing Governance Needs: Boards with finance committees require specialized financial expertise. Nonprofits can incentivize board engagement by offering reduced fees for the organization, ensuring alignment with the nonprofit’s mission and financial goals.
Signature Analytics’ nonprofit accounting services help you make financial decisions based on the highest quality accounting practices, while our day-to-day outsourced accounting teams implement the highest quality donor and government accounting standards.
For additional assistance with cash flow management, developing detailed nonprofit budgets, and audit support, contact Signature Analytics today.
