CFO Studio Magazine, 1st Quarter 2012
Interview by Andrew Zezas
CFO Audrey Wells provides insights into the world of not-for-profit organizations.
AUDREY WELLS IS CFO OF FAMILY SERVICE of Morris County in New Jersey. The nonprofit organization has a very specific mission: to strengthen the community by empowering individuals and families to meet and overcome life’s challenges. Wells recently appeared in a CFO Studio interview hosted by Andrew Zezas.
Tell me about Family Service of Morris County.
Wells: We’re about a $3.2 million organization with about 90 employees. We’re located in Morris
County and do services for the most part in Morris County, although we do go outside the county on occasion. We concentrate on four areas of impact. The first is giving children the best start in life. The second is keeping seniors independent and in their homes. The third is maintaining healthy families, and the fourth is preventing substance abuse.
There are many in the for-profit world who would suggest that not-for-profit isn’t really about business, it’s about other things, and that not-for-profits should run themselves more like for-profit organizations. How do you respond to that?
Wells: I totally agree with that assessment. But, a lot of not-for-profit organizations, and I’d like to think that ours is one of those, already run like a corporation to a certain extent. There are many, many things that we can learn from what corporations do well while still keeping the different sort of atmosphere that you have in a not-for-profit organization. A not-for-profit organization usually has a very passionate workforce, very mission-driven, maybe a little more laid-back than a corporation, but there are certain things that you can definitely carry over from the corporate world.
For example, streamlining procedures – you know… touch each thing once and move it along, don’t do things that aren’t necessary. Another would be in the area of technology. We should be making better use of technology to make our jobs more efficient, to be able to collect data more efficiently, analyze and report more efficiently. A third example is doing complete financial analysis. You’d be surprised how many organizations really haven’t figured out how to analyze their programs separately – figure out where their actual revenues are going and how they’re being used. We may not do the same thing with the analyses that a for-profit corporation would do, but it’s really important to know where your dollars are going and at least have a basis for making good decisions.
There is really a primary difference between how a for-profit and a not-for-profit views its ultimate objective. A for-profit’s job is to maximize revenue, minimize expenses and return as much back to the shareholders as it can. But I’ve heard you say that from a not-for-profit perspective, you have a different focus and that you focus on revenue and expense differently.
Wells: Given the same revenue stream that you would have in a for-profit corporation, we focus on maximizing the efficient use of the limited resources we have. Obviously, this is an oversimplification, but we try to use every bit to provide services to the end users, our clients, and they are the ultimate stakeholders.
We’re not necessarily working for a bottom-line profit.
The economy’s been pretty funky in the last few years, as we all know. How has that affected funding sources, revenue in your case – have they increased, have they been static or are they declining? And how do you deal with that?
Wells: We’ve been pretty lucky. Even during this time, we’ve actually grown a little bit. But, the mix of our revenues has changed. We have noticed that private donations have declined somewhat. We’re lucky we have a pretty loyal donor base, but even so, we’ve definitely noticed a slippage there. It’s harder to meet our goals. Foundation giving has definitely declined. And, a lot of foundations are now putting a bit more stipulation on the money. For example, they might say that this funding is only for startup; after this, you have to go find alternate means of funding the same program. So, it’s been a little more difficult to bring in revenue that way. We found that we have to place a bit more reliance on fee-for-service programs to supplement any kind of grants or contracts that we have.
You talked about how certain organizations are placing collars around their funding, and giving you more descriptions. Are they also looking to measure how that funding is being spent and measure the results?
Wells: Absolutely. That’s actually a huge area right now where not-for-profits have to come up to speed. A lot of the funders these days – government organizations and private and corporate foundations – are looking for impact-based programs. It’s one thing to say that you saw this many pre-schoolers and helped them get ready for kindergarten, but funders are much more likely to give you continued funding if you can show that your contact with these children actually made a difference. So, they’re really looking for a measurable impact on the community.
And, organizations that can come up with the best ways to measure that are the ones that are most likely to get funded.
I’ve got to imagine that you’re looking at the expense side. Have expenses risen, have they been declining – and how are you getting in control of those?
Wells: Like any good for-profit organization, we at Family Service also have done an analysis of our expenses and seen how we can keep them in check. Since more than 80% of our expenses are payroll and payroll-related expenses, it’s been somewhat of a challenge. What we have done is we have streamlined certain positions and combined certain positions. But we’re really doing the best that we can to keep our good employees and make sure that they can continue to deliver the services to the clients. So, to that end, we’ve had to be a little creative with the way we staff certain things.
Let’s talk about the role of the CFO, specifically. Not-for-profit, for-profit – is the role very different when the CFO is performing services for not-for-profit versus a for-profit organization?
Wells: In general, the mechanics of the job are the same. If you’re working for a for-profit corporation, you’re looking to maximize profits, obviously. If you’re working for a not-for-profit, you’re seeing it from a slightly different angle. There’s more of a personal feel for clients, programs and things like that. The job
is the same, but there’s just more of a personal self-fulfillment working for a not-for-profit – feeling like your actions are actually helping end users.
I would imagine, too, that you’re measuring success differently in a not-for-profit: Did we deliver the service? How well did we deliver the service? And can we continue to deliver the service?
Is that different from the perspective of a large versus a small company?
Wells: I think, in general, between a large and a small company, whether it’s a for-profit or not-for-profit, it’s very similar. But in a smaller company, the job is much more hands-on, simply because there are fewer staff members to do some of the day-to-day functions. A CFO in a smaller organization will find himself or herself doing things like bank records and even possibly cutting checks. I think that the job of the CFO in a smaller organization also is a little bit broader. Again, there just aren’t as many staff members. For example, my job not only encompasses finance and accounting but also information technology, human resources and facilities management.
How closely do the CFO and CEO align in not-for-profits or for-profits?
Wells: I think that for most issues in any kind of organization, the CEO and the CFO need to be involved – maybe one more from a strategic perspective, one more from a financial perspective – but certainly they need to work closely together. It’s nice to bounce ideas off one another, and it also helps sometimes if the two don’t necessarily have the same perspective on everything. For example, if one is a bit more big picture and the other is a little bit more detailed. Certainly, you might get the best of both perspectives that way when you work together.
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