A Financial (Leadership) Statement

By: Reyma McCoy McDeid

How confronting systemic barriers will result in more young and/or multiply marginalized nonprofit professionals attaining executive and board positions in the nonprofit sector.

There are many stakeholders in the nonprofit sector who believe that, in order for an individual to be considered for either an executive director, CEO, or board treasurer position within an organization, they must be a CPA, have an MBA, and be in possession of a resume that includes at least a dozen years of financial management.

I do not subscribe to this opinion.

In fact, substantial evidence points the fact that placing requirements onto positions such as the ones mentioned above that pertain to finance-specific academic credentials can actually be discriminatory against multiply marginalized nonprofit professionals who may have experienced barriers to participating in financial management coursework or been excluded from consideration for employment in positions that could afford them resume-enhancing financial management skills development.

This is deeply problematic because being a competent and effective executive director or board treasurer should be contingent on how well a person in such a position engages in financial LEADERSHIP, not MANAGEMENT.  This disparity especially pertains to young nonprofit professionals, particularly those who are also multiply marginalized and is, in addition to a brief demystifying overview of how to engage in financial leadership, the subject of this overview.

But first, an introduction: my name is Reyma McCoy McDeid and, in addition to being the board treasurer for the Autism Self Advocacy Network, the National Council on Independent Living, and the Iowa Coalition for Collective Change, I am also the executive director for the Central Iowa Center for Independent Living in Des Moines, IA.  I am a forty-year-old Black woman on the autism spectrum.  I have a Master’s in Nonprofit Administration and have worked in the nonprofit sector for twenty years, with ten of those years being executive-level roles.  During my professional tenure, I have, through observation of organizations that are not only poorly financially managed, but also poorly financially led.  The two tend to go hand-in-hand and an essential component of a strong financial leader is identifying the warning signs:

  • Reports are prepared by a non-CPA and consistently contain errors that the organization is depending on the board treasurer to discover
  • The organization has a budget of less than two million dollars and a full-time accountant on staff instead of outsourcing financial management to a third party CPA firm- particularly if the staff accountant is not a CPA, themselves
  • The executive director/CEO and/or treasurer is not reviewing financial reports until board meetings
  • Independent, third-party financial audits are not conducted on a regular basis- or ever
  • Policies and procedures are out-of-date and the organization is reliant on unwritten financial management/leadership guidelines
  • If a finance committee is a component of an organization and it is comprised primarily of white, cis, middle-aged people and, when opportunity arises to recruit new members, too much emphasis is placed upon finding candidates with finance backgrounds and dismissing those who have interest, but lack the credentials and experience

Effective financial leadership goes hand-in-hand with effective financial management.  And organizations that engage in healthy financial management practices do so through the retention of an impartial, third party (for smaller nonprofits) CPA support, NOT via an executive director/CEO- and certainly not via a volunteer board treasurer, committee member.

That said, it is essential that executive staff, board treasurers, and finance committee members be able to gauge the financial health of an organization- literacy of financial reports is essential to that.

In the video that accompanies this overview, I elaborate on the basics of financial reports: the annual budget, the balance sheet (or statement of financial position), and profit/loss margin report.  These documents, when prepared by a competent CPA via Quickbooks, are meant to be simple to read tools that help stakeholders to clearly understand where an organization stands- not only financially, but as a whole.

To reiterate what I discuss in the video: a budget is like a panoramic shot of an organization since it is drafted annually.  Balance sheets and profit/loss statements SHOULD be able to be lined up to look like that panoramic shot divided into twelve panels.  Of course, expenses can vary on a monthly basis, so this is just a general rule.  However, financial leaders can identify budget line items that are nearing- or surpassing- the 100% expenditure allotted in the interest of asking questions regarding what is occurring within the organization that is leading to spending that occurring at an unanticipated rate and brainstorm alternative means for the organization to get a particular need met in a manner that does not exceed what the budget stipulates.

A pertinent example of this is when an organization is in need of unplanned legal support- while the organization can consider shifting and amending a budget to cover the fees, those within the organization who operate in financial leadership roles can also explore seeking out resource development opportunities- or even the in-kind (donation of goods or services instead of money) assistance of a lawyer.

To reiterate: preparing these reports is financial MANAGEMENT.  Interpreting and using the information derived from them is financial LEADERSHIP.  Understanding the discrepancy between the two activities reduces barriers to young and/or multiply marginalized nonprofit professionals in being considered for positions that pertain to finance within an organization.

In summary, financial leadership is all about knowing how to read- and tell- the story of an organization by looking at its numbers.  It’s also about ensuring that the organization has pertinent and up-to-date policies and procedures in place, as they pertain to finances.

Ultimately, it is my hope that readers of this overview (and viewers of the video) step away from this with a desire to either support an organization by engaging with its finances, no matter one’s credentials or, for those already in finance-specific roles, a willingness to confront the barriers to participation in leadership roles that are rooted in the implementation of arbitrary qualifications that are tied into the systemic exclusion of historically underrepresented nonprofit professionals in financial leadership positions.

For more information on how to address systemic barriers within the nonprofit/social services/political spheres please connect with me at www.reyma.org.