There are several factors to consider when deciding how to best manage your organization’s financial operations. What are your goals? What skills and resources do your staff, board members, or other stakeholders bring to your non-profit organization (NPO)? Is your organization growing at a rapid pace? Are budgeting and planning increasing in importance?
Answering those questions will help you determine your organization's needs and better understand which approach to financial oversight is required for high financial prudence and regulatory compliance. Bookkeeping is (or should be) table stakes. You need someone to manage your financial records and regularly ensure accurate and transparent financial reporting. Do you need to approach your financial management from a more strategic point of view - thinking of the big picture, or are the day-to-day bookkeeping tasks and outputs enough?
What are Controllership Services
Controllership services focus on helping organizations effectively manage their financial and accounting operations. They can be delivered by in-house professionals or an external firm in full-time or part-time roles. Controllership services may include financial planning and analysis, budgeting, financial reporting, design and implementation of internal controls, and compliance with financial regulations. Controllership services aim to provide organizations with accurate and timely financial information, ensure that financial operations are managed effectively, and provide financial guidance to senior leadership and the board of directors. These services assist NPOs with the following specifics.
1. Financial Planning and Budgeting
- Strategic Budget Development: Controllers help create detailed budgets aligned with the organization's strategic goals. This includes forecasting revenue from donations, grants, and fundraising events and planning for operational expenses.
- Resource Allocation: They ensure funds are allocated efficiently across programs and services, maximizing the impact of every dollar spent.
- Cash Flow Management: Controllers monitor cash flow to maintain liquidity, ensuring the organization can meet its short-term obligations.
2. Financial Reporting and Analysis
- Accurate Financial Statements: Preparation of balance sheets, income statements, and cash flow statements that reflect the organization's financial health.
- Donor Reporting: Providing detailed reports to donors and grantmakers on how their contributions are utilized, enhancing transparency and trust.
- Performance Metrics: Analyzing financial data to assess program efficiency and organizational effectiveness, informing strategic decisions.
3. Regulatory Compliance
- Tax Compliance: Ensuring adherence to tax regulations specific to non-profits, such as filing Form T3010 in Canada or Form 990 in the United States.
- Legal Requirements: Staying updated on laws affecting non-profit operations, including charitable solicitation laws and employment regulations.
- Audit Preparation: Coordinating annual audits by preparing necessary documentation and addressing auditor inquiries.
4. Internal Controls and Risk Management
- Policy Development: Establishing financial policies and procedures to safeguard assets, including approval processes, expense reimbursement, and procurement policies.
- Fraud Prevention: Implementing checks and balances to prevent misappropriation of funds, such as segregation of duties and regular reconciliations.
- Risk Assessment: Identifying financial risks and developing strategies to mitigate them, including insurance coverage and contingency planning.
5. Financial Systems Implementation
- Technology Solutions: Selecting and implementing accounting software tailored to non-profit needs, facilitating efficient financial management.
- Process Improvement: Streamlining financial processes to reduce errors and improve productivity, such as automating invoice processing or integrating donor management systems.
6. Grant Management
- Grant Compliance: Monitoring grant agreements to ensure compliance with funding requirements, including allowable expenses and reporting deadlines.
- Financial Tracking: Allocating and tracking funds for specific projects or programs, ensuring accurate reporting to grantors.
7. Strategic Financial Advisory
- Board Support: Providing financial insights to the board of directors, aiding in governance and strategic planning.
- Financial Sustainability: Advising on strategies to diversify revenue streams, manage investments, or establish endowments.
- Cost-Benefit Analysis: Evaluating potential projects or initiatives from a financial perspective to inform decision-making.
8. Donor Relations and Fundraising Support
- Financial Transparency: Enhancing donor confidence by maintaining transparent financial practices and reporting.
- Fundraising Analytics: Analyzing fundraising activities to identify trends, donor retention rates, and areas for improvement.
- Campaign Budgeting: Assisting in budgeting for fundraising campaigns and events to ensure cost-effectiveness.
9. Training and Capacity Building
- Staff Education: Training non-financial staff on budgeting, financial policies, and compliance requirements.
- Financial Literacy: Promoting a culture of financial responsibility within the organization, ensuring everyone understands the importance of financial management.
Why is a Controller Important to a Nonprofit
Controllers play an essential role in NPOs because they manage the NPO's financial affairs - which can be more complex in the nonprofit world. The controller is responsible for ensuring that the organization's financial records are accurate and up-to-date and for preparing financial reports to make informed decisions about the organization's operations. The controller is also responsible for developing and implementing financial policies and procedures and ensuring the organization complies with all relevant financial laws and regulations.
In some cases, the controller may also manage the organization's budget, forecast future financial needs, and identify areas where the organization can save money. The controller plays a crucial role in helping the nonprofit organization achieve its financial goals and fulfill its mission.
How Can a Controller Help a Nonprofit Improve
A controller can help a nonprofit improve by ensuring that the financial information used to make business decisions is accurate and current and by providing financial analyses and insights to help the organization make more informed decisions. In addition, the controller may identify areas where the organization can improve its financial processes and controls, helping to reduce costs and increase efficiency. For many nonprofit leaders, having access to Controllership services and personnel expands their skill sets and empowers them to operate more strategically within their organization and stakeholder group.
According to Brandon Yan, Executive Director of Out On Screen, who outsources their Controllership services to Enkel, “...not only do we get deep expertise in the nonprofit sector, but the reporting and support I get is helping me be a better ED to both our staff and Board of Directors.”
Adding Controllership Services at Your Nonprofit
While there is little doubt that the Controller role's strategic oversight and financial insights can add tremendous value to a nonprofit, the question becomes, “how best to acquire these skills at your organization?” You might follow the following steps:
Assess your organization's needs: Evaluate your current financial management processes and identify areas where additional controllership services would be beneficial. Identify the specific tasks, responsibilities, and expertise required for effective controllership.
Determine resource availability: Assess the resources available within your organization, including staff and Board members with financial expertise or the capacity to hire new personnel. Consider whether you have the budget to support adding a controller or need to explore alternative options like outsourcing to firms that deliver Controllership as a service.
Hire or designate a controller: If your organization has the resources, you can hire or outsource a controller with experience in nonprofit financial management. Look for candidates or firms with strong financial planning, analysis, compliance, and strategic decision-making backgrounds. Alternatively, if you have an existing staff member with the necessary skills and experience, you can designate them as the controller.
Define the scope of controllership services: Clearly outline the responsibilities and tasks the controller will handle and ensure there is little to no overlap with other staff or accounting partners. This may include budgeting, financial analysis, compliance management, and oversight of financial operations. Determine the level of involvement and authority the controller will have in decision-making processes.
Establish internal controls: Work with the controller to establish and enhance internal controls to ensure financial information's accuracy, integrity, and security. This may involve implementing procedures for financial reporting, approval processes, segregation of duties, and monitoring of financial activities.
Collaborate with stakeholders: Engage with the board of directors, senior management, and other key stakeholders to communicate the addition of controllership services. Highlight the benefits of enhanced financial oversight, strategic decision-making, and improved financial reporting.
Continuously evaluate and refine: Regularly assess the effectiveness of the controllership services and make necessary adjustments. Seek feedback from staff members, the board of directors, and other stakeholders to ensure the controller's role stays aligned with the organization's needs and objectives.
It's important to note that the specific approach may vary depending on the size and complexity of your nonprofit organization. Should you hire someone on staff? Should you hire a third-party provider? Is it a full-time or part-time role? What should it cost, and how much can you afford to spend? Today, it’s more common than ever for nonprofits to outsource core back-office functions, including Controllership services.
According to Rebecca Pauls, Executive Director at PLAN (Planned Lifetime Advocacy Network), “I think outsourcing accounting services is the way of the future for nonprofits. The philanthropic world is reluctant to fund costly operations and administration because it takes dollars away from the core mission. Not only am I getting great, multi-disciplinary accounting services, but my costs to get that level of service are way lower than they would be if I had to hire all of the people to do the work, and then manage them day-to-day.”
Signs Your Nonprofit is Ready for Controllership Support
Here are a few telltale signs that now might be the right time to add Controllership services at your nonprofit:
- You have an annual operating budget of $500k or more
- You are having a hard time figuring out if you are on budget
- There are opportunities that you can't commit to because you don't have the right visibility on your organization's finances
- You are not meeting your obligations with the CRA
- You need longer-term planning for the organization
- You’re struggling to stay on top of compliance and regulatory requirements with existing resources/processes
Effective controllership ensures financial integrity, regulatory compliance, and informed decision-making that leads to credibility, sustainability, and the ability to fulfill your mission. Consulting with financial professionals or seeking guidance from nonprofit management organizations can provide valuable insights and support in implementing controllership services effectively.
At Enkel, we specialize in all things “back office,” including Controllership as a service. With over 100 nonprofit clients, we’ve developed a deep understanding of the challenges and opportunities facing Canadian NPOs and have built a proven methodology for managing their financial and accounting operations.
