The Dual Purposes of Accounting and Fundraising Software
Accounting software and fundraising software are both integral components of success in a nonprofit. And they each serve a unique purpose.
How Fundraisers and Accountants Can Better Communicate
Bridging this communication gap can help your organization ensure every dollar raised is used effectively.
How Nonprofits Can Choose the Right Banking Partner
The right nonprofit banking partner may not be the first thought that comes to mind, but is very important for the organization.
Donation vs. Loan: Can a Foundation Give Money to a Nonprofit?
Donation vs. Loan: What’s the difference? In a nonprofit knowing how these two differ can be an important distinction.
Nonprofit Fundraising Strategies to Consider
Nonprofit fundraising strategies are essential for the health of an organization. Read this article to see some of the stratgies.
Nine Fundraising ideas for nonprofits
Fundraising ideas for nonprofits is a fun topic to think about when you’re feeling the need to generate money into your organization.
How to Comply with Accounting Standards for Nonprofits
Accounting standards for nonprofits are probably not the first thing you think about, but are crucial for your organization to succeed.
Why Your Church Shouldn’t Take Pass-Through Gifts
Pass-through gifts can seem exciting for your church, but make sure you understand the full legal requirements involved.
Understanding the Job of a Nonprofit Operations Manager
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There are more than 1.54 million nonprofits globally. To ensure that a nonprofit runs efficiently, several people work behind the scenes to make things much easier, and one of those people is the operations manager.
The operations manager might be the secret weapon of the most successful nonprofits we know. By taking charge of getting things done, an operations manager helps executive directors focus their energy on the strategic big-picture that will move their mission forward.
If you’re looking to enter the world of nonprofit organizations with a background in operations management, you might be wondering how your skills can help you. Or, if you’re a nonprofit founder or an executive director, you might be wondering how an operations manager can help make your organization ruthlessly efficient and highly effective.
Read on now to find out what the job description of a nonprofit operations manager might look like.
What does an operations manager do?
A nonprofit operations manager, or director of operations for a nonprofit, is responsible for the day-to-day operations of the organization.
They oversee the administrative staff and make sure that the office runs smoothly. They also develop and implement operational procedures and systems and manage budgets and financial reports. In short, they ensure that the nonprofit runs like a well-oiled machine!
Now, if that sounds like they do a bit of everything, it’s because that’s true!
An operations manager, by definition, is a manager. They don’t necessarily need to be an expert at any one thing. Still, they need to be able to be proficient enough at many things to manage a highly productive team to get results for their organization.
Here’s how Krysta Grangeno described her day-to-day tasks in operations for a nonprofit organization:
Who reports to the operations manager?
And who do they report to?
It depends on the organization, but generally, any department is responsible for the day-to-day operations of the entity. That may include
- Finance Department
- Fundraising Department
- Program directors
- Human Resources
- Information Technology
- And more!
You can see that, depending on the size and structure of your organization, the ops manager will have to oversee a large number of departments.
In turn, your operations manager will either report to the Director of Operations, the Chief Operating Officer (COO), or directly to the CEO or Executive Director. They may also have some direct interaction with the Board of Directors, although the board isn’t technically their supervisor.
What are the job responsibilities of a nonprofit operations manager?
As mentioned above, their primary role is to supervise and organize the efforts of the departments under their responsibility. Here’s a breakdown of what duties a nonprofit operations manager will be expected to handle:
Ensure the Office Runs Smoothly
The administrative staff is responsible for keeping the office organized and running smoothly on a day-to-day basis. The operations manager will make sure that they have everything they need to do their job effectively and that they are meeting all deadlines.
An operations manager must be exceptionally well organized, as they’ll be responsible for creating systems and processes that ensure every department is meeting its expectations. Often, they’ll also need to be aware of all legal or reporting requirements that the organization may have in executing their programs.
Implement Budgets and Oversee Financial Strategy
The operations manager will be responsible for spearheading the budgeting process for the organization and ensuring that the accounting department delivers timely and accurate financial statements for the board of directors or other stakeholders. You’ll also need to be intimately familiar with these statements as well and review them proactively to identify potential issues before they become problems.
As the operations manager, part of your role is to ensure that the financial department runs effectively. This includes ensuring that checks and balances are in place and that employees in the financial department are adequately trained to do their jobs.
The operations manager must also be acutely in-tune with the organization’s budget. Because their role is so wide-reaching, they need to be aware of how shortfalls in one area (like fundraising) may impact the ability to execute in others (like executing programs or meeting payroll).
That doesn’t mean that the operations manager needs to be an accountant. Generally, they’ll oversee the accounting team or work as a liaison with an outsourced accounting firm. But ultimately, they are responsible for ensuring that the accounting work is done correctly and on time.
Supervise Human Resources
Ideally, the operations manager’s role in human resources is limited to supervision, but that’s not always the case. In some smaller nonprofits, HR may get put completely onto the ops manager’s plate, but we’d recommend against it.
Human resources is a specialized field that requires experience and specific knowledge. You need to comply with employment law, collect the correct information, withhold taxes appropriately, and onboard and train new employees.
A knowledgeable HR professional should establish the policies and procedures for the human resources department, but many nonprofits can’t afford a full-time HR coordinator. That’s why many nonprofits choose to outsource their HR to external firms as well.
Even if you’re working with an external firm, the operations manager will probably need to be involved in many day-to-day items related to HR—like searching for employees to hire, interviewing, training, counseling, and terminating employees.
Manage Technology Integration
Technology is a massive part of the work that nonprofits do. Almost every person in your organization depends on technology. And the networks and systems that keep those people aligned take organization, security, and maintenance.
Depending on your mission, you may even be dealing with highly sensitive personal information that you have a legal responsibility to protect, even in digital form. As the operations manager, you’ve got to make sure the appropriate technology systems and controls are implemented throughout the business.
Not utilizing the proper systems could mean the loss of crucial data needed in the future. Or it could mean a crumbling IT infrastructure that can’t support the business model being implemented.
Nonprofits often don’t need, or can’t afford, an internal IT department. And relying on someone’s husband or nephew to fix problems isn’t an acceptable solution. Instead, many organizations outsource their IT department to a service provider. In this case, it’s the operations manager’s job to liaison with the IT provider to ensure the office gets the support it requires.
Ensure Compliance and Organization
Records need to be kept in order within any business. There are several reasons for this, but compliance is an important one for many nonprofits.
Your organization needs to comply with accounting regulations, legal restrictions, employment rules, and other industry-specific regulations. And the operations manager is ultimately responsible for ensuring that the company is prepared to prove its compliance when audited.
Not only does record organization help when something needs to be located, but it also speeds up business efficiency. Instead of wasting time hunting for something, it will be easy to access the record database. All you’ve got to do is type in some information and locate the data needed.
How to evaluate performance and further development
Whether you’re building the leadership team to include an operations roles, or you’re currently in an operational leadership role — it’s important to regularly evaluate performance as well as work on developing to further improve your work.
If you’re evaluating your ideal candidate, after they’ve been in the position for a certain period (a year, for example), it’s important to compare their achievements to the job description. For self-evaluations, read resources (like this one) to find usable knowledge to help improve your performance.
Key areas to concentrate your efforts include:
- Purposeful communication: In operations, too much communication is nearly as problematic as not enough. What you say, how you say it, must be as useful as possible. That’s where developing purposeful communication tactics come in handy.
- Organizational processes: As someone who ensures compliance and handles intricate areas of a nonprofit, the ability to develop processes takes precedence over nearly every other aspect of your role.
- Continuing certifications: There are a number of nonprofit certificate programs available for leadership teams. Those instructing the programs often have robust experience in the sector. Taking these programs helps you find the additional knowledge to improve your performance.
A Note on Outsourcing Professional Services:
We’ve mentioned outsourcing a few times here, related explicitly to bookkeeping/accounting, human resources, and information technology. That’s because this is an emerging trend we see gaining steam in the industry.
Traditionally, many nonprofits had a scrappy, do-it-all mentality when it came to these areas. So, an operations manager or financial director frequently ended up having responsibility for everything— from making bank deposits and firing employees to troubleshooting network issues.
But this approach causes more problems than it solves. Having trained professionals handling complex tasks that are outside their area of expertise is hugely inefficient. And it’s just asking for mistakes.
Yet most organizations can’t afford a full-time accountant, HR coordinator, and IT professional. And that’s where the operations manager comes in.
When organizations outsource these 3 functions and have the operations manager work directly with each team, they can get the full professional support of each team without paying a full-time salary. Often, these teams are more talented and efficient than an internal team member would be.
We believe this is the operational business model of the future for successful mid-sized nonprofits in the $1M to $15M/year range. If you’d like to talk to us about outsourcing your bookkeeping and accounting to The Charity CFO, send us a message to set up a free consultation.
What Qualities Make a Good Operations Manager?
Let’s turn to Krysta again, to offer a first-hand perspective on what skills an operations manager needs:
What A Nonprofit Operations Manager Does: A Recap
A nonprofit operations manager has many responsibilities, but their primary role is to coordinate all the various departments to ensure that business runs smoothly.
The operations manager will oversee the finance department, human resources, information technology, programs, fundraising, and more. And they must grasp how each department impacts the other to ensure that the entire organization runs harmoniously.
By doing their job well and assuming responsibility, they free up each department to focus on what they do best, rather than overlapping tasks or getting tied up in work that’s unrelated to their department. They also help free up the directors to focus on strategy rather than the day-to-day minutiae of each department.
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How Do Nonprofits Make Money?
You need money to carry out your mission. But how do nonprofits make money anyway? We’ll walk you through 8 popular money-making strategies.
Financial Oversight Guidelines for Nonprofit Boards
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Private Foundation vs. Public Charity: What’s the Difference?
What’s the difference between a public foundation vs. private charity? Which one is better for your needs? Find out in this explainer.
Is Your Nonprofit Ready For Federal Grant Funding?
Federal grant funding may seem like a great way to grow your mission. But if you’re not ready, your dream can become a nightmare. Find out if you’re ready for federal funds.
Cryptocurrency for Nonprofits: 6 Things You Need to Know
Nonprofits accepted over $300M in cryptocurrency donations in 2021. If you don’t know why cryptocurrency for nonprofits matters, start right here.
Nonprofit Audit Requirements: Do You Need An Audit?
Are you clear on the nonprofit audit requirements for your organization?
Contrary to what many people envision, a nonprofit audit doesn’t usually start with a letter from the IRS. Instead, an independent nonprofit audit is something you choose to build trust in your nonprofit organization.
In fact, the IRS doesn’t issue requirements for nonprofits to be audited, but other federal and state agencies do in some circumstances.
Plus, many grantmakers, foundations, lenders, and donors will require an independent audit before giving money to your nonprofit organization.
An audit can be a critical step for a growing nonprofit that needs to raise increasing amounts of funds. But it’s expensive. And time-consuming. So it’s not always a wise investment for some smaller nonprofits.
In this article, we’ll take a look at what an independent financial audit is and when your nonprofit might need one. And we’ll also look at your less-expensive alternatives for establishing financial credibility with your stakeholders.
What is a nonprofit financial audit?
A nonprofit financial audit is an independent examination of the accuracy of your accounting records, financial statements, and internal controls.
It confirms your compliance with federal grant management standards. And many federal and state agencies require audits, depending your organization’s fundraising, size, and spending.
(For example, 26 states require an audit before a nonprofit can earn charitable registration — necessary for in-state fundraising. And, the Office of Management and Budget requires an audit when a nonprofit spends more than $750,000 in federal funds in a year through the end of 2024. Starting in 2025, the new threshold will increase to $1,000,000.)
When you pass the audit, you’ll receive a clean bill of health from your auditor and a professional opinion stating the accuracy and validity of your accounting records. It assures outside observers that “the organization’s financial records meet generally accepted accounting principles.”
Bottom line? An audit shows your organization is trustworthy, compliant, and well-managed.
And that inspires trust and confidence among potential funders, banks, and other potential partners.
What a nonprofit financial audit is NOT:
First, this isn’t the same as an IRS audit–it’s not an “I’m being audited!” situation.
Instead, it is a decision to take proactive ownership of your organization’s financial health, transparency, and validity by hiring a professional to examine your books.
It’s also not a compilation of your financial statements, your financial strategy, or a report of financial viability. Those are up to you and your in-house or outsourced accounting team.
What are the nonprofit audit requirements? And is your organization required to have one?
There are no hard-and-fast rules for when you need to conduct an audit. But here are some of the common external triggers that may require you to conduct an independent audit:
✔️ When you spend over $500,000 per year.
Nonprofits that spend $500,000 a year are typically required to do an annual audit (but this varies by state, so check your state’s requirements)
✔️ When it is in your bylaws.
Check your company’s founding documents. The founders may have stated the organization would complete annual audits.
✔️ When you receive federal funding.
Organizations that receive more than $750,000 in federal funding may be required to complete an audit.
✔️ When you want to get serious about grant funding.
Many grants require an audit (not a review or compilation) because it provides an opinion of assurance.
✔️ When you want to apply for a loan.
Many banks will ask for audited financials as a prerequisite for lending you money.
Some internal changes may also trigger an audit:
- Changes in services, programs, or leadership
- Acquiring, merging with, or losing a partner organization
- Shifting debt, leases, or contracts
The benefits of an independent financial audit for nonprofits:
No other report, review, or statement inspires more confidence than an audit. Which makes it easier for you to attract larger donations, apply for grant funds, and access lending facilities.
Because it’s a universal indicator that your organization takes fiscal responsibility seriously, it’s impact goes beyond fundraising. An audit is also a symbol to the media, volunteers, watchdog groups, and the community you serve.
Internally, it provides valuable oversight for your bookkeeper or accounting team. And it gives the board and leadership the peace of mind that your books are accurate and reliable.
All in all, a financial audit helps you hold your organization accountable to your mission, build trust with the outside world, and access money to pursue your goals.
Less expensive alternatives to a nonprofit audit:
Because a nonprofit audit can easily cost $10,000+, not every nonprofit can afford one.
If you need to build confidence but aren’t ready to invest in an audit, you have two main alternatives: a financial review and a financial compilation.
We’ll look at the differences between your three options here. But the primary difference between a financial review, a financial compilation, and an audit is the level of “assurance” they provide.
What is assurance?
Assurance is an opinion given by a CPA on the accuracy of an organization’s financial statements. It shows whether or not your accounting records are accurate per generally accepted accounting principles (GAAP), in the auditor’s professional judgment.
An audit provides reasonable assurance, a review offers limited assurance (but not a professional opinion), and a compilation offers zero assurance.
Nonprofit Audit Alternative #1: Financial Review
In a Financial Review, an independent auditor reviews your financial statements to determine if they’re consistent with generally accepted accounting principles (GAAP).
It offers limited assurance that no significant modifications need to be made. While it does evaluate the accuracy of financial records, no professional opinion is given on that accuracy. A financial review typically costs 40-60% less than an audit.
Despite the lower level of assurance, a financial review may be enough for some grantmakers to approve your organization. Even if a grant asks for audited financials, sometimes that isn’t a deal-breaker if you have a financial review and meet their other criteria.
But without at least a financial review, you’re probably out of luck when it comes to most grants.
Nonprofit Audit Alternative #2: Financial Compilation
A compilation simply organizes your financial records for a specific period in a GAAP-acceptable format without evaluating the accuracy of those records.
It’s a cost-effective option for organizations that need a GAAP report. But it offers zero assurance as to the accuracy of your books.
A compilation can help your nonprofit identify obvious errors by getting their books into an organized format. It adds primary value and serves owners, board members, creditors, and financial institutions. A compilation is your least expensive and time-consuming option.
Not sure if you meet the requirements for a nonprofit audit? We can help you figure that out.
The Charity CFO doesn’t conduct nonprofit audits. But we have 5 former nonprofit auditors on our team, so we know exactly how to prepare your organization to pass your audit the first time.
Even better, with our nonprofit bookkeeping and accounting services, we’ll ensure your books are always audit-ready. Plus, give you timely financial reports and expert advice that help you carry out your mission.
We’ll help clean up your books and implement state-of-the-art systems to save you time and bring your accounting department into the 21st century.
We’re honored that over 120 nonprofits trust us with their bookkeeping and accounting. And we’d be excited to show you how we can help your organization meet your goals.
