Not Your Average Joe

Not Your Average Joe
As Nonprofit Board Members, CPAs Bring Wealth of Knowledge and Skill

In this age of increased emphasis on governance oversight, some experts fear too many nonprofit boards lack the financial sophistication necessary to meet the new and improved bar of accountability. Enter the certified public accountant as an ideal candidate for nonprofit board membership.

“It’s an issue that many board members simply don’t understand how to read nonprofit financial statements,” says Carolyn Patterson, board chair of the Alliance for Nonprofit Governance (ANG). “That would be one of the great virtues of having more accountants involved in leadership in the nonprofit sector, because they can help in an area where there is a real deficit.”

As president of a 140-member alliance, which includes the New York State Society of CPAs, Patterson says the demand for CPAs to sit on the boards of nonprofits is very high. The slew of corporate scandals in the for-profit sector has clearly impressed upon nonprofit boards the need for strong governance. However, the recognition, though welcome, is unable to conceal the dearth of board members who can file a Form 990—something that, Patterson says, “may not be quite so simple for the average Joe.”

CPAs can of course do this and many other things. Though conflict of interest concerns prevent CPA board members from actually performing an audit for the nonprofit they serve, CPA board members can still review the audit and explain its significance to fellow members in layman’s terms. They can also help ensure that the organization has appropriate internal controls in place.

In addition to their financial expertise, Patterson points out that CPAs have strong ties to the business community, which is an asset for the nonprofits they serve. These trusted business relations are a great vehicle through which CPAs can persuade their professional acquaintances to also get involved with nonprofits, through volunteer service or financial support. Encouraging qualified individuals to participate in nonprofit leadership is central to the ANG’s primary mission of improving the effectiveness of nonprofit boards, Patterson said.

Benefits of Getting Involved

According to Patterson, board service can be very beneficial to those who participate.

For starters, sitting on a board is a great way to serve the community. For some, Patterson notes, it’s a satisfying respite from the jobs that they perform each day.

“There are people who just like to do different things when they volunteer than at work,” Patterson said.

Membership on the board of a lower-profile nonprofit can provide more junior CPAs with wonderful leadership training. Fellow board members often seek out their financial expertise, Patterson said.

The experience can also provide board members with valuable insight into the nonprofit world, and is a networking tool that enables them to make new contacts.

But even if board service is impracticable, Patterson encourages CPAs to consider other ways of serving. One avenue is pro bono work.

“There is a desperate need for pro bono help on the part of a number of smaller, underfunded organizations,” Patterson said.
Though this type of pro bono volunteerism is not an official part of ANG’s charge, Patterson said ANG’s training seminars and resource materials can be useful for individuals who would like to work with nonprofits in a capacity other than through board service. ANG’s training and education about the responsibilities on nonprofit boards are also available to paid CPAs who want to become more knowledgeable about their nonprofit clients.

CPAs, Patterson observed, are in a “wonderful position” to inform boards about their financial and fiduciary responsibilities and to make suggestions based on their observations.

“It’s a question of how you can expand on your role not only as trusted accounting adviser, but also as a person who cares about the viability of the organization and the good of the community,” she said.

Implications of S4836-A

The skills and attributes that a CPA can bring to the nonprofit board table could become even more significant if New York State Attorney General Eliot Spitzer’s proposed legislation to impose Sarbanes-Oxley–style regulations on the not-for-profit community gains momentum. Part of the bill, S4836-A, would require the president or CEO and the treasurer or CFO of nonprofits with annual gross revenues of at least $1 million, or assets of at least $3 million, to certify the accuracy and validity of the annual report as well as the adequacy of the internal controls.

As reported in the August 2003 edition of The Trusted Professional, several CPAs and experts interviewed believe these and other stringent reporting standards could severely strain the resources and capabilities of nonprofit organizations, in particular those that lack the staff and board members with the financial expertise to readily meet the bill’s requirements, forcing them to seek outside assistance.

“How does a board president or an executive who is a bachelor-level social worker attest that their internal controls are up to snuff?” Doug Sauer, executive director for the Council of Community Services, said when interviewed last fall. “That forces digging up more money, either for staff to do it, or for an auditor.”

Beyond the added expenses and burdens of meeting new statutory obligations, some feel the proposed legislation could also harm board volunteerism. If the extra time that could be involved doesn’t discourage them, Syracuse CPA Mark Hettler, whose firm has 100 nonprofit clients, believes that the intimidating aura of the bill’s attestation duties and their associated exposure risks could have a daunting effect on volunteers who might otherwise serve on a board of directors.

According to Patterson, the ANG doesn’t have a formal position on S4836-A, but the Manhattan-based organization is certainly familiar with the apprehension about the bill and remains in contact with the New York State Charities Bureau of the attorney general’s office. Following a Sept. 24, 2003, ANG conference that Spitzer keynoted, the Alliance sent to him a summary of the major points that emerged from the event’s breakout session and discussions regarding the proposed legislation.

Among other items, the summary called for clarification of what actions would be necessary to meet the requirements of the bill, such as what a nonprofit would actually have to do to be in a position to certify to the adequacy of its internal controls.

Conference participants also expressed concerns over greater difficulty in board recruitment and added time and expenses. The summary also suggested that the resources required to enforce the proposals could be better spent going after nonprofits that abuse the system.

The report further expressed ANG’s appreciation of Spitzer’s ability to raise awareness of financial accountability and good governance for both the nonprofit and for-profit sectors. Patterson added that some Alliance members feel the legislation could also be helpful in restoring the credibility of the nonprofit community with donors, as some nonprofits have struggled to raise money in the wake of highly publicized issues for nonprofits following Sept. 11, 2001, and the many corporate scandals of the past two years.

To find out more about nonprofit boards or getting involved with the ANG, visit www.angonline.org.

Editor’s Note: In the next issue, The Trusted Professional will include a follow-up article on training and placement programs for volunteers and on nonprofit boards’ roles and responsibilities, as suggested by the ANG.