Guidestar
James Lum.
Sure, you can donate to a group that claims to support a cause that is close to your heart, but there is no guarantee that the agency you are supporting is using the funds it collects responsibly.
That's where Guidestar comes in. The company tracks every IRS-registered nonprofit in the US.
The social-good platform provides users with information about each program's mission, legitimacy, impact, reputation, finances, programs, transparency, governance, and more.
Business Insider sat down with Guidestar
Business Insider: How is a CFO role different at a nonprofit compared to a for-profit company?
James Lum: The biggest difference is the importance of focusing on a mission. Every company has a central reason for being. It's even more important in the nonprofit sector. In fact, it can sometimes blind the organization from other important metrics like financial performance.
What is your day-to-day work like at as a nonprofit CFO?
JL: I spend a lot of time juggling different tasks. I will typically work with our marketing and sales groups to find the next opportunity. I help them assess their plans and spend a good amount of time finding better ways for my teams to perform.
Much of the job lands squarely within the typical CFO realm. I look at daily metrics such as sales and collections, and I examine general daily tasks that are being completed or that need to be finished.
I definitely think CFOs in nonprofits spend more time thinking about fundraising. I also manage marketing initiatives at Guidestar.
What are the main challenges for CFOs at nonprofits in today's market?
JL: Being relevant is often a big question. Nonprofits are under a lot of pressure right now. There is an increasing focus on showing the impact of your mission statement. People are increasingly aware of the importance of impact and want to see it being quantified and tracked over time.
Nonprofits are now competing with corporate- and social-responsibility programs, and even startups that are all mixing business and mission. Nonprofits need to show why they are the best at accomplishing a specific goal and with specific types of impact.
Are companies and nonprofits being more transparent with how they raise funds and where those funds go?
JL: I don't think there is good transparency. Is it better than what we have had in the past? Certainly. Is it where we want it to be? Not at all. Not for corporate-social-responsibility programs, not for nonprofit financials or operations, not for the whole sector.
The entire sector is full of vanity metrics. It's what you want to put out. There is no real or strenuous requirement to put things out that are not flattering. Everything that is put out there for the most part is not questioned.
Organizations are being more transparent, but there simply isn't a lot of accountability being examined by members of the press, analysts, and outside investors.
How can more accountability be achieved?
JL: Right now we rely on IRS 990 tax filings to examine a company's current financial situation. Those forms are over a year old. It's not timely. If you were making equity market decisions with year-old data what would happen? Wall Street would fall apart, but that is fundamentally how nonprofits work.
Guidestar is personally doing impact calls, which are like earnings calls. Forty-five days after our quarter ends we report on financial and programmatic results.
During our calls potential investors have an opportunity to look at what we are doing right then. They can then ask questions and decide to if they want to work with Guidestar or donate to our cause.
I would love to see big nonprofits in the United States think about being more transparent and accountable in a more real-time fashion.
Do you think for-profits are becoming better at offering transparency?
JL: They are doing a better job and they are seizing the momentum from nonprofits and corporate-social-responsibility programs have really matured to a large degree.
There is better consistency in standardization amongst that group in how they want to go about industry best practices. They are definitely developing.
Things like SASB, the sustainability accounting standards board, and other impact-measure boards are all steps in the right direction at for-profit agencies.
It was a fragmented market for standards and metrics, and they are starting to come together.
What advice can you give to people who are trying to pick the right charity to support?
JL: I would recommend that they be as thoughtful as possible. It is always good to give with your heart. That is the way a majority of Americans give.
If you want to make an impact simply be thoughtful about what you think is important. Is it climate change, poverty, education? What social issue do you see as being the problem?
Do you want to reduce fossil-fuel usage? Then you should look for the metric that you think is most important and impactful when it comes to reducing fossil-fuel usage, and then you find the people who are looking into that direct impact.
You need to look for the outcome and not the output, and after you determine what the outcome is you can find the groups that are looking for the output.