Best in class
When Kenyan native Kamal Rajani FCCA came to Canada 11 years ago, he had no idea he would be devoting the next 10 years of his accounting career to conserving Canada’s wildlife and natural ecosystems.
Today, as CFO of the Nature Conservancy of Canada (NCC), Kamal has spearheaded many of the operational and strategic improvements that have won the organisation the tag of one of the best-run not-for-profits in the country for four years running.
Making the grade
NCC is one of the largest landowners in Canada with over one million hectares of land with a book value of over C$550m and other assets of over C$100m. It aims to protect areas of natural diversity by securing important land through its purchase, donation or other mechanisms, and then managing it for the long term. In 2013, it was one of only four not-for-profits to receive an overall rating of A+ in MoneySense magazine’s ranking of the top 100 charities in Canada – an endorsement of its programme efficiency, fundraising efficiency, governance effectiveness and reserves grade.
However, when Rajani joined the NCC finance team as a project accountant in July 2003, the picture wasn’t so rosy. As he explains, the organisation was going through some very difficult times, with the loss of financial leadership, cashflow stresses, confusing financials, a high-risk profile, and a lack of proper financial reporting.
He explains: ‘When I arrived at NCC, we had several big challenges. First, the CFO and the FD both decided to move on within my first five months there. We were also going through a much needed systems conversion, and were in the middle of a fundraising campaign. We also suffered from a lack of hedging strategy, resulting in a hit to the operating position. Since a significant portion of funding at the time came in fixed US dollar grants, the appreciating Canadian dollar made conservation delivery very challenging.
‘Accounting standards were not known or understood by many in the organisation and management, and the board spent an inordinate amount of time deciphering and analysing financial results. Also, the numbers were changing at the year end as accounting standards had not been applied consistently, putting NCC’s flow of grants at risk.’
Having access to financial management information would ultimately make or break the organisation. ‘For NCC ever to be a significant player in its sector, it is vital to have stability in fiscal management,’ Rajani says. ‘The board needed to concentrate on strategic decisions and not on accounting errors, interpretation of accounting standards or uncertainty of financial performance.’
NCC desperately needed a financial information system to meet differing reporting needs as well as to facilitate growth. Improving the financial and management reporting became Rajani’s top priority. It was at this point that he brought his international experience as an ACCA member to bear. His previous job, he says, was a great training ground for the challenges he would face at NCC.
Initially his NCC role involved fiscal management of a US-based funding programme, something Rajani was used to managing at his previous job in Kenya at the International School. The protocols were familiar, for a start. He continues: ‘There were also quite a few problems at the International School such as non-existent financial policies, financial planning or cashflow management, and it was five years behind in audits, so I was used to managing multiple financial challenges at once. My exposure to different types of accounting software and databases was also important in the systems conversion and implementation at NCC, as was my exposure to foreign exchange management.’
Once the financial and management reporting systems were in place at NCC, managers could make informed financial decisions that allowed them to focus on conservation and fundraising, says Rajani.
‘The processes were streamlined and controls established. Financial statements were provided in a consistent format, and were timely and accurate. This gave confidence to management, the audit committee, the board and ultimately donors.’
He highlights several key issues in a successful financial management transformation: ‘First, along with establishing critical success factors, it’s important to identify potential failure points. Second, because systems can be developed and implemented in many ways, there has to be user consideration. No project is simple and one must be prepared to look for temporary and permanent solutions.’
Keeping up the grades
As NCC builds its portfolio of conservation land across Canada, the finance function continues to evolve.
With growth, says Rajani, come new challenges. The organisation has spread across Canada and what used to be easily communicated in a small office now has to be documented and communicated to a wide variety of users. Also, now NCC is best in class for conservation delivery, it is often looked to for best practices in management and governance. ‘There is therefore an even greater need to ensure transparency in all respects,’ explains Rajani.
‘Finally, we’re reporting to a wider group of constituents as the donor base grows. Several years ago financial institutions did not lend to charities, mainly due to risk management. Today they do and one of the things they look at closely is fiscal management more than secured assets. It is increasingly important to provide outcome measures and we’re attempting to report environmental impacts versus fiscal management measures, which are short-term checks.’
At the end of the day, what inspires Rajani in his role? It’s really the same today as it was 10 years ago, he explains. ‘Having seen the depletion of habitat and mismanagement of wildlife in eastern Africa, it’s the protection of the environment I find the most gratifying. We are conserving natural habitat for both the present and the future.’
The diversity of the job and the challenges that come with it are a secondary reward. Each and every property or programme that is undertaken by NCC is different, he says. ‘Properties are actual acquisitions of interests of land; programmes vary from supporting another organisation or studies related to management of habitat conserved. Each has its own accounting challenge – the use of fund restrictions, requirements matching, cashflow management and reporting.
‘The fun part of being CFO at NCC is that it’s not simple straightforward accounting. In order to understand the numbers you have to get involved in how things are financed to make sure that planned conservation is done and the organisation’s reputation is upheld, particularly when it comes to contractual obligations. If you look at different funding sources and projects, there are so many combinations and permutations.
‘So these are many little pieces of the puzzle that you have to put together on a regular basis to achieve the whole picture. And at the end, the puzzle isn’t the same shape as it was in the beginning.’
Another area becoming increasingly important with growth is the treasury function, he says. Donors provide funds in advance for conservation work and NCC endows funds when it acquires properties.
The income from invested funds supports the future management of properties. With the recent recession and slow return to recovery, management and monitoring get intense, along with reporting. The endowed funds are for the long term, yet alarm bells ring when there are negative swings in investment values, he says.
The CFO role has evolved a fair bit as NCC has grown, Rajani explains. ‘As well as ensuring that the financial reporting is timely and accurate, I’m quite involved with the business side, dealing with funding programmes, particularly those that involve extensive reporting, and strategic management for the use of funds and risk management/cashflow around that.’
Meanwhile, the scope of financial reporting has expanded as a result of the changing nature of the projects that NCC is undertaking. About six years ago, it acquired a significant property in the western Canadian province of British Columbia. One of the plans for ensuring continued stewardship funding for the Darkwoods property was the sale of carbon credits, which for NCC was new ground.
‘After going through all the challenges relating to validation, NCC was able to sell the carbon but the accounting issues were unknown to management as the area is an emerging one,’ explains Rajani. ‘Once I had determined a solution in consultation with the external auditors and standard-setting accounting bodies, it was my job to explain the accounting treatment in a way that management and the board could understand and accept. The revenue will be recognised over 100 years but we had the cash!
Helping management through accounting standards and implementing secondary systems will always be an ongoing and important part of my job as CFO so that conservation accomplishments can be achieved efficiently.’
Ramona Dzinkowski, economist and business journalist
This article was first published in the international edition of Accounting and Business magazine in April 2014