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Board Member Financial Literacy and Stewardship

Not-for-profit board members are responsible for providing guidance and direction to ensure that a given organization is proactively working towards achieving its mission and strategic vision. Part of this responsibility includes securing and managing financial resources to allow the organization every opportunity and capital resource needed in order to move in the right direction of growth, achievement, and wealth building.

Many organizations have a finance committee and board treasurer who are granted the responsibility of oversight and discernment in managing the financial resources. Many of these organizations also fill this committee with CPAs, financial advisors, bankers, and other individuals with financial backgrounds to allow for the most suitable individuals to manage and oversee this responsibility. However, when it comes time for the treasurer’s report at the regularly scheduled board meeting there is often minimal discernment or dissection into the financial matters by the whole governing board.

One of the main issues with this approach is that every board member is charged and governed with financial stewardship within their organization. This is also especially important in many small organizations where the board is heavily relied upon to further enhance segregation of duties and oversight among internal management. Additionally, many committees are so intertwined in their goals and objectives that it is also important to understand every aspect and component of the organization. A siloed committee approach generally does not produce the same results as committees that are working in harmony. For example, in order for the organization to run its programs within its mission, it needs to secure the capital to fund these programs while also securing enough capital to cover its routine and monthly expenses. Thus, it is just as important for the resource development committee to understand the undertakings of the program committee and the budgeted expenses of the finance committee and vice versa. The finance committee needs to understand the capital needed to fund the programs established by the program committee as well as the targeted fundraising goals of the resource development committee. So how do we make the connection?

First, it is important to recognize that not all members of the board possess a rudimentary understanding of financial literacy. Nevertheless, if the financials were presented each month in a different light, it may allow for a paradigm shift in board members’ thoughts and produce deeper conversations during the board meetings.

Ideas for Presentations of Organization Financials

Here are a few ideas of different ways the financials could be presented each month:

  • Financials and budgets presented in a visual and comparative format such as bar and pie graphs
  • Trend lines regarding year over year performances and whether the organization is heading in a positive or negative trend towards achieving its strategic plan
  • Ratios that are unique to your organization presented in graphical form over multiple years – a few examples include:
    • Fundraising goal to actual
    • Revenue composition
    • Pledge collection rates
    • Funded status of operating reserve
    • Liquidity
    • Investment returns
    • Underwater endowments
    • Revenue per constituent served
  • Writing a one to two paragraph report without using numbers to discuss the financial health of the organization
  • Proforma financials to establish connections between the strategic vision end result and the current status of the organization
  • Visual cash flow projections demonstrating future cash needs of the organization and what reserves are in place now to save for them
  • Dashboards that present, at a high level, the most pressing needs and goals of the organization

While each of the aforementioned views can certainly allow for a different perspective of the finances of the organization, it is also important to then cross-reference this information back to the underlying financials. Then with the additional information and resources at hand, your organization can begin to benefit and strive with more synergy between committees and insightful conversation towards achieving its mission and vision.

If you have questions about how your organization can restructure its financial presentations or board duties, please contact Andrew Brock (abrock@blueandco.com) or your local Blue & Co advisor.

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