Nonprofit boards serve several purposes. Among their responsibilities is financial oversight. This doesn’t mean that they are hands-on with the bookkeeping. Instead, it means reviewing and shepherding the organization so that it adheres to sound financial best practices that support achieving its mission. If you’re confused about what this means, or you’d like to steer your board towards productive conversations around finance, the following tips will help you strengthen your board’s financial oversight to your organization’s benefit.
What Does a Nonprofit Board Do in Terms of Financial Oversight?
Nonprofits boards focus on specific tasks when it comes to financial oversight. They should be well-briefed on the organization’s financial position, review major financial investments and decisions, and approve or halt them if they feel they aren’t a good fit for the organization. They serve as trusted stewards and advisors who keep one experienced eye on the mission and the other on the margin it takes to achieve the mission.
What they are not is hands-on financial help. A board’s financial oversight duties do not extend to working directly on any accounts, systems, payroll, or finances. Review them, yes. Guide and advise, yes. But actually, performing bookkeeping functions, writing checks, or handling money is not within the scope of their duties.
Financial Oversight: The Board as Wise Advisors
Healthy nonprofits treat their boards like the wise advisors they are (or should be). They regularly share financial information with their boards, including but not limited to:
- Budgets and budgets versus actual
- Cash flow statements
- Statement of financial position
- Restricted fund information and updates
- Overall financial dashboards, reports, and plans
Of course, this list is just a suggestion. Your organization may wish to share different information with your board, and that’s fine. As for how often to share it, the answer depends. If your organization is growing rapidly, you may wish to share information frequently. Mature organizations may have a quarterly, biannual, or annual cadence, whatever works best.
Tips for Getting the Most from Your Board’s Financial Oversight
The members of your board should have extensive experience they share to help your organization thrive. To get the most of their knowledge, talent, and experience, use these tips.
- Set expectations from the start: New board members should be briefed on their role. Learn about any special expertise they may have, too, that you can tap into. Set the expectations right from the get-go so everyone is clear on what financial oversight means at your organization and what you hope to achieve by partnering with your board on this important responsibility.
- Create a finance committee: Let’s face it: not everyone on your board has the experience or interest in finance you may hope for. A subcommittee dedicated to financial oversight may work better for some boards so that people on the committee can focus on finances while others focus on operations, talent management, mission, or other important activities.
- Offer training: It may also be helpful to offer training to your board on how to read financial statements. Your CFO, treasurer, or accounting team leader should work with the board to ensure they truly understand how to read and interpret key financial information.
- Make financial conversations about impact and strategy: Try to keep financial conversations with your board focused on the impact the organization has as well as its strategy for using money effectively to achieve its mission.
- Maintain good lines of communication: No matter whether you work with a portion of your board or the entire board on financial oversight, always maintain open communication with them.
Organizations can live or die by their financial state, and many a nonprofit that was doing great work closed its doors due to poor financial management. Conversely, with good financial oversight and advice, and a board that supports you, your organization will thrive.
Welter Consulting
Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.
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