Transcript:
three tips for new board
members particularly from a finance
perspective when small nonprofits have
new people coming on the board they
often try to do some kind of board
orientation uh when I’ve been brought in
in the
past I’ve focused that on how to read
financial
statements I was going to do that as
this presentation I was going to do
three tips that I had to do with
understanding basic financial statements
I sent that to our CFO as a proposed
outline and he said um I think you
should consider zooming out and really
looking at the the big picture things
that board members really should be
focused on let’s assume people have some
familiarity with reading basic
financials and think instead about what
board members should really be watching
for and that comes down to three big
questions where are we where are we
going and are we going to get
there so this first one where are we has
to do with actually looking at the basic
financial statements uh because that
really gives a snapshot of the current
situation what is the status quo I chose
this image of lush weeds to accompany
that slide because I don’t want to get
into the weeds uh about how to read
financial
statements but I do want to say this is
a great place to start particularly for
new board members to take a quick look
and understand what are the financial
strengths and weaknesses and and
possible issues ues that a particular
organization is
facing so for example um is there
adequate cash on hand how many months of
operating expenses does the organization
have in available cash um are there
liabilities on the balance sheet are is
the organization carrying debt for some
reason is there a plan to get out of
debt uh also thinking about uh
restricted versus unrestricted assets um
is the organiz ation able to recover uh
their operating costs from the
restricted Grant sources uh or do those
procedures and processes need to be
Revisited things like that um so that’s
the question
of where are
we next we’re going to think
about where are we headed so now we’re
talking about budgeting and
planning and the key here is
understanding that the budgeting
process tells you how the organizations
strategy translates into financial
planning so I
consider if you will the budget as a
moral
document it is the blueprint for what
we’re going to do and how we’re going to
perform in the future so are we really
considering strategically what kinds of
resources we need and where we want to
allocate those resources in order to
become the organization we hope to
be often I meet uh when I meet onetoone
with Auditors I like to ask the question
if you could wave a magic one and have
nonprofits just do one thing differently
what would you wish that people would do
differently and one of the best answers
I got recently was um an auditor said My
Wish for nonprofits is that they would
budget for and plan for building up
their cash
reserves is that part of the budget uh
to really like strengthen the
organization’s Financial stability and
have them equipped in such a way that
you could we an unexpected uh change
whether that’s unexpected expenses being
incurred or uh dip in revenue for some
reason could you make it work um another
important Point here while we’re talking
about
budgeting uh at the from a board member
perspective is monitoring budget
performance nobody wants to be the bad
cop but uh often in reviewing budgets
versus actuals somebody needs to hold an
organization accountable for keeping
within the budget so if there are
expenses that are exceeding the budget
by uh more than a small amount or if
revenue is falling short um there may be
difficult conversations that need to
happen and that’s um Something board
members particularly should be aware
of and the third question the final one
are we going to get there so this is
about risk
management um this about contingencies
are there plans for unexpected costs or
Revenue shortfalls how realistic are the
revenue projections how confident are we
that we’re going to hit our targets um
in addition to those sorts of internal
calculations and discussions uh what’s
going on sector-wide what are the are
there broader Trends we should be aware
of are funders pulling back because of
market performance are there are
compliance issues that we need to worry
about in our particular field and you
know things like that um so taking an
aggregate I think this is a helpful
perspective for particularly for new
board members new to a finance committee
or new to a nonprofit
board things things to think about um
and then if we have one more minute here
or
two I want to address this question what
is fiduciary responsibility anyway um
often when joining a nonprofit board for
the first time people learn the phrase
fidu AR responsibility because that is
your legal obligation as
a a member of the board of directors uh
here we have some helpful clarifying
points that fiduciary responsibility is
carrying out the duty of care the duty
of loyalty and of obedience so it’s
really avoiding conflicts of interest
putting the organization’s interests
first and ensuring compliance and uh
making sure that we’re doing things in
the uh
within bounds of whatever laws and
regulations might
apply
um so that’s fiduciary responsibility in
a
nutshell um if you have more questions I
want to talk
more please do reach out you can send me
an email schedule a meeting shoot me a
call or a text as you wish um again my
name is Jonathan Morris with the
consonant group and I look forward to
speaking with you
thanks