Management and Leadership in Nonprofits


Shoring up financial oversight on a nonprofit board

Dec 05, 2019
By: George Persekian

A while ago, one frustrated nonprofit professional posted the following lament to an online forum:

Many times board members do not understand what it means to be on the board, how to run effective meetings, how not to micromanage the staff, how to support the ED, and so forth. It ends up being a personal thing for them rather than approaching the NPO from a strategic mindset.

Do you have that problem?

I know I do.

New board members need training and guidance to provide meaningful support. Running a meeting and reading financial reports, for example, are learned skills. And knowing how to offer suggestions, without micromanaging, is also an area where many board professionals could grow. 

As a staff member, there’s a lot you can do to coach and shape your board. Financial education is one big part of overall board training.

It’s not enough to do good work

Nonprofit board members need to understand the essential role they play in an organization. It’s not enough to do charitable work. The organization has to concern itself with proper management. 

Without it, organizations may find themselves ill-equipped for looming threats or changes, unprepared for emergencies or (tragically) the victim of fraud. 

Board members must understand that they have legal and fiduciary responsibilities. Staff can help make sure people understand those obligations before they’re elected. Would-be board members who are more interested in service than governance might be better directed to other volunteer roles. 

Look for board candidates who are ready for big-picture leadership responsibilities such as:

  • Checks and balances
  • Safeguarding funds
  • Setting the direction for the future
  • Ensuring community needs are met sustainably 
  • Building community connections

Creating a financially savvy board

Your board members probably have a wide variety of backgrounds. That means some of them will understand financial reporting, but some of them will not. You need to keep the latter folks in mind as you plan your financial reports. 

Part of board member orientation might include targeted training on nonprofit finances. Bring in an outside speaker or consultant who can present some basic financial training to your board and walk them through your financial reports for the first time. 

As part of that training, provide new board members with your most recent financial reports, current year budget and a copy of the prior year audit and tax return.  

If you don’t have the resources to bring in an outside trainer, consider swapping services with another nonprofit peer — you train our board, we’ll train yours. Or, tap someone on the board with financial experience to lead the session. Having an outsider train your board on what to look for adds a layer of impartial checks and balances between your board and your financial staff. 

Nonprofit board financial reports 

Reviewing financial reports isn’t always the most interesting or engaging, but it may be some of the most important work your board does. It’s essential that your board members can interpret the reports they’re looking at — because sound decision making begins with understanding your financial statements. 

Tips for sharing financials with your nonprofit board:

  1. Prepare your board for financial discussions. Board meetings should always include a financial report as an agenda item, and members should have enough time to review financials ahead of your meeting. Include a balance sheet, income statement, cash flow forecast and current budget.
  2. Graph it. Visuals, like graphs and tables, are generally easier to understand. Include a dashboard with an overview of key metrics and then supply additional explanations or narratives as supplementary information. Start with simple, high-level reports and be ready with details so you can answer questions as they arise. 
  3. Present and interpret. Walk board members through key financial information. Highlight areas where your financials are off-trend. Explain what’s going on behind the numbers. Point out potential problems and opportunity areas that should drive strategic discussion. 
  4. Anticipate board questions. You know your board. If common questions come up, get in the habit of footnoting your financials with explanations and supplementary information. Encourage your board to ask questions during the meeting, and make your CFO available to board members who want to do a deeper investigation.
  5. Train your board. Not everyone knows how to read a financial report. Provide a financial training session as part of your board orientation. And remember, volunteers who don’t understand may be leery of slowing down the meeting or admitting confusion. If your board members aren’t asking questions or initiating discussion, that might be a signal that people don’t have an adequate grasp on the information you’re presenting. 
  6. Be willing to say, “I don’t know.” Better to admit you don’t have an answer than to provide inaccurate or misleading information at a board meeting. 
  7. Crowd source solutions with your peers. Talk to other nonprofit professionals and find out what kind of dashboards, graphics or benchmarking tools they’re using to communicate with their board. 

Use financial dashboards to communicate

If you’re using Sage Intacct, board reporting gets a whole lot easier thanks to the “Nonprofit Board Book,” a set of built-in dashboards that provide a clear graphic view of key nonprofit metrics recommended by GuideStar. 

The Nonprofit Board Book includes real-time reporting on revenue composition and source, balance sheet metrics and the income statement.

Looking at a sample balance sheet (below), we can see a reduction in liquidity. But in asset composition and net asset composition, we see that unrestricted investments have grown, providing a buffer and potential source of liquidity. Graphic dashboards, like this, can help communicate essential financial data in a way that’s easier for volunteers to understand. 

Shoring up financial oversight on a nonprofit board

Board Book dashboards also include general “questions to consider,” which are great discussion tools for leaders and board members. For instance, the balance sheet dashboard prompts reviewers with questions like these:

  • How readily do receivables become liquid?
  • Are liabilities growing over time?
  • What unrestricted net assets are available? 
  • What’s the reserve policy for use and replenishment?

Similarly, prompts on the income statement dashboard encourage leaders to consider expense category growth, the stability of the revenue mix, whether surplus cash is being converted to reserve, etc.

The dashboard also provides a direct link to GuideStar, where nonprofits can subscribe to benchmarking tools that provide visibility into the metrics of similar organizations. 

What’s more, organizations that use Sage Intacct can set board user profiles so that board members can log in, access gated financial information and get reports specifically tailored to their needs. 

How Wipfli can help 

The right financial tools can help you communicate your financial message. Wipfli specializes in the nonprofit sector, assisting leaders who want to strengthen operational practices and magnify organizational impact. Contact us about financial support and advisory for your team. 


George Persekian
Senior Manager, Business Development
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