The Financial Role of Your Board of Directors

We often coach our non-profit clients how to effectively use the board of directors in financial matters. Many times, without proper guidelines, a BOD can get into the weeds & make the organization less effective as a whole.

For non-profits, the BOD functions as a governing body to oversee the organization's strategy & accountability. The employees & managers deal with the daily operations & report to the BOD. When it comes to money matters, there is often confusion about where those responsibilities fall. The non-profit board should have a big-picture approach, and a system of checks & balances to protect the against mismanagement or fraud. Here are some examples of financial responsibilities of the BOD:

Assist the ED with the development of the budget as needed

Final budget approval

Review financial documents quarterly

Address cash flow issues

Watch for signs of mismanagement of funds

General financial “steering” of the non-profit

Often there is a subcommittee dedicated to finance, but smaller organizations may leave it to the general BOD. A well rounded board / financial committee should have members with financial expertise & can include:

An accountant or bookkeeper

A local banker

If the organization has endowments or investments, a financial manager with non-profit experience

A representative of the specific economic population you serve, if applicable

A few other tips for success:

Apart from the ED (who should be involved in all board meetings) the members should be independent–they are not a part of management / staff & they don’t have other ties to the organization. There should be clear job descriptions for all positions, including where the BOD & staff responsibilities intersect.

Overall, your BOD should be an asset in furthering the mission and effectiveness of the organization. A diverse team of people dedicated to the goals of the organization is vital to the success of your mission.

What do YOU do to make sure your non-profit board is successful? What tools do you use to make sure everyone knows their role? Comment below!