Not all board members need to be familiar with financial terms and concepts, but each organization needs to develop a clear and explicit agreement for how financial accountability will be ensured. The following is a starting point for an agreement that the board and staff can make to ensure a partnership for accountability.
Starting with this template, a discussion on the finance committee with the executive director and the finance staff will go a long way towards clarifying roles.
Sample Board-Staff Agreement for Financial Accountability
This agreement should be discussed and renewed when there is a new board treasurer or a new staff head of finance.
Jan Masaoka is editor-in-chief of Blue Avocado. Her background includes serving as a finance director for nonprofits, as executive director of CompassPoint, and as a PTA treasurer for her children’s elementary school. This article is adapted from a segment of Best of the Board Cafe, Second Edition, published by Fieldstone Press.
See also in Blue Avocado:
Help – this is a good article, but under salaries and personnel whose responsibility is it to establish and appprove job descriptions. It seems that that is a joint function-the CEO provides a draft and the Board approves the general job descriptions (not day to day tasks) and the salary or salary ranges. Please comment.
Great article as usual-
It is very important that Boards provide oversight;but also help Managment as well. If the Board micro manages the finances; the Finance team can end up spending precious time managing the Board as opposed to the dozens of other critical things a normally understaffed team has to do.
There is a fine line and a good Board Chair and Treasurer will make sure they balance and support the Finance function as well as fulfill their fiduciary duty. Financial education of the Board is a pervasive problem in general.
Edward M Mulherin, CPA, Esq.
Founder & CEO- eCratchit, Inc
As part of the accounting staff for several nonprofits, I would highlight that there’s a difference between “tough” questions and accusatory ones. Depending on the resources of an organization, they may not have always had or will have the means to provide all of the above things in completely orthodox ways (e.g.-an overworked E.D. or office manager who is also having to do financials after they’ve already put in 40+ hour week). I’ve had to clean up and order things before but it has never meant that someone previously was trying to hide something or defraud. And quite often, everything was there in some form even though it wasn’t done the way a large CPA firm would’ve done it.
Board members and executive directors who learn the key underlying principles of financial information can avoid panicking or accusing when they have questions. So I appreciate and heartily support the above encouragement for taking the time and responsibility to educate yourself on what really matters when you’re looking for important financial indicators.
Let me pile onto the many others from whom I’m sure you hear on a regular basis about how much we all appreciate, admire and get a chuckle (and sometimes a huge belly laugh) from Blue Avocado. You are doing something so useful, so worthwhile for the philanthropy sector. Thank you.
Wearing my volunteer hat, the article on fiscal accountability and board/staff roles was a wonderful one for my board. We don’t have issues on this topic – but that is best time to refresh what we owe each other.
I am on six non-profit boards. I find most board members do not understand their fiduciary "duty of care" and gloss over financials. They seem to understand "profit or surplus" and do focus on expenses; but few focus on revenues. Then comes the almost mystical balance sheet, which only accountants seem to pay attentioin to. I find few board members realize thiei liability as a board member. Only one board I serve on requires board members to make an annual donation to the non-profit. Some board members say "I donate my time, that should be enough." And time is valuable, but board members seldom realize that they are responsible for raising the funds to complete or carry on the non-profit’s mission. I loved the template! Cecil Carter
This is an excellent article and the accountabilities are very clear. However, I believe there is a glaring omission. What about board participation in fundraising? There is one very small mention in the budget section that says, “Engage in long-term planning for funding, such as identifying a target mix of contributed and earned monies.” At the very least the board should be doing this. In my experience, it is more important than ever that board members be actively engaged in fundraising and willingly participate with the staff. Staff needs the active engagement of board members with cultivating, soliciting and stewarding gifts. Strong relationships with donors are especially critical in these lean times.
With the staff creating and driving the fundraising plan, the board should participate by identifying and engaging prospects with the organization (corporate leaders and individuals) meetings, site visits, letter writing, invitations to events, etc. And there needs to be a strong group from the board who are enthusiastic and successful solicitors. In fact, I would add a full section on fundraising to this agreement on Financial Accountability.