What a Finance Committee Can Do for Your Board of Directors

Implementing a finance committee of the board of directors was one of the best things our organization ever did. Here’s why.

What a Finance Committee Can Do for Your Board of Directors
7 mins read

Could your nonprofit benefit from a dedicated Finance committee?

Baby Bear Hugs’ mission is enhancing family strengths for happy and healthy children, families, and communities. The program provides parenting education and support through certified parenting educators in the homes of families (virtually during the pandemic) through ongoing, regularly scheduled interactions. Baby Bear Hugs is a multi-county program with a 30-year history in rural Eastern Colorado.

We have always struggled with funding, living month-to-month, usually not having any reserves.  Although we developed a diverse base of funding sources over the years, we did not have any underlying, guaranteed source of funding. Our board consists of members from the counties where services are delivered and represent agencies that we refer families to and that refer families to Baby Bear Hugs. We also have board members representing the financial sector, resulting in a wonderful, involved board.

For several years, we’ve worked on increasing staff pay and reserves without much success. We were never able to focus on finances and fundraising as much as we would have liked because we were building program and evaluation. To increase funding, along with other ideas such as implementing a fundraising gala event, leadership had the idea of implementing a finance committee.

The development of this committee was board-approved. Here’s how we did it.

Forming the Finance Committee

  1. Initiation. Our leadership staff and members of the board of directors discussed the formation of the committee. We asked questions such as, Would we need regional representation? How often should we meet? Should we meet in person?

We came to a basic understanding, deciding that at least initially we didn’t need regional representation because we had that on the board of directors. The priority here was financial expertise and the ability to benefit from ideas born from group conversations, fed by knowledge and backgrounds of committee members.

Building relationships was important so we met in person. We could modify these steps in the future if needed.

  1. Selection of the members. After much contemplation among leadership, a slate of 5 highly qualified members of the finance committee were selected representing CPAs, bankers, insurance agents, and financial advisors. The Executive Director approached the slate of candidates, and we were very fortunate that they all said yes. If they had not, there were names of alternate candidates on the list.
  1. Formation of the finance committee job description. The finance committee members developed, reviewed, edited, and fine-tuned a committee job description Then, the description was formally approved by the board of directors.
  1. Monthly meetings. The committee decided to meet monthly, as that was the best way to stay connected and on top of the finances. They set a regular date, time, and location. One of the committee members offered their agencies board room for our meetings.  When the pandemic broke, we switched to virtual meetings.
  1. Learning about Baby Bear Hugs. The finance committee members came up with the idea to do a “Baby Bear Hugs 101” type of training, highlighting one program at each meeting so that members could learn about the organization. They also asked great questions about staff composition, job descriptions, and compensation.

The Committee at Work

Here’s an example of what the committee did for us:

  • Identify avenues for funding. Once they knew how Baby Bear Hugs carried out the work of the mission, program structure, and personnel, the committee focused on the financials.

Committee members learned about all the avenues for funding, from family foundations to contracts through the counties that Baby Bear Hugs serves. The committee used their diverse backgrounds to suggest areas we could tap into and were instrumental in helping the organization receive a PPP loan and in getting it forgiven.

  • Enhance the outcome. The finance committee learned that each county was responsible for carrying out one fundraising event per year. The committee made it their responsibility to review these plans and results.

When they began to review county fundraisers, the committee was able to identify ways to increase the outcomes of these fundraisers. They also caught a potential legal concern with a current fundraiser (nonprofit “selling” guidelines) and helped mitigate it.

  • Prepare for next year. When reviewing the budget for the following year, the finance committee helped incorporate increases in pay right into the budget so we would be prepared for it in the following year.
  • Prepare for the future. The finance committee recommended, and the board approved, putting a percentage of specific fundraisers (an annual raffle and the gala) into a sustainability fund to begin building program reserves.

Creating Your Own Finance Committee

Every organization’s needs and structure is different. For us, the fact that we cover 8 counties and 13,706 square miles is sometimes a challenge. So, it’s essential that we have representation from each county on the board of directors itself—but for the finance committee, experience, profession, and willingness to serve are more important.

The success of this structure is dependent on the qualities individuals bring to the committee. What the finance committee members bring individually and their willingness to discuss ideas collaboratively provide invaluable information and outcomes by not only increasing the finances of Baby Bear Hugs, but making the organization stronger as well.

In case you missed it…

Process, Process, Process: The evaluation model you shouldn’t ignore

About the Author

Ruth Seedorf serves as the Executive Director for Baby Bear Hugs and has seen this program grow from a solely volunteer program in Yuma County, Colorado to the 8-county, twenty-four-staff member program that it is today. With an undergrad is in Child Development and Family Relationships, parenting and helping parents understand child development is a passion for Ruth. She says: “I happened to be in the right place at the right time to become involved with Baby Bear Hugs and it has been a wonderful opportunity.” Discovering that she enjoyed working in the nonprofit world, Ruth received her Masters of Nonprofit Management degree in 2005. She has worked as a child development screener, served as a School Board Member, served as a member of the Colorado Home Visitation Consortium, and as Chair of the Board for Rural Solutions.  Ruth grew up next to the mountains in Longmont, but moved to the eastern plains of Colorado with her husband and discovered that the plains are unique and beautiful too. She and her husband have 2 wonderful children and 4 grandchildren.

Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. Views represented in Blue Avocado do not necessarily express the opinion of the publication or its publisher.

4 thoughts on “What a Finance Committee Can Do for Your Board of Directors

  1. I couldn’t disagree more strongly. A Board finance committee should NOT be responsible for fundraising — that is the purview of a fundraising committee or a development committee. A finance committee is responsible for selecting external auditors, recommending an annual operating budget to the full Board, and periodic detailed review of the financial statements. The accounting/controller functions are VERY different from the development/fundraising functions, both at the staff level and the Board committee level.

    1. Eric, I don’t believe I stated that the finance committee was responsible for fundraising. This committee gives advice and suggestions about increasing fundraisers, which is the focus of this article. They do not do the fundraising. The staff and volunteers do the work of fundraising for the organization.
      You are correct, the Finance Committee selects the auditor and reviews the audit, they review financial statements, and recommend the budget to the Board of Directors.
      We are not a big enough organization to support a separate fundraising committee or a development committee so we are thrilled with the direction we have chosen.

      1. I agree with Eric’s comment. This article includes the statement: “To increase funding, along with other ideas such as implementing a fundraising gala event, leadership had the idea of implementing a finance committee.” Whether or not the finance committee is responsible for doing the fundraising itself is besides the point to me, the point is that this article focuses more on fundraising than finance, as I understand finance, which is accounting, internal controls, budgeting, etc.

        If this article was titled “What a Fundraising Committee Can Do for Your Board of Directors,” that would match the content here much better. Your organization is small, and you have concentrated both financial oversight and fundraising into one committee, but that doesn’t mean that this content is relevant to most finance committees, or related to financial oversight in any way. I would expect Blue Avocado to have reviewed this more closely.

        I opened the article to learn more about financial oversight, internal controls, schedules to review financial statements, and similar information, and found an article mostly about how board members can assist with revenue streams. I would have let this go, but your response to Eric ignored the larger point and focused only on the word “responsible,” which seemed to me sidestepping valid critique.

    2. Hi Eric, I didn’t see where it said the Finance Committee is responsible for fundraising. I do love that the committee has a very hands on approach to the past, present and future of the organization through their lens of expertise. I would love to have this type of commitment and passion on my team!

Leave a Reply

Your email address will not be published. Required fields are marked *