This article by Kate Sphar appeared in our February 2014 Newsletter| Making Nonprofits Stronger
Leslie and I love our jobs. We work with a lot of really fantastic people at organizations that are doing meaningful work in their communities. Over time, we have seen nonprofit leaders become smarter and more savvy about how they manage. In the ten years I have been a consultant to nonprofits, I have seen the level of financial acumen among my clients increase significantly overall.
Of course, that doesn’t mean there isn’t room for improvement. Perhaps it is because of the increased sophistication of nonprofit managers that we see Boards “checking out” financially. Even in this day and age of increased scrutiny on nonprofits, we still encounter Board members who aren’t aware of their responsibility regarding the agency’s financial health and solvency. They should take notice of the numerous local nonprofits that have faced instances of misappropriation or theft, bringing to light how crucial is it that both Board and staff understand potential financial risks and ensure that their organizations are operating in a fiscally sound way. Nonprofits of all sizes, from universities, to the United Way, to a small volunteer fire department, face the risk of fraud, from both inside and outside the organization.
But not all risk looks like these obvious cases of criminal behavior, Boards have to be vigilant as to their financial decision-making in all regards. As recent events at Conneaut Lake Park and the August Wilson Center illustrate, a Board of Directors can potentially be held liable for a “breach of trust”, in the form of misuse of organizational assets or poor/nonexistent planning.
So let’s debunk the Top Three excuses we hear as to why Board members aren’t more aware and engaged in their fiduciary responsibilities:
Moreover, we often find that Boards don’t actually understand what staff members’ and contractors’ responsibilities are. I can’t tell you how many times I have heard a Board member say that they were disappointed their contract bookkeeper hadn’t solved their strategic financial issues. Bookkeepers are hired to keep the books! Executive Directors, too, are often ascribed financial acumen that many will admit they do not have. Financial roles are not interchangeable, and just because someone performs a duty related to organizational finances does not mean they have the capability (or capacity) to act as a CFO. If you need strategic financial guidance, you have to invest in it (or convince it to join your Board).
The bottom line is that every Board member needs to understand all aspects of its financial systems. Ask yourself some questions:
We can help organizations assess their financial systems or educate their Boards . You can contact me at 412.443.0411 or Kate@BonnerSphar for more information.