We sat down with Katy Avenson and Kara Hamann of Avenson Hamann CPAs to discuss board and staff member responsibilities in accounting. Their practice is focused on providing consultative accounting and tax services to the nonprofit sector so they have a great understanding of the specific issues that are of concern to nonprofit professionals.
How do you see the fiduciary responsibility of board members? What do board members need to know in terms of finances?
Remember that a board member’s job is not to micromanage finances; it’s to provide oversight and guidance for the organization. Board members should understand the financials enough to ask how they can be of assistance. For example, if an organization is behind on revenue the board can offer ideas for new funding sources or help brainstorm cost-cutting opportunities. If there is an issue with the current financial institution, they can use their relationships with bankers or loan officers to negotiate better terms. Nonprofits all-too-often think that board members need or want to see a multi-tab spreadsheet with every item detailed out. In reality, they need to see enough to provide oversight and ask big-picture questions that guide management decision-making.
Is a dashboard a helpful way to present information to a board member? Or do they need more (or less) detail?
A dashboard can be a useful tool if you keep in mind that there is no one right dashboard for all organizations. The goal is to communicate information to the board, so let their level of understanding guide the presentation of the financials. Sometimes a pie chart, picture or personal anecdote is the most effective method of relaying financial success (or stress). Numbers don’t necessarily tell the full story – money and mission should always be considered together. A big financial surplus may mean the mission isn’t being fully delivered and a deficit may not necessarily indicate mismanagement. Cutting costs by cutting the mission is not the goal. A dashboard is great tool for keeping the board focused at a high level and seeing progress over time. With that in mind, don’t fall into the trap of thinking every financial metric needs to be on your dashboard. Think through what key points your board should focus on.
You can also consider creating a dashboard for program metrics instead of just a dashboard for overall financial information. Correlating funds donated with specific program amounts or items forces you to think about what resonates with your donors and how your financials relate to that. Financial numbers are empty unless they show how it ties back to program success. Always consider the financials within the frame of what aspect of the mission is this expense serving.
From a staff perspective, what are some accounting procedures that seem to fall through the cracks but that could save a lot of heartache later?
- Ask yourself if you have the right software in place to properly report programs and various types of restricted funding. What tools would make the job easier?
- Development and program managers have a lot of information that impact financial reporting. Inter-departmental communication is key.
- Are you tracking and reconciling on a regular basis? Grants often have expense matching or other requirements that aren’t reported to the funder regularly, but can be requested at any time. Make sure you’re keeping up.
- Understand that not all money is “good money.” Do grant restrictions and reporting requirements make things unnecessarily difficult on the organization or hinder other programs? Can (and should) the organization fulfill what the funder requires?
Nonprofit Elements can help you communicate the right level of information to your board so that they can uphold their fiduciary responsibility and support your mission. We can also train existing and new board members on their roles and responsibilities so that they understand the information they are receiving and ask questions that help further your success.