An Executive Director told me her Board was managing some of her staff and micromanaging her. She asked me “What is her Board supposed to be doing?”
A nonprofit board has three primary responsibilities: Fiscal, Strategic and Developmental. This blog post will outline the Board’s fiscal responsibilities. Future posts will address the other roles.
A Board’s fiscal responsibility is to insure that the nonprofit spends within its means, that their expenditures are consistent with its mission and strategy, and that their expenditures are prudent.
The process begins with the preparation of an annual budget which lists the amount of all the expected sources of revenues and expenses. The items and quantities are typically based on last year’s actual revenues and expenses, adjusted for the trends verses previous years and any new plans or new external factors that could alter those trends. The Executive Director and their staff typically prepare a budget for the coming year and the Board revues it in detail to insure that it is complete, prudent and consistent with the nonprofit’s mission and strategy.
Each month the Executive Director or CFO should present to the Board last month’s actual cash revenues and expenditures and the year-to-date actuals compared the comparable budgeted amounts, and the net cash-on-hand. Any significant deviations from the budget should be discussed and result in a decision if budgets need to be adjusted. The net cash-on-hand should be reviewed to insure that it is sufficient to meet upcoming cash flow requirements. If not, spending or borrowing plans need to be adjusted to insure continual nonprofit solvency.
This annual and monthly fiscal discipline helps insure that corrective action is taken before smaller deviations from the fiscal plan become a major issue or crisis.
Next month’s blog will be about a Board’s strategic responsibilities.
Author: Bob Cryer, Executive Coaches of Orange County, www.ECofOC.org