Have you ever sat through a board meeting, or even a meeting with your accountant, and got that glazed over look in your eyes? I know I have experienced that feeling. I have sat through, and given, hundreds of presentations of financial statements at non-profit boards through out my long career. One thing has stayed content, the Bored Board Look!.
There are many reasons why people volunteer for non-profit boards. They genuinely believe in the cause (the best reason). They are resume building. They are trying to make business connections. They were talked into it. They are giving money and would like control of the organization in return.
I have met and dealt with all of these board members. The one constant usually is they are not at all interested in financial statements until there is a crisis, or it affects them personally.
There may be many reasons why members eyes glaze over during these presentations.
1. The main reason generally is they have no idea what the financials are telling them. They also are too embarrassed to ask questions so they just go along.
2. I am the ____ expert. Let someone else figure out the financials.
3. They trust the accountant or CEO implicitly.
4. That’s what they have auditors for!
5. They are the owner of WIIFM radio. As in What’s In It For Me! (Hat tip Ray Edwards) This Board Member is mostly concerned about how their business or cause or family can benefit from any decision made.
6. Ego. This Board Member will generally ask questions but they will often be irrelevant and condescending.
So what should a Board Chairperson or a non-profit CEO/CFO do to combat this? And why should the Board Member care?
- Board Training. The most important factor in getting an effective Board is training. Do Not assume that just because the Member is a successful person, that he/she understands the finances of the non-profit organization. Train them how your organization works and the key numbers they should be looking at. See upcoming Board training course.
- Encourage questions. If a new Board member sees that questions are encouraged and lead to greater understanding, the more likely they are to ask relevant questions. One purpose of a Board is to guide policy and financial decisions. The better you understand the organization, the better your advice will be.
- Simplify things. Yes Generally Accepted Accounting Principles are complicated. But a good accountant can point out the main facts and put them in terms that “normal” people can understand. Start with the Cash Flow Statement. It is is the key to survival.
- Fiduciary Responsibilities. A Board Member has an obligation to act in the best interests of the donors and the organization. You owe it to the donors and the beneficiaries of the non-profit to make sure the organization is efficiently and properly using its resources.
As a Board Member you need to fulfill your fiduciary responsibility and understand your organization’s financial situation. Do not be afraid to ask questions and don’t quit until you understand and are satisfied with the answers. It will benefit the causes you care deeply about.
Question: What do you wish you understood better about your organization’s financial statements? How could you better serve your organization if you knew the financial situation better?