The role of the board in financial oversight
By: Jennifer Kelsch
While managing a nonprofit’s day-to-day finances falls on its senior management, one of the most important responsibilities of a nonprofit board is to offer active oversight of the organization’s financial affairs, beyond approving reports and budgets. By remembering these three Es, board members can serve an active role in oversight and ensure the organization has adequate resources to advance its mission.
Budgets and financial reports should represent the real and thoughtful input from the board with narrative explanations on the direction of the organization in any given year. Board members can become involved in planning and monitoring oversight by participating in the internal controls of the organization and challenging the prepared budgets and their results.
Applying for grants, financial reporting, fundraising, legal, ethical, governance responsibilities—all require good financial judgment. Ensuring your board includes individuals with more than just a passing understanding of budgets, financial statements and nonprofit tax law is critical. These individuals must know how to look at the numbers and assess the big picture and communicate what they see to others.
A creative and innovative voice is critical to any nonprofit board, especially when it comes to fiduciary matters. It’s not enough for the nonprofit to “get by” on minimal resources. Active board members should contribute innovative solutions to existing problems, offer insight and foresight, and ask good questions and expect good answers.