Presenting Financial Statements to Your Board of Directors

As a nonprofit organization, governance lies with your Board of Directors. The Board holds the ultimate responsibility for your organization, including tax and reporting compliance, and are tasked with upholding your organization’s mission, strategy, and goals. The decisions your board makes set your organization’s policies and procedures, and those decisions affect daily operations and your ability to maintain continued success.

Why your presentation style matters

Financial statements are complex and contain a great deal of technical information. Despite the fact that so many of the critical decisions made by nonprofit boards are based on your organization’s financial standing, board members often lack the financial expertise and training to fully appreciate or foresee the financial implications of the decisions they make. While Board training significantly increases a nonprofit’s odds for successful operations, a typical board term is around 5 years, meaning frequent turnover also attributes to members’ inability to understand the details in your financial statements.

Avoiding information overload is key for successfully presenting the financial statements to your Board of Directors. You need to captivate your audience and keep them in sync with the strategies and trajectory of your goals for public funding, private funding, grants, and fundraising events. It’s important that the information presented to your Board is timely, accurate, and relevant to your Board’s decision making needs. Giving your board members a head start can also work in your favor. Supply relevant information beforehand, so they have the opportunity to review the data and consider their questions and concerns. It’s also a good idea to stay away from strictly going over your financial statements, line by line, number for number. Instead, highlight the key internal and external metics and add narrative detail and graphic representations to break up the monotony and technical speak. Your goal is for your Board to have a firm high-level understanding of your financial situation without the nitty gritty, inconsequential, or unnecessary details.

Information your board needs to know

A firm grasp of compliance matters and the financial status of your organization are essential for your Board of Directors to perform their duties effectively. It’s important, legally and for your organization’s success and reputation, that you disclose everything relevant to their financial decision-making. They need to know where your organization’s  funding comes from, where it’s being spent, and that your plans for the future have been thoroughly analyzed, with benefits outweighing the risks.

Your Board should receive a copy of the organization’s income statement to assess expenses, specifically as they compare with the organization’s budget. They should receive a copy of your organization’s balance sheet for full awareness of liabilities and assets, including their status –  whether with donor restrictions or without, and for what purpose those restricted funds can be spent. Annually, your Board should receive copies of the organization’s 990 filings, annual financial reports, and your audit report, as applicable. And, don’t underestimate the need for benchmarking data, presenting your goals based on proven industry trends, and preparing and providing different scenarios based on the Board’s possible choices relating to allotment of funds. A properly prepared budget should be provided to your Board for data comparison and context.

Ultimately, your Board is responsible for the decisions that drive your nonprofit’s success. The quality of the information they receive, as well as their understanding of it, will determine the direction your organization takes – and these decisions will guide your organization in its success in fulfilling its mission. Are you prepared to confidently present your financial information and future goals to your organization’s Board of Directors?

Getting Started

The professionals at Albin, Randall & Bennett are nonprofit industry leaders. ARB’s Nonprofit Services Group is here to help organizations like yours through every stage of the financial statement process, including assistance with nonprofit board member training and presenting to your Board of Directors. Contact us to discuss your presentation strategy or to address other nonprofit tax, accounting, and consulting needs you may have.

 

by Jason LeBlanc, Principal, CPA