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Governance
Finance And Fundraising
The Fundamental Role of the Board
"It is the responsibility of the board of directors to ensure
the organization has the financial resources to carry out its work
and to oversee its financial management. The success of any not-for-profit
organization depends to a large extent on its ability not only to
obtain but also to manage the money it requires to run its programs
and services.
To fulfill its financial obligations, the board must put in place
adequate financial controls to protect the organization's assets
and limit its expenses. " TVO/United Way of Canada - Centraide
Canada. Board Basics for Volunteers, Unit 1.
The board's fundamental role is to ensure that the organization
has the financial resources to meet its mission and that those resources
are managed responsibly.
To ensure that the organizational goals and budget are compatible,
board members should develop policies and monitor finances in three
basic areas:
1. Financial management:
- approving and developing . the annual budget,
- financial controls and procedures, . financial record keeping,
- reporting systems;
- monitoring the revenue and expenditures of the organization;
2. Fundraising;
3. property/capital management.
For working boards and collectives, the role of individual board
members goes beyond this fundamental role. These members provide
operational support by writing grant applications, signing cheques
and preparing financial reports for the board and funders.
Why is financial management so important for the board?
The allocation of financial and human resources is the tangible
expression of the board's priorities and values.
As the board is ultimately liable for the financial situation of
the organization, it needs good financial controls. It is not necessary
for the board to do the financial management tasks itself, but it
must make sure they are properly done. The community, to whom the
board is ultimately responsible, is more willing to support organizations
whose funds are prudently and effectively spent.
The Annual Budget
The organization's budget is its financial plan for one year and
includes:
how much money the organization will receive, (income or revenue)
and where it will come from; and how the organization will spend
its money (expenditures or expenses).
Three rules related to financial control are:
1) Two people should be involved in the control procedure for all
expenditures from cheque writing to authorizing payments.
2) All money received should be recorded in a minimum of two places.
3) Records should be reconciled or balanced on a regular basis.
Financial Record Keeping
Every organization should have some system (manual or computerized)
to ensure accurate financial records are kept. There should be a
bookkeeping system, a cash management system, and internal controls.
It is the board's role to ensure accurate financial records are
kept. The actual record-keeping is usually done by staff.
Financial Reporting Systems
Throughout the year, the board should get accurate financial information
about the organization. It should expect:
Monthly financial statements or the income statement. This presents
the actual income and expenses of the organization over a specific
period of time. They usually use the same categories as the budget.
A balance sheet. This presents the organization's net worth - what
would be left over if all assets were converted to cash and used
to pay off all liabilities. An organization should produce a balance
sheet at least once a year.
Specific project or event reporting. The board may require, because
of funding conditions or for planning purposes, a report of a specific
project.
An audit. The audit is done at the end of each fiscal year and
is the examination of all the books and records (which may include
minutes of board and committee meetings) by a qualified person from
outside the organization to ensure the financial statements are
a true and accurate representation of the facts.
An incorporated organization receiving government funding is required
to have an audit and to have the auditors approved by the membership
at the Annual General Meeting.
Role of the Treasurer and the Finance Committee
There are several positions that have a role to play in ensuring
good financial management.
Treasurer
This board member has specific financial responsibilities which
may include (depending on the size of the organization and the board
model):
a) signing cheques
b) chairing the Finance Committee
c) presenting financial reports to the board
d) participating in budget development.
In very small organizations, the treasurer might be responsible
for most of the budget preparation.
*In the Policy Governance model there is no role for the treasurer.
All financial management is the responsibility of the CEO.
Finance Committee
This committee reports to the board. It may be chaired by the treasurer
or another board member. It monitors the financial status and practices
of the organization in more detail than the board normally does.
In some boards, this committee advises the Executive Director on
financial matters. The working board may also choose to have this
committee make specific financial decisions.
Staff person
The staff person can be the CEO or Executive Director in larger
organizations or a bookkeeper or support staff person in a smaller
organization. In most cases, this person would be a resource to
the board. In the case of the CEO, he or she may have decision-making
authority in the budget process.
Fundraising
The board is responsible for ensuring there are enough financial
resources to meet the mission of the organization. Often board members
are expected to fundraise for-the organization. Yet board members
may find fundraising one of the more difficult tasks they are expected
to perform.
United Way of Canada/Centraide Canada
What Board Members Should Know About Fundraising
1. You must make a personal commitment to the goals and objectives
of the organization.
2. You should be committed to the purposes of the fundraising or
development program.
3. Give leadership and time to fundraising efforts.
4. Some organizations establish a fundraising committee, chaired
by a board member.
5. Depending on financial resources some organizations use outside
fundraising consultants.
6. Monitor progress and effectiveness of fundraising efforts
7. Stay up-to-date on trends and new techniques in fundraising
8. Seek out and cultivate prospective donors
9. Use knowledge, understanding and personal networks to spread
the word about the organization
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