Ask the Expert: Important Questions Nonprofit Board Members Should Ask

Written by
Kate Mombourquette

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Dear Finance Expert,

I’m a nonprofit board member and admittedly I don’t feel comfortable interpreting financial statements. What should I focus on? What are the important questions I should be asking to meet my fiduciary responsibilities and protect the organization?

Signed, Lost in Translation

Dear Lost in Translation,

Reading financial statements can be flat out intimating. Board members don’t need to be financial experts, but they must possess a basic understanding of the finances in order to make decisions that satisfy their duty of care.

It’s important as a Board, not to get caught by surprise when it comes to the finances of the organization. As I’m sure you know, board members can be liable if something goes awry. As an engaged board member, it’s crucial to ask questions. Here is a list of basic questions to get you started:

  • Is the board provided the Form 990 prior to filing?
  • Did the organization receive a clean audit?
  • Are there footnotes that are of concern?
  • Do all board members receive reports in advance, with enough time to review before scheduled meeting?
  • Are we documenting our board meeting minutes and decisions?
  • Do we have the appropriate checks and balances to prevent errors, fraud, and abuse?

When it comes to getting the full financial picture of an organization, collaboration is key. The executive team and board members should work together to make sure all members are educated and informed regarding financial documents. The following questions address some of key issues board members should raise when reviewing the organization’s finances.

  • Are we meeting restrictions and guidelines set by our funders?
  • Is our cash flow projected to be adequate?
  • Do we have sufficient reserves?
  • Is our financial plan consistent with our strategic plan?
  • Are we regularly comparing budgeted vs. actual?
  • Are our expenses appropriate?
  • Do our financials report against key performance indicators (KPI’s)?
  • Do we have clear and concise dashboard reports?

Board members can’t provide financial oversight if they don’t know what to look for. Education, collaboration and asking the important questions is vital to good governance.

If you’d like to learn more about which financial information is critical to review or are interested in a financial assessment for your organization, contact us at insource@insourceservices.com or 781-235-1490.