transforming communities through charitable investment

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Managing the ‘F’ word in your organisation: Board Financial Oversight

Do your Trustees have a full grasp of the charity’s finances when they are presented at Board meetings? Are they switched on or off; do they take an interest or even challenge the numbers; do they offer insights that inform your investment, risk and fundraising strategies; or do they just agree with what’s put in front of them?

We have worked with many Boards that fail to demonstrate a full understanding of the finances when the charity’s financial and management accounts are presented to them. There are often assumptions made that the accountable officer has it all covered or that the Treasurer or someone with knowledge of finances can be depended upon to ask the finance-related questions. But an oversight of the hidden financial holes can potentially lead to disastrous results that can see the organisation eventually fold.

Our 10-point checklist:

  1. Invest in financial literacy throughout your organisation, through training and information sessions, and even include an agenda item at your Board meeting devoted to just that. This should include compliance, understanding the basics of P&L, balance sheets, ratios, and the all-important matter of full cost recovery.
  2. Promote a positive financial culture so that there is transparency and discussion about numbers that don’t appear to be adding up, or that wins in fundraising are celebrated. 
  3. Give the discussions concerning finance some meaning by linking numbers and units to the impact of services on your service users. The Board needs to know how the resources that flow into the organisation make a difference on the ground. This should help to avoid treating the subject of finance in isolation and position it instead as an integral part to most of your Board discussions.
  4. Be diligent about implementing cyclical events concerning budget setting, forecasting and business plan reviews through forward planning and timely communication.
  5. How you present accounts can make a difference to how Board members engage with them. Change the format in which the accounts are normally presented at meetings, even introduce a financial dashboard that is graphical or have visual impact and which highlights key points. Rule: simple, succinct and strategic.
  6. Develop a risk management framework that specifically addresses financial issues. Depending on the size of your organisation your Board may decide whether they want oversight to only strategic risks or to operational risks also.
  7. Challenge your accountable officer for finance, raising tough questions that no one is asking.
  8. Focus and contextualise fundraising discussions at the Board meetings around your short, medium and long term financial position. This should at the very least address areas of investment in resources and growth, capacity and income and expenditure projections.
  9. Keep an eye on your reserves and ensure that everyone is clear about the reserves policy. This sounds obvious, however so many organisations that we have worked with overlook this very simple and essential matter, which later comes to haunt the Board.
  10. Form a finance, or finance and fundraising, committee that helps to present the financial position at Board meetings. This will devolve and speed up the decision making process, engage Board members, and remind them of their responsibilities.

Good financial management is more than just about compliance and good practice. It can help your organisation to thrive and maximise impact in the communities you serve. Keeping heads in the sand can eventually be a high cost to the organisation.

Further information on how we might be able to assist you in implementing our 10-point plan or conducting a health check, please get in touch.

Board financial oversight, a 10 point plan

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