For many not-for-profit organizations, the challenges of the pandemic continue. Board members have a fiduciary responsibility to oversee and protect the not-for-profit’s finances and reputation. As we approach the conclusion of 2020, now is a good time to be planning ahead and asking the board of directors what financial information is important to them. Since every organization is unique, the best practice is to determine what financial information is essential for the board to make strategic decisions.

Here are 3 examples of financial reports that the board may utilize on a regular basis.

Statement of Financial Position

The Statement of Financial Position (Balance Sheet) provides an understanding of the organization’s resources and obligations, both current and long-term. Assessing the current resources and obligations provides insight into the organization’s ability to pay the bills. One critical component of this assessment is determining available cash. The first item listed is cash, but not all of this balance may be available for current spending. Available cash is the cash less amounts restricted for specific purposes by donors or creditors. If the organization has receivables the board can assess the likelihood of collecting the amounts and the anticipated timing. This is an important consideration in evaluating the timing of cash flows. 

Budget to Actual Reports – Revenue and Expenses

Providing the board ongoing reports comparing budget to actual revenue streams and expenses is essential in determining what is not going according to plan. Understanding this is critical in recalibrating to the changes in a timely manner. COVID-19 was a significant change and not-for-profit boards used these reports to adapt and respond. Some potential questions for the board to consider include;

• Has the pandemic caused any significant decreases in contributions for the organization?
• Should the organization assess other opportunities for revenue?
• Are there concerns related to the financial health of the organization if actual results are significantly different than budgeted?

Comparison to Prior Year Reports

Identifying trends from current year and prior year financial information will allow for the board to strategically plan for the future. If current trends are continuing the board can assess

• What will be the organization’s financial position in 6 months?
• Do the variances from the previous years meet your expectations or is it a reason for concern?

When there are significant changes like the current year’s pandemic the board can utilize the comparison to determine;

• What revenue sources were most impacted? 
• Is there too much reliance on a single revenue source?
• Were programs or events canceled or adapted due to COVID-19?
• What has proven effective in achieving mission objectives in changing circumstances?

Key Takeaways

Find the financial details that are most important to the board for your organization. You may even be able to limit the administrative time needed to prepare materials for each board meeting by reducing unnecessary information and focusing on key metrics. A final quick tip is to always document these important discussions during each meeting so they can be kept on file and referred back to when needed.

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