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The Board Member's Easier Than You Think Guide to Nonprofit Finances
Everything You Need to Know in 1-Hour
by Andy Robinson and Nancy Wasserman, 111 pp.
With the possible exception of “How do I avoid fundraising?” a board member’s most commonly unasked question is, “What do all these numbers mean – and what am I supposed to do with them?”
Financial planning and budgeting combine all of our money taboos with that common disorder, math phobia. Put a spreadsheet in front of many nonprofit leaders, and watch how they keep their eyes down, like many of us did when the dog ate our homework.
With their book, The Board Member’s Easier Than You Think Guide to Nonprofit Finances, authors Andy Robinson and Nancy Wasserman help trustees (and their staff colleagues) confront and address this fear – with wisdom, clarity, humor, and humility. If you find math mysterious and scary, yet you need to understand financial statements to do your job as a board member ... read this book.
OF RELATED INTEREST
The Ultimate Board Member's Book, by Kay Sprinkel Grace
After reading this perceptive work, your board members will have a solid command of just what they need to do to help your organization succeed. It's all here in 114 jargon-free pages: how boards work, what the job entails, the time commitment, the role of staff, fundraising responsibilities, conflicts of interest, effective recruiting, de-enlisting board members, and board self-evaluation.
About the Authors
Andy Robinson (www.andyrobinsononline.com) provides training and consulting for nonprofits in fundraising, board development, marketing, earned income, leadership development, and facilitation. Over the past 16 years Andy has worked with organizations in 47 U.S. states and Canada. He specializes in the needs of groups working for human rights, social justice, environmental conservation, arts, and community development. Andy is the author of several books including How to Raise $500 to $5000 from Almost Anyone and Great Boards for Small Groups, both published by Emerson & Church.
Nancy Wasserman is the principal of Sleeping Lion Associates (www.sleepinglion.net), a consulting firm that works with mission-driven ventures to identify, analyze, and address strategic questions and develop plans for implementing new programs or ventures. She has helped businesses, nonprofits, cooperatives, and government agencies better understand their financials, prepare feasibility analyses, and develop business and program plans. Nancy has extensive experience with groups working in social finance, sustainable development, energy efficiency, agriculture, and affordable housing.
When you order five or more copies of The Board Member's Easier Than You Think Guide to Nonprofit Finances, you will receive a FREE set of training activities designed by the authors to highlight various chapters in the book - and help sharpen your board's financial acumen. The exercises will be included with your shipment.
Table of Contents
- What Every Board Member Should Know… and Probably Doesn’t
- When Things Go Horribly Wrong, Part 1: Where Did All the Money Go?
- When Things Go Horribly Wrong, Part 2: Where Did All the Money Come from?
- Managing Money is Managing Mission
- Learning a New Language: Financial Management Isn’t Really about Math
- A Three-Minute Guide to Measuring Your Organization’s Financial Health
- It’s Easier than You Think: Creating a 1-Page Financial Dashboard
- Managing Risk, Part 1: Diversify Your Income
- Managing Risk, Part 2: Financial Controls
- Managing Risk, Part 3: Insurance and Other Necessities
- How Much Control is the Right Amount? Finding the Best Altitude for Financial Oversight
- “Do We Really Need a Finance Committee?”
- It’s Not Your Money: Financial Conflicts of Interest
- “Where Do We Stand, Where Have We Been?” Understanding and Using Financial Statements
- Budgets as Maps: Planning Your Future
- “Are We Heading in the Right Direction?” Managing the Budget
- Big Ticket Purchases: Capital vs. Operating Expenses
- How (and Why) to Read an Audit
- Your Tax Return: Surprise, It’s Not Just about Money
- Money in the Bank: Reserve Funds, Endowments, and Lines of Credit
- Yes, This is Everyone’s Job: Training the Board
- Developing the Next Generation of Nonprofit Financial Geniuses (Like You)
This article is excerpted from The Board Member's Easier Than You Think Guide to Nonprofit Finances, by Andy Robinson and Nancy Wasserman, ©Emerson & Church, Publishers. To obtain reprint permission, call 508-359-0019 or email us.
What Every Board Member Should Know … and Probably Doesn’t
I ran into a friend in the grocery store recently. We were hanging out in the aisle, chatting about our neighbors and families, when the conversation turned to a local nonprofit.
“Aren’t you on the board of Neighbors Helping Neighbors?” I asked.
“Yeah, about a year now.”
“I know a little about them, but I’d like to know more. How big’s your budget?”
“Last year, about $325,000. We’re aiming for $350,000 this year.”
“And you raise the money how?”
“Well,” she said, “about half comes from the state, a quarter from the city and county, and the rest from foundations and individual donors, including 5 percent we raise at our annual dinner. Would you like to buy a ticket?” she asked, raising an eyebrow.
“Of course,” I said, laughing. “But first, tell me where the money goes.”
“We’re a social service agency, so the biggest line item is salaries. It’s about 70 percent of the budget. The rest goes to rent, utilities, accounting, staff development, the usual stuff. We also pay mileage for volunteers, because they do a lot of driving. We like to say 85 percent of the money we raise goes to program costs.”
Since fundraising is my business and she was asking for a gift, I pressed a little further.
“Do you have a reserve fund?”
“Not formally, but we try to have money available to manage our cash flow,” she said.
“Our goal is to have enough cash in the bank to cover expenses for three months, in case our government funding is reduced or delayed. We’re a little short of the goal, but if our event is a big success, we plan to rebuild our reserves. Now about that ticket ....”
As you might have guessed, this conversation never really happened. But as nonprofit advocates and consultants who have spent a collective fifty years working with a variety of organizations, we still dream about the perfect trustee – and when it comes to financial management skills, our fictional board member comes pretty close. We can debate all the dimensions of board leadership – strategic planning, program oversight, serving as ambassadors on behalf of the organization, and so on – but one essential aspect is written into the law governing nonprofit organizations: fiduciary responsibility.
These are big words, and they don’t mean simply approving a budget or signing off on an audit. In the deepest sense, accepting fiduciary responsibility means integrating financial thinking, including stewardship of your assets, into every aspect of board governance. If you don’t know the financial information by heart – if you’re not steeped in the numbers and understand why they’re important – it’s impossible to exercise that responsibility.
So imagine we bump into each other and I start asking about your organization. Could you answer the following questions – or would you turn and run?
-What is your organization’s annual budget?
-What are your current sources of income – and what would be the best mix of income for your organization?
-What are your largest expenses? What percentage of the budget do they consume?
-Does your organization have a reserve fund? How much is in it, and under what circumstances can it be used?
-What is your biggest financial risk?
-How do you use financial management tools to measure your impact? Does your organization compute the cost per unit of service, for example, for each client you help, or audience member you entertain, or acre you protect?
-What would help you understand your organization’s financial situation more clearly?
If you can answer these questions with confidence and clarity, and do so without shuffling through a pile of papers, please pass this book along to a colleague – and consider mentoring that person in the joys of financial management.