An Interview with Andy Robinson and Nancy Wasserman, authors of The Board Member’s Easier Than You Think Guide to Nonprofit Finances.

The Board Member's Easier Than You Think Guide to Nonprofit FinancesIn your book, The Board Member’s Easier Than You Think Guide to Nonprofit Finances, you say financial management isn’t really about math. What do you mean?

Financial management is about assessing whether your nonprofit is meeting its mission effectively and efficiently. In other words, are your programs successful and are you providing your service at an appropriate cost? That’s oversight, not math.

Describe a pet peeve, when it comes to oversight.

Board members who grab onto specific line items – “Why aren’t we shopping at ___? We could save $50 on office supplies” – rather than focusing on bigger issues like long-term financial sustainability. When it comes to financial management, it’s far too easy for board members to descend into the thicket rather than staying at the proper altitude. They don’t call it “oversight” for nothing. This is where a skilled treasurer can really be helpful.

So many organizations have bookkeepers or accountants or even CFOs. If I’m a board member, I say “Why bother?”

Because you’re responsible for maintaining the financial strength and integrity of your organization. This isn’t just a good idea – it’s the law. As leaders, board members have a duty to report to members, supporters, the IRS, and the community at large about how their organization is using its resources and meeting (or not meeting) its mission.

It’s true that many organizations have bookkeepers, accountants and CFOs. But they can miss the big picture, make mistakes, report fraudulent information, or embezzle funds. Board oversight provides an essential check-and-balance.

Cite a dumb financial mistake you’ve seen from a nonprofit board.

Years ago, one of us served on the board of an organization that was overly reliant on one foundation. When that grant was repeatedly deferred and delayed, the executive started secretly emptying her own retirement account to cover payroll – without notifying the leadership. The board knew about the funding delay but never asked the question, “What are you doing to keep the ship afloat?” Turns out the grant wasn’t renewed, the organization folded, and the executive director was out of a job and her retirement savings.

This behavior – call it martyrdom – is more common that many people realize, especially in grassroots agencies. When employees treat organizational funds like a personal piggybank – putting money in on their own initiative, then taking it out to repay themselves – it’s a slippery slope that’s both unethical and potentially illegal.

Since United Way’s scandal some years back, there hasn’t been much in the news about fraud in the nonprofit sector. Is it over-hyped?

A 2007 study found that nonprofits lose 13% of their philanthropic income to fraud. That’s a lot of money that could be going to good causes! A recent Google search on the phrase “nonprofit embezzlement” generated 387,000 hits – so no, the problem hasn’t gone away. But nobody wants to talk about it. It’s embarrassing. It makes you and your organization look bad. So when it happens, most nonprofits try to keep it quiet.

I can’t think of a duller subject than a financial audit. In a sentence or two, I challenge you to make it interesting.

Audits tell you how much your organization is worth and – since you brought it up – they are also one of the better ways to uncover fraud and embezzlement. There’s nothing more exciting than crime – check out the local TV news – especially when the word gets out and you have to defend your nonprofit’s reputation.

Okay, a second challenge: Is there a way to dispense with sleep-inducing spreadsheets?

In recent years, many nonprofits have embraced the idea of a dashboard: a one-page document that shows how the organization is doing at that moment, with data on historical trends. The principle is that trustees can, by carefully reading one page, know enough about the organization’s finances and effectiveness to ask good questions and provide appropriate oversight.

Here’s a sample from a fictional group called Neighbors Helping Neighbors, which coordinates volunteers to provide social services to seniors to help them continue to live at home. Notice how the form is divided among three categories: Financial, Efficiency, and Impact. At least a third of the metrics focus on the success of their programs, rather how they raise and spend money.

In addition to reading your book, of course, and contributing as much as they can afford, tell us the single best thing a board member can do to ensure his or her organization’s fiscal health.

Ask questions: What’s the best mix of income for an organization like ours? What’s our biggest financial risk? How can we better use financial management tools to track our impact? Don’t simply defer to the wisdom of the treasurer or the bookkeeper – ask questions until you understand where the money comes from, where it goes, and whether that money is doing the work you want it to do to improve your community.

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.

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.