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C LARK N UBER P. S. What Board Members Need to Know About Non-Profit Finance – What’s Important, What’s Distracting United Way Worldwide Financial Management.

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Presentation on theme: "C LARK N UBER P. S. What Board Members Need to Know About Non-Profit Finance – What’s Important, What’s Distracting United Way Worldwide Financial Management."— Presentation transcript:

1 C LARK N UBER P. S. What Board Members Need to Know About Non-Profit Finance – What’s Important, What’s Distracting United Way Worldwide Financial Management and Human Resources Forum October 8, 2013 Andrew M. Prather, CPA Shareholder aprather@clarknuber.com 425-635-4571

2 Page 1 C LARK N UBER P. S. Agenda Board Governance 101 –Discussion: Focusing on mission outcomes; monitoring finances Finances – What’s Important and What’s Not –Discussion: Key financial data points for UW Boards to monitor

3 Page 2 C LARK N UBER P. S. Learning Objectives Board Governance 101 –Refresher on the role of the Board vs. staff –Best practices on how to focus the Board on mission outcomes Finances – What’s Important and What’s Not –How to distinguish between “dashboard” issues and “GPS” issues –Best practices on key financial data points for UWs

4 Page 3 C LARK N UBER P. S. Case Study: The Board Debate on New Tires vs. Retreads “OLD” “NEW” February 2014 Report

5 Page 4 C LARK N UBER P. S. Board Governance 101 Role of the Board vs. Management The Board’s Duties Role of the Finance Committee

6 Page 5 C LARK N UBER P. S. VISION Executive Director MANAGEMENT Staff GOVERNANCE Board

7 Page 6 C LARK N UBER P. S. Role of the Board vs. Management Board’s Role: –Ensuring that the organization is pointed toward the right target, that it is moving at the right pace toward that target, and that it stays in-bounds as it does so. Management’s (Exec. Dir. & Staff) Role: –Getting people together to accomplish desired goals and objectives using available resources efficiently and effectively; including planning, organizing, staffing, directing, and controlling for the purpose of accomplishing the mission.

8 Page 7 C LARK N UBER P. S. Role of the Board vs. Management Board’s Role: –Ensuring that the organization is pointed toward the right target, that it is moving at the right pace toward that target, and that it stays in-bounds as it does so. Management’s (Exec. Dir. & Staff) Role: –Getting people together to accomplish desired goals and objectives using available resources efficiently and effectively; including planning, organizing, staffing, directing, and controlling for the purpose of accomplishing the mission.

9 Page 8 C LARK N UBER P. S.

10 Page 9 C LARK N UBER P. S. Duty of Loyalty Duty of Good Faith Duty of Care The Board’s Duties

11 Page 10 C LARK N UBER P. S. Duty of Loyalty Duty of Good Faith Duty of Care Regularly prepare for and attend board meetings Read all the information provided to you Actively participate in board discussions, exercising independent judgment in decision making Ask questions so that you have a complete understanding of the organization’s financial picture Understand the impact of various revenue development approaches on your organization’s financial health The Board’s Duties

12 Page 11 C LARK N UBER P. S. Committee of the Board –Spends extra time on financial matters on behalf of the Board –Allows more Board meeting time to be focused on mission Advisory group to CFO Finance Committee

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14 Page 13 C LARK N UBER P. S.

15 Page 14 C LARK N UBER P. S. Focusing on Mission and Results Past emphasis on inputs and activities. Holding managers accountable for results encourages them to focus more on results. In the past, managers were primarily held accountable for the prudent use of the resources they were given, the authorities they used and the activities they carried out. The concern was to ensure that spending was within budgets and complied with established rules and regulations. This did not encourage a focus on the results produced by these resources; rather, compliance dominated managers' attention. 1997 October Report of the Auditor General of Canada

16 Page 15 C LARK N UBER P. S. Discussion Question How does a UW finance leader direct the Board to focus on mission outcomes and less on financial metrics?

17 Page 16 C LARK N UBER P. S. Nonprofit Finances & the Board – What’s Important, What’s Not? What’s on the Board’s mind? Dashboard issues vs. GPS issues

18 Page 17 C LARK N UBER P. S. Topics from Audit Report Meetings Operating reserves Growing revenues Quality of finance staff Risk management

19 Page 18 C LARK N UBER P. S. “We don’t want to be on the front page of the newspaper.”

20 Page 19 C LARK N UBER P. S. What’s Important and Why? Board’s Role: –Ensuring that the organization is pointed toward the right target, that it is moving at the right pace toward that target, and that it stays in-bounds as it does so. How do we coach the Board to properly carry out its role in the area of financial governance?

21 Page 20 C LARK N UBER P. S.

22 Page 21 C LARK N UBER P. S. GPS Issues: Pointed at the right target Moving at the right pace Dashboard Issues: Staying in-bounds

23 Page 22 C LARK N UBER P. S. Distinguishing Between the Dashboard and GPS GPS issues –Mission-related –Examples - Strategies to improve education Strategic partnerships Dashboard issues –Boundary-related –Examples – Financial – operating reserves, budgets, etc. Compliance – legal, regulatory, best practices, etc.

24 Page 23 C LARK N UBER P. S. What Does the Board Do With Dashboard Issues? Identify the issue Establish written policy to create the boundary Monitor actual results and hold management accountable to stay in- bounds Periodically reassess relevance of the issue

25 Page 24 C LARK N UBER P. S. What Does the Board Do With Dashboard Issues? Identify the issue Establish written policy to create the boundary Monitor actual results and hold management accountable to stay in- bounds Periodically reassess relevance of the issue Example: Need for operating reserves Written policy; maintain reserves of 8-12 weeks Monthly financial report on month-end actual and year- end forecasted operating reserve balance Annually reassess need to maintain operating reserve and adequacy of policy

26 Page 25 C LARK N UBER P. S. Discussion Question What information on a UW’s periodic financial statements should the Board be concerned with?

27 Page 26 C LARK N UBER P. S. Resources Independent Sector’s Principles for Good Governance and Ethical Practice http://independentsector.org/governance_ethics_resource_center AICPA NFP Audit Committee Toolkit http://www.aicpa.org/InterestAreas/BusinessIndustryAndGovernment/Resources/NotForProfitR esourceCenter/Pages/AICPANot-for-ProfitAuditCommitteeToolkit.aspx National Center for Charitable Statistics – Nonprofit Operating Reserves Initiative Workgroup http://www.nccs2.org/wiki/index.php?title=Nonprofit_Operating_Reserves BoardSource https://www.boardsource.org/eweb/ Clark Nuber’s In the Boardroom Governance Newsletter https://www.clarknuber.com/news/publications.php#newsletters

28 Page 27 C LARK N UBER P. S. Questions? Andrew Prather CPA Shareholder Clark Nuber P.S. aprather@clarknuber.com 425.635.4571

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