Serving on a nonprofit Board is a big responsibility. Among other things, Boards are responsible for financial stewardship and oversight, also called “Fiduciary Responsibility.” Fulfilling financial oversight responsibilities doesn’t mean that every Board member has to be a financial expert. However, some Board members must have the necessary financial skills and knowledge to make appropriate financial decisions about the nonprofit’s donated funds and assets.
What skills and experience should Board members possess to effectively and appropriately fulfill the organization’s Fiduciary Responsibility? Should any particular financial professional background and experience be included in the Board’s membership? As usual, there isn’t just one “right” answer, but here’s some insight.
Effective nonprofit Boards often look to these four professional backgrounds to recruit some of their members:
Accountant
Accountants have technical training and experience that help nonprofits ensure that they get clear and reliable financial reports. They are used to helping their clients understand their finances. They can provide that same understanding to their fellow Board members. Also, Board members who work in public accounting or in a corporate setting know how to use financial statements as planning and management tools.
Banker
Bankers know the actions necessary to achieve financial goals and assess risk. Lenders and other banking professionals help a range of organizations meet their financial needs. That knowledge is hugely valuable to any nonprofit. Bankers’ experience in reading and interpreting financial information is also invaluable for making informed financial decisions.
Project Manager
Project management boils down to planning, tracking and controlling a budget, schedule, and resources to achieve a goal. Skills in those areas are an asset for any organization. Project managers have organizational and analytical skills to help nonprofits plan and assess financial decisions, monitor results, and track achievements, including programmatic results.
Chief Operating Officer/Administrator
Board members with experience running a business, agency, or department provide an opportunity to increase your Board’s financial IQ. Chief Operating Officers and Administrators are familiar with the inputs and considerations needed to make informed and appropriate financial decisions. They are also accustomed to making difficult decisions under stress, handy to have in any organization.
Getting the right mix of Board members with a financial background is crucial for nonprofits to fulfill their Fiduciary Responsibility. Effective Boards make sure that some of their members possess the necessary financial skills and knowledge to make appropriate financial decisions about the nonprofit’s donated funds and assets.
So, now you have some Board members with financial knowledge. How do they fulfill help the entire Board fulfill its Fiduciary Responsibility? Find out by coming back to read next week’s blog post, “Financial Duties of Nonprofit Boards.”