Every board member is responsible for understanding and monitoring the financial status of his/her organisation, although many board members do not have a financial or accounting background and they may struggle fully to comprehend the implications of the financial reports that they receive.Treasurer
It is important to have someone on the board with financial skills, who understands the financial systems and processes of the organisation and who can interpret them for the board. However, this does not absolve other board members from their responsibility to ensure they are fully aware of the organisation’s financial position.
The position of Treasurer is often stipulated in the constitution of non-profit organisations. Some organisations, especially those with professional financial staff, replace the role of Treasurer with a small Finance sub-committee, in which case the Chair of that sub-committee fulfils some of the functions of a Treasurer, but with a more hands-off, supervisory role.
It is recommended that the Board draw up a description of the role of Treasurer to suit the operation of that particular Board. The description should reflect the skills, interests and amount of time that the Treasurer has to offer and should indicate those tasks that will be undertaken personally and those that will be delegated to others. It should be revised whenever a new Treasurer takes office.
In general, the Treasurer is responsible for:
- Financial oversight - ensuring that record-keeping and accounts meet the conditions of funders or statutory bodies, that the organisation complies with relevant legislation and that appropriate financial systems and controls are in place. (This includes decisions on how to monitor issues such as electronic transactions, where for instance it is all too easy for electronic authorisation to be given for payment without the original invoice having been sighted.)
- Planning and preparing the annual budget for approval by the board (in co-operation with senior staff if relevant) and then (with the board) ensuring that the organisation operates within the budget as approved
- Banking, book keeping and record keeping (ensuring that a proper record is kept of all money received and payments made and that accounts are reconciled at least once per month)
- Taking reasonable steps to ensure implementation of systems to prevent funds being stolen or misused
- Regular financial reporting to the board, as well as to the Annual General Meeting
- Control of fixed assets and stock (ensuring proper records are kept and that required insurances are in place)
- Ensuring that the accounts are ready for audit each year.
- In organisations with paid staff, much of this work may be undertaken by an Administrator or Finance officer. However, the board still has a responsibility for oversight. It is not good business practice for one person to have sole control and oversight of the organisation’s finances.
At the very least, it is essential that effective financial systems and procedures are in place, are being consistently followed and are in line with best practice and legal requirements.
In a larger organisation, monitoring the information being supplied to the board by the paid staff may be undertaken by a Finance sub-committee. This may consist of the person with financial skills as Chair, together with one or two other members of board (for whom it may be a useful educative process). In addition, Finance sub-committee meetings would usually include the CEO and the senior staff member responsible for financial management and fund raising.
In a smaller organisation, the Finance sub-committee is even more important. Again, with the financially skilled person as Chair and perhaps a paid Administrator in attendance, other members of the board may have the opportunity to develop their financial knowledge and skills through working on it.
Finance sub-committee meetings should be accurately minuted and the minutes tabled at the full board meetings.
As for any sub-committee, it is important that the board draws up clear terms of reference for the Finance sub-committee, identifying:
- which tasks need to be performed (for example, overseeing financial implementation and reporting systems to ensure integrity and probity)
- who will undertake the tasks
- how they will be monitored.
The Finance sub-committee does not carry responsibility for the organisation’s finances but reports on its deliberations to meetings of the full board, which retains ultimate authority and responsibility. By whatever means the financial oversight tasks are carried out, final responsibility for the financial health of the organisation remains with the board as a whole. Every board member is accountable and must be able to understand the financial reports that are brought to board meetings.
Are your board members actively involved in financial management?
BoardConnect has a checklist for financial management - 20 questions to prompt consideration and discussion of the soundness of your board’s financial practices. Click here.
For further detail regarding financial management, check Brian Tucker’s excellent article: Don’t Overlook the Books. Click here for the link to the article via the BoardConnect website.
There is also a useful checklist on the DIY Committee Guide website to help identify how actively board members are participating in financial management. Click here.
“The DIY Committee Guide”, a website based in the United Kingdom. http://www.diycommitteeguide.org/article/what-role-treasurer
The Centre for Philanthropy and Nonprofit Studies,(QUT) https://wiki.qut.edu.au/display/CPNS/2.2+Roles+Of+The++Management+Committee
Fishel, D The Book of the Board, Federation Press 2008 (2nd Edition) – Chapter 9: Financial Planning and Control
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