Monthly Financial Reports

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THE MONTHLY FINANCIAL REPORT is one of the principal supervisory tools available to any governing board of directors. The first point we must make about it is that it should be just that, a monthly financial report; and that your full board of directors should in fact be reviewing this important report every month. It is not sufficient for a board to delegate this task to a finance or to an executive committee for the “in between” months and for the full board to only review the report quarterly. Your full board of directors is morally, and legally, responsible for the financial well being of your nonprofit organization and is therefore responsible to review the financial report on a monthly basis.

There is another, very basic, reason for a board to review this report monthly. It is characteristic of most boards of directors that there will be some members of the board whose only exposure to any financial report is during the periodic meetings of the board. If such people only see this financial report on a quarterly basis, they never will learn how to read it correctly and comfortably. Practice may not always make perfect, but it certainly helps!

It is also because of the fact that several members of a typical board will probably not be experienced in reading financial reports that your report should be as simply stated as is possible and yet be a meaningful, useful report. Far too often, financial reports are so complicated that only a C.P.A. could make sense of them. Such complexity is usually unnecessary. It is usually possible to tell the current financial story of the average nonprofit organization fairly simply. Apply the so-called “K.I.S.S.” principal, so popular a few years ago, that admonishes us to “Keep It Simple Stupid!”

One of the more common problems is unnecessary detail. Some financial reports literally list every check received and every invoice to be paid. Proper summaries by categories which relate to your budget is what you and your financial advisor should work towards. And with respect to the payment of invoices, contrary to the mandates of some government sponsored agencies, board approval of what bills to pay is not an appropriate activity for a board of directors. To handle such matters is why there are staff, budgets and financial reports.

Another problem that arises with financial reports is the time at which individual board members often receive them. The worst thing to do is to distribute them at the board meeting and give everyone only a few moments to look them over. Once again, remember that there are more than likely people sitting around the board table who, because of inexperience with such matters, need more time. Put this report in the mail with the notice of the meeting and give your board members adequate time to review it at their own pace. They are entitled to such a courtesy. You might wish to consider moving the date of your monthly board meeting deeper into the month in order to make the mailing of this important supervisory tool possible.

As for you, individually, if there is something about your financial report that you do not understand, don’t be afraid to ask. You are, together with the other members of your board, personally responsible for the financial health of the organization. You are therefore entitled to have the financial details and status of your nonprofit organization clearly spelled out. Too often financially inexperienced board members will remain silent when they do not understand what they are reading, afraid they will be thought “dumb”. If you don’t understand what you are looking at, the chances are very good that others are in the same boat. Don’t be afraid to speak out? It’s your right and your responsibility.

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