- Specific financial management tasks are normally allocated to the Treasurer and presented to the Board so that it can be clearly understood.
- It is important for everyone on the Board to make informed decisions about the organisation’s finances
The Board or Committee is ultimately responsible for the financial health of your organisation. Your organisation’s finances are the responsibility of all Board or Committee members and so you’ll need to be familiar enough with your organisation’s financial information and not just rely on the Treasurer. Financial reports should be on the agenda at every board meeting. The financial information should be presented clearly so that it can be understood by everyone and so that sound decisions can be made. Key financial issues include ensuring the organisation has sound budgeting, accounting and financial control processes, ensuring it has access to the resources it needs and remains solvent, ensuring processes are in place for secure and safe money handling and other anti-fraud measures and that the organisation is planning ahead to anticipate future revenue and expenditure. Some organisations – particularly larger ones – may also have financial reporting obligations to regulatory agencies.
Boards often allocate specific duties to a Treasurer, or have board members with financial expertise, and may also appoint a finance committee to look at finances more deeply and advise the Board. Part of the Treasurer/Finance Officer’s specific role is to administer funds and maintain financial records, do the banking, account for money received and spent, prepare financial statements, budgets and reports for the Board.
While not every governance member is expected to have specialist financial expertise as would be expected of a Treasurer, all governance members must have a level of financial understanding to enable them to make informed decisions about the organisation’s finances and to review and ask questions about financial reports.
Key documents that you should develop familiarity with over time include: the monthly financial reports and statements prepared for your Board meeting (usually known as profit and loss reports); the annual budget; the balance sheet (that shows assets and liabilities); your organisation’s annual financial statements and key funding contracts and their terms. It is good practice for organisations to have their financial statements externally checked or ‘audited’ by a professional accountant each year.
You should feel comfortable understanding the financial information presented to you and feel welcome to ask questions about what the financial information being presented means.
You should work to understand the monthly financial reports such as “Profit and Loss” statements and your organisation’s balance sheet, as well as your organisation’s annual budget and annual financial statements.
Want more? ... check out these resources
Online article – Community Governance NZ – 5 minute read
Community Governance NZ offers this nice introduction to the key financial concepts and processes you should work to get your head around as a Committee or Board member.
Online article – Institute of Company Directors – 5 minute read
A great cheat sheet setting out all the lingo accountants use so you’ll be sounding like a finance pro in no time. Once you’ve mastered that, have a wander around the Institute’s finance information for board members module – loads of helpful material.
Online toolkit – Australian Indigenous Governance Institute – 6 minute browse
This is a very practical resource with great advice relevant to smaller community based organisations. It has some specific content of relevance to First Nations community controlled organisations, but many tips that are universally relevant.
Webinar – Ourcommunity.com.au – 45 minute
An easy watch webinar from Ourcommunity.com.au that give you a good guide to the questions it’s good to ask when you are reviewing your organisation’s finances. You’ll need to register to watch.
Online article – Australian Securities and Investments Commission – Over 10 minutre read
Trading insolvent – or spending money when you don’t really have it – is a very big deal and one of the major responsibilities of governance members is to avoid it. This package on the ASIC website gives you all the basics on Insolvency. Click on the “what to do if you suspect financial difficulty” link to go to the section about how to take action if you are worried about insolvency.