A Simple Not For Profit Board Package

NFP Board Chairpersons  are often asked what information the Board would like to see on a monthly basis.  The resources in a small NFP are often limited, so the answer to this question must be practical but yet satisfy the fiduciary obligations of the board.  A board needs to be informed, but should also resist the inclination to ask for “everything”.   Obversely,  even the most dedicated board member also has limited time to devote to being a volunteer board member.  In short, the monthly reporting package must deliver necessary information efficiently and on a timely basis.

What is an example of  such a board package? An experienced financial manager can often realistically produce the following information for the board every month:

1. A complete set of financial statements, including balance sheet, income statement, and cash flow statement.  Available software often makes this extremely easy to do.   One problem often encountered is the board package does not get published in a timely fashion. Often  the  financial officer will not  like to make accrual and  reversing entries during the monthly close since this may require extra work.  It is important for the board Treasurer and Chairperson  to impress on the accountant the speed of producing the information will often outweigh the minor inaccuracy the use of accruals will produce.   Remember, financial information is meant to help run the company, ideally playing both scorekeeping  and predictive roles.  Waiting until all of the information is available and certain before sending out the financial statements reduces their  predictive value  and reaction time of management for correcting  problems.   The financial statements should include year to date  and  monthly financial information compared to prior year results as well as to the budget.
2. A short commentary on the financial information.  This is the equivalent of the “MDA” in a commercial company.  In a small NFP this can be done in one page and supplemented via verbal discussion at board meetings.
3. Supplemental Schedules.  Certain information is critical for directors. Cash flow information is one example.   While software such as Quickbooks can produce historical cash flow statements,  it is often a burden to produce a cash forecast on a continuous basis.   As a substitute, directors can receive:
   1. An aging of accounts receivable.  This information is extremely critical when  the main revenue sources are state and local governments.  Payment will often lag from these entities, so cash forecasting is critical.  GAAP net income is important, but at the end of the day the staff is paid with cash receipts, and not net income
   2. An  analysis of accrued expenses and accounts payable.   The board needs to know if liabilities are piling up or if they are being paid on time.
   3. A report on any major financial commitments such as employee bonus payments or capital asset acquisitions.
4. The Executive Directors’ Report.  This too can be a relatively short report.   More complete information may be presented at the next board or committee meeting. The ED should report  significant events that have occurred or are expected to occur.  The report should include all of the good news and all of the bad news of the month, as difficult as the latter is to report.  It should contain a report on significant initiatives management has undertaken, such as grant applications, potential new sources of revenue and  as well as potential deviations from the approved budget.   It is important to understand reporting these events to the board does NOT mean the board has approved either the reported initiatives or budget deviations.  For instance, a board may want additional information before the ED can finalize and file a grant application.  Grants will often come with obligations and  the board will want to  make sure any grant will not result in a loss to the organization.
5. Minutes of Committee Meetings.  Committee meetings are an integral part of board advisory, management, and oversight functions.  Board members are entitled to know what other board members are doing, especially because committee actions often result in issues the entire board needs to deal with.

Board packages will need to be tailored to the individual needs of the board and the organization.  The package described above efficiently delivers a lot of information very quickly.  One such example is a periodic reforecast of projected results for the year compared to the original budget. Other information can be added to this package from time to time. At the end of the day  though, it is the responsibility of management to determine what  it needs to report and how much detail is appropriate.