As we continue with our series about the responsibilities of nonprofit boards, we look at the topics of securing financial resources and protecting assets. Boards typically accept the responsibility for managing existing resources, but it is common for boards to refuse the responsibility for securing additional resources. The board needs to ensure that fundraising policies are in place, and then provide oversight for the fundraising efforts that are occurring. Sound financial management in both aspects is crucial to ensure that cash flow is available to keep the organization running.
Ensure Adequate Financial Resources
The nonprofit board must ensure that financial resources are available to carry out the organization’s mission. First, evaluate the national fundraising standards for your type of organization, then set financial goals to achieve them. Several key activities which the board must participate in will help assure that will happen.
- Creating a fundraising plan that will meet the strategic goals of the organization
- Actively participating in executing that plan, ensuring there are several diverse and dependable revenue streams.
- Managing the budget to avoid spending beyond its means
If you have a development committee, often the tendency is for the other board members to assume that the committee is solely responsible for raising funds. Instead, all board members should be engaged proactively in shouldering this responsibility.
Keep in mind that it is risky to depend on only one or two revenue sources for the majority of income. The most effective solution is to ensure the fundraising plan includes many donor sources. Multiple sources will help stabilize cash flow, reducing the risk of financial challenges if a single revenue source falls through.
Protect Assets and Provide Financial Oversight
Financial oversight is rated the second strongest area of board performance, behind understanding the mission. (Board Source Governance Survey, 2015)
The board’s number one responsibility is to safeguard organizational assets, holding these assets “in trust.” Part of this responsibility lies in the approval of an annual budget and tracking expenses and revenues against this budget. In addition, it should be reviewing the cost and effectiveness of existing programs, examining alternatives and their financial implications and making modifications during the year if there is a shortfall.
This financial oversight should always include a partnership with management of the fundraising activities to ensure anticipated revenue will support the projected programs.
For support in designing and training an effective non-profit board, Mirenda & Associates is here to assist. Our team specializes in the training and resources you need to build strong leadership for a nonprofit. Contact us to learn about the successful systems that can be implemented to support the needs of your organization.