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Financial Literacy and Your Board

Sara Glidden, Program Manager

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Woman looking at an exhibit at ArtsWorcester.
Woman looking at an exhibit at ArtsWorcester.

In talking with cultural organizations across the state, a common refrain I hear is, “We love our board members, they do so much for us. But how can we get them to embrace financial literacy?”

What should board members know about your finances?

As organization leaders, we look for board members who have experience in for-profit business (Hooray! A banker! An accountant!) and then we are frustrated when they don’t understand how our financial model works. Or we welcome new board members who bring valuable experiences and connections, but they don’t understand financial issues.

Executive leaders do so many things to support new board members in learning how to be good stewards of our organizations. The ‘best practices’ of the nonprofit field tell us to have board orientation materials, mission statements, job descriptions, and to provide budgets and financial statements. We have board retreats, and policies on ethics.

Does that mean we need to conduct actual finance training?

Mostly no. Perhaps we assume that board members already have this knowledge. Perhaps we don’t feel confident of our ability to teach it. After all, many of us are in this field because of our passion for the mission, not because we want to be finance experts.

And yet a board member’s greatest responsibility is for the financial health of the organization. Sometimes we think a board’s financial responsibility only means raising funds.

But that’s not true.

So what should leaders of organizations be doing? (And by leaders, I mean the Executive Director if there is one, or the Board Chair. Or even better – both, working together.)

  • Make sure that your board has a finance committee. That’s the most important committee for your board. Identify a few people on your board who have the skills and interest to learn more about your organization’s financials. Juliet Feibel, Executive Director of ArtsWorcester, talks about this on the Mass Cultural Council’s  podcast: “You will never have a board whose members are all equally as enthusiastic about the monthly financials, but you will–if you have a few of them–they will help show others.”

 

  • Make sure that your board has the necessary knowledge about your organization so they can understand your needs. That might mean building a bridge between governance and operations. Make sure that your finance committee understands the assumptions and expectations built into your budget, and they can become your best advocates to the rest of the board.

 

  • Make sure that your board understands the indicators of nonprofit financial health or stress. NonProfit Finance Fund has an excellent blog post on the top indicators of nonprofit financial health. If you are doing well, your board should recognize it. If you have challenges, your board should be your partner in addressing them. Either way, they need a clear understanding of your financial world, and you need to be efficient and effective in helping them get there.

If you are looking for materials for board or staff finance training, there are a lot of high quality, free materials available. I suggest looking at the resources provided by BoardSource, or the National Council of NonProfits, especially:

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