Financial Accountability
Board and Staff
By Mark D. Burkhardt, Director for Outdoor Ministries, ELCA
Who’s responsible for the financial affairs of our outdoor ministry organization, the board or the staff?
That’s one of the most frequently asked questions I receive each year. The answer is actually very clear, financial accountability is the board’s responsibility. Now, that’s not to suggest that the staff is totally free of responsibility. In fact, staff and board need to work together to create an environment of healthy financial accountability. But ultimately, the board is accountable to the constituency for ensuring that the organization is fulfilling its financial obligations, reporting it’s financial condition accurately, investing it’s resources wisely and planning for it’s financial future. The role of the staff is to manage the daily finances of the organization and to ensure that the board and its committees have timely and accurate information when needed.
The Duty of Care is a legal principle that is applied to every board. Basically, this principle states that boards have a duty to be reasonable and prudent. This duty requires that the board handle the resources of the organization (especially financial resources) in a reasonable and prudent manner, always being good stewards on behalf of the whole. Board members are expected to oversee the resources of the outdoor ministry organization with no less interest and care than they would use in managing their own personal finances. They act on behalf of the whole constituency or the owners (however corporate membership is defined in your outdoor ministry organization).
Let’s take a look at how financial accountability plays out for most boards. Boards are responsible for fulfilling all financial obligations of the organization. Basically, that means that bills and salaries get paid on time, federal and state salary withholding taxes are paid when due, and loan payments are made on schedule. The responsibility of the staff is to present evidence to the board on a regular basis that these obligations have been met. Staff members should work with the Treasurer to provide simple, easy-to-understand reports for the board. Board members should receive some basic education in how to read and understand the financial reports they are receiving. Board members should also feel free to ask questions of clarification. In times of financial shortfall, it’s the board’s responsibility to find a way for the organization to meet its financial obligations. Often this involves authorizing that a line of credit be established with a bank, or that a special appeal be initiated seeking additional donations to cover the shortfall. Staff may help the board consider various options, but the board is responsible for deciding on an appropriate course of action.
Boards are also responsible for seeing that the financial condition of the organization is reported on a regular basis. Board members should expect to see an updated financial statement at every board meeting. That means that some boards receive monthly financial statements, some every other month and some quarterly. Your board should decide what makes sense for your organization. Whatever the reporting schedule you establish, there should be no exceptions. The Treasurer and the staff are responsible for seeing that these reports are produced as agreed. Failure to receive one regular financial report should be considered a warning sign for board members. Failure to receive more than one financial statement in a row should be a "red flag" that something is not right. Most importantly, the finances of your organization should be reviewed by an independent audit committee or an auditing firm on an annual basis. A report of this audit should be made to the board with recommendations for improvements. The board should take these recommendations seriously and move to implement them as quickly as possible. An annual financial report should be made to your constituency (usually at the annual meeting), along with a summary of the audit report. A copy of the complete audit report should be available for anyone to review.
The board is also responsible for seeing that restricted and designated funds are invested wisely. Often investment options are considered by a small committee with special expertise who then make recommendations to the board. Investments may include a mix of various types, usually of low to moderate risk. Each board will need to determine the level of risk that is acceptable for your organization. High risk investments should always be avoided. Again, just as with operating funds, the board should receive a regular accounting of the status of these invested funds, showing all income and expenditures. The proper use of restricted and designated funds is very important. These funds should never be used for any purpose other than the one for which the donor intended them or the organization’s bylaws permit. Nonprofit organizations are at risk of losing their tax exempt status when funds are misused. More importantly, the board is responsible for maintaining a high level of trust between your ministry and your donors. That trust should never be violated.
Finally, the board should always be looking out for the future financial health of your outdoor ministry. In many ways this can be a challenging responsibility. Many external and internal factors could impact your organization in the years ahead. Changes in local, state or federal regulations could place enormous financial burdens on your facility. The national economy could change dramatically, affecting donor support or investments. New opportunities to purchase property or expand program could challenge your current thinking. The job of the board is to see that your strategic plan includes a financial component that will support the direction for ministry that you intend to pursue. Long-range budget projections, including the impact on user fees should be developed. New sources of income and ways to cut current operating expense should be developed. Plans for starting or building an endowment to help fund new programs or maintain facilities is almost a necessity in today’s operating environment. Looking beyond the present financial realities or your organization will help to prepare your outdoor ministry for the opportunities and challenges of the future.
Meeting financial obligations, reporting regularly, investing wisely and planning for the future are keys to success for every outdoor ministry organization. Financial accountability is a board responsibility. The staff has an important role to play, but the board has the legal authority and responsibility to provide financial oversight for your organization.