Rethinking the finance committee
This post was inspired by a webinar about Nonprofit Capacity Building that I attended today. The webinar was hosted by NonProfit Quarterly and explored relevant topics such as network leadership, coaching, board governance and more.
Jeanne Bell of CompassPoint made the point that our current construction of nonprofit board committees focused narrowly on management tasks often frustrates deeper board engagement with the really strategic issues of the organization.
In particular she singled out the Finance Committee as one in need of a strategic overhaul because of the critical need to join thinking about impact and financial sustainability.
I am so with you Jeanne.
Personally, all the people reading this article should take down some pointers from this post and need to understand and evaluate how to plan your finance as this is one such aspect which is quite vital no matter the place where it is put in use.
Reinventing the Finance Committee
I’ve also been urging Finance Committees (and board Treasurers) to reinvent their jobs.
Below are some of the typical tasks for the Finance Committee.
- ensuring prudent asset management in accordance with financial objectives and Board-approved policy
- reviewing and recommending to the Board an annual budget that reflects Board-approved priorities and adheres to policy mandates
- ensuring strong internal controls
- regularly reporting to the Board on the financial condition
- monitoring compliance with restricted obligations
- ensuring prudent cash management and cash budgeting
- developing and recommending financial policies to the board — e.g. spending policies, investment policy, insurance coverage, risk management – and monitoring their implementation.
- researching and recommending staff compensation and benefit policies
In my experience, many nonprofits find their finance committee taking up only the first two of the items above. Many organizations would be doing cartwheels if their finance committee actually attended to all eight items on this list.
But what if the Finance Committee also facilitated strategic thinking within the Board about the short and long-term financial condition of the organization by:
- developing a deeper financial analysis of organizational health
- developing financial literacy among the directors
- analyzing trends
- preparing long-term financial forecasts based on different strategic scenarios
- bringing strategic financial issues to the attention of the board for discussion and planning
- leading the discussion on key performance indicators for the Board and then revising financial reports accordingly
This type of work can completely snap the board’s focus to the really big picture issues the organization is facing. (In just the last two months, I’ve witnessed the power of this process when one board was presented with a trends analysis and the other a five year forecast with multiple program scenarios).
Shift the work by renaming the committee
Jeanne suggested such a committee would probably need a new title. Maybe a Strategic Revenue Committee? Financial sustainability committee?
Don’t think this is just for finance.
In my oldy but goody article, Is it time to abolish the board fundraising committee, I suggested splitting out the management jobs of fundraising into task oriented committees like major gifts or special events which are largely managed by staff. A new committee would tackle the bigger strategic issues (some of which are mentioned above) by creating a new Revenue Planning or Fundraising Policy Committee.
How have you dramatically overhauled your board committees to make them more strategic? What did you name them? How is that working for you?