The Nonprofit Board Treasurer: 4 Myths Busted
Nonprofit board members, particularly those who claim to have little or no knowledge about nonprofit finances, often breathe a sigh of relief when there is at least one member who understands the organization’s figures on the board. This member, often a banker or accountant, is the individual frequently recruited for the position of board treasurer.
But are members' expectations fair and realistic about what is involved with the board treasurer job and who should take on this role? Here are four of the most commonly shared myths about nonprofit board treasurers.
1. The board treasurer is singularly responsible for the board’s financial-related fiduciary duties.
The most important responsibility of a board treasurer is to serve as a link to the nonprofit’s management to ensure the board has current, complete, comprehendible and accurate information from which to make decisions about financial policies, strategies and progress.
The board severally and wholly has the fiduciary responsibility for a nonprofit. This means that each and every board member is responsible for understanding and, when appropriate, acting regarding a nonprofit’s current and future financial condition. The only way members can fully understand the nonprofit’s financial condition is when they are able to read and understand their nonprofit’s financial statements, particularly in light of the annual budget.
Failure on the part of each member in this regard is a failure of fiduciary duty and, in turn, could have consequences individually and collectively in financial health, legal responsibility, and most importantly, on mission pursuit and achievement.
2. The board treasurer should be professionally trained in finance.
There is a saying that the difference between an individual’s checkbook and an organization’s checkbook is the number of zeros. While possessing higher financial literacy experience and knowledge than the average citizen is a plus to serving as nonprofit board treasurer, this is not a requirement for the position.
As an essential resource and in addition to the executive, nonprofits generally employ or contract with a bookkeeper or financial service provider — and possibly an accountant — who is responsible for ensuring that financial information is current and accurate, and those resulting reports conform to generally accepted policies and procedures. Auditors are also a valuable resource to ensure the organization is financially compliant with recommended practices and has the appropriate financial skills.
3. The board treasurer should control the books and prepare financial statements for the board’s review.
Some board members view the treasurer as the board's bookkeeper, accountant and auditor. Although this might be the case in some startup and early-stage nonprofits with limited financial resources, it should be noted that they are in this position as a volunteer. Combining those roles can lead to undesirable situations, and it's necessary to set up checks and balances within a nonprofit’s organizational structure.
In most nonprofits, financial oversight, policy, planning and evaluation is shared among members commonly dividing the work into committees or task forces. It demands time and study, and is best informed by management, committee or task force homework.
4. The board treasurer should chair the finance committee.
It may make the most sense to have a different board member chair the finance committee to provide a check and balance, and ensure members are engaged regarding financially related policies and plans, as well as monitoring the results. A finance committee, not unlike an executive committee, could give the perception that board members don’t have to pay as much attention to the details because someone else is taking care of it.
As an alternative, the development of a more inclusive and comprehensive committee, such as a sustainability committee, could be a good option to consider for more strategic oversight and long-range sustainability, particularly in light of short-term, present-day realities. It is possible to construct a committee that incorporates the fundraising side of the organization with the spending side to develop a more comprehensive lens by the whole board and management.
It is the board as a whole that is responsible for and must understand the financial matters of a nonprofit. While professionally trained individuals might add content value and have a shorter learning curve, good training and experience can prepare every board member for the job. Volunteer treasurers may be called upon to perform the bookkeeping and financial reporting functions but this is not inherently what the position of board treasurer demands. It is best to hire a service to handle these tasks.