From On the LeaderBoard Volume 1, Issue 2
This discussion covers both primary expectations and practical considerations of the Board member who controls the purse strings.
Some say the most important role on the Board is that of treasurer. If not most important, then it’s second only to that of the Board chair. The treasurer is indeed a key and pivotal role for every corporate organization, including those that are not-profit.
The treasurer’s primary duty is oversight of the organization’s financial standing and statements. This is not to say the treasurer dictates financial decisions. The duty is to fulfill, or oversee fulfillment of, the Board’s collective decisions regarding finances.
Oversight of the financial statements means that the treasurer is at least reporting on the organization’s current finances. This is done via what is known as generally accepted accounting principles (G.A.A.P.) that are applied to the standard financial statements common to for-profits and non-profit organizations alike.
Like our well-known refrain in pregnancy help work, the best decision is an informed decision. The treasurer should be careful to insure accurate and timely financial statements. Also, the treasurer should help Board members understand that information in context. Reporting on year-over-year comparisons, year-to-date budget numbers, cash flow projections, and other evaluation tools can make it very helpful for Board members to understand the numbers as they are as well as what they should, could, or need to be.
The treasurer should also oversee the internal controls relative to the organization’s finances. The treasurer should make certain that good policies guide segregation of duties, bank reconciliations, disbursements, and other key processes that require checks and balances. For a variety of reasons, an organization’s financial statements could be scrutinized in an audit. For example, the organization might need to hire a certified public accountant to conduct a private audit or a government agency such as the Internal Revenue Service could require an audit. Any auditor will look closely at the policy, procedure, and practice of handling the finances (including opening mail and processing donations).
Many a treasurer serves as the de facto bookkeeper for the ministry handling all, or a significant portion, of the disbursements and deposits. Depending upon the availability of the treasurer, this arrangement can work for most small and even medium-sized ministries. Adding a bookkeeper to serve more regular and/or increased hours can facilitate segregation of duties (a strong practice for potential audits) and enhance evaluation and analytical efforts. Once enlisted (possibly hired), the bookkeeper fits into the organizational chart under the executive director in coordination with the Board treasurer.
Not all Board members enter Board service with knowledge of common financial statements such as the income (or profit/loss) statement, balance sheet, and statements of equity and cash flow. The treasurer should make the effort to educate as well as possible all Board members regarding these key decision-making documents.
It’s common, especially in smaller organizations, for the office of secretary and treasurer to be a combined function. This may work for a very new and very small organization (budget wise), but the complexity of the finances and the requirements of good record keeping can quickly overwhelm all but the most capable person unless that person has lots of available time. It’s wise to split these two responsibilities into two distinct officers with the separate functions fulfilled by different individuals.
A good resource for any treasurer is Step Up to the Next Level – A Guide for Pregnancy Centers to Improve Their Internal Operations and Get Ready for an Audit by James L. Ulvog, CPA, available at RiverstoneFinanceBooks.com.