156. Minding the money — What’s a Chairperson’s Responsibility?

While most non-profit leaders would argue that their work is “not about the money,” if “the money” is not handled well, then eventually “the money” will get the focus it does not deserve. Board chairs exercise significant leadership in educating and guiding the board members in fulfilling their due diligence, their “fiduciary responsibility,” in relationship to financial matters. Next to personnel, finances are the most important resource that a non-profit possesses.Often a board’s credibility will rise and fall in relationship to their ability to oversee the agency’s finances well.

Recently I attended a seminar for non-profit board members and executives. I was somewhat surprised to discover that a significant portion of the presentation was devoted to the issue of fraud within non-profits — how to prevent it and how to detect it. Obviously this is a growing problem and churches are not immune unfortunately.

The chairperson of a church board, as servant of that board, has to assist the board in fulfilling its responsibilities in preserving, obtaining, and managing financial resources essential to the agency’s mission. This will include coordinating the education of new and continuing board members about financial oversight and risk management. It will involve a review of policies regarding financial oversight to ensure they are up-to-date and being followed by management and board committees. Where policy gaps are discerned, then the chair will lead the board in the development of new policy. The chair needs to ensure that the audit committee and its chair know their responsibilities and are performing well. The chair needs to work with the lead pastor to ensure that accurate and up-to-date financial reports, including risk assessment notations, are available to the board on a regular basis. In cases where churches have financial investments, the chair should be working with the board finance committee to ensure that investment policy is being followed and regular reporting about the performance of the investments is being received by the board. Careful accounting of the investment income and its usage should be standard procedure.

Let’s consider a few key chairperson responsibilities relative to finances:

1. Establishing  and overseeing the annual budget.  Although the chairperson probably does not get involved directly in this process, ensuring that the board has a process for this and is following it conscientiously is an important leadership obligation. If your board has a standing finance/audit committee then usually this committee will handle this work, in collaboration with the administration. However, remember the built-in swarm of conflicts of interest that the administration bring into this process. Further, pay particular attention to the voice that the congregation needs to have in budget approval based upon the agency’s bylaws. Finally, does the board have a policy that limits the scope of the administration’s authority to alter the budget once approved? This should be in place and being monitored.

2. Ensuring that sound financial operational policies are in place and being followed. Here is where the warnings about fraud are most pertinent. Your annual audit or financial review should include a review of these processes and recommendations, if necessary, for change in order to protect the integrity of the financial system. Any recommendations should be implemented immediately, with report back to the board that they have been implemented. In churches it is important to have good systems for collecting, counting and securing weekly offerings. As well, a simple procedure should be employed for claiming expenses and receiving reimbursement that has a “paper trail” with appropriate signatures. Cheques should always have two signatures from approved signing officers. Using knowledgeable volunteers and employees who have submitted clear criminal record checks are simple, but important safeguards. One way for the board to satisfy itself that these appropriate processes are in place is for the treasurer and the lead pastor to be reporting to the board about these measures periodically.

3. Overseeing the annual financial review or audit, including the selection and appointment of the auditors. A chairperson’s responsibility in this aspect of financial oversight begins by guiding the board in establishing a standing finance/audit committee of the board, with a clear set of responsibilities. Then, the chair needs to help the board appoint to this committee people with some financial expertise (this will also influence recruitment of new board members). The chair of this committee will become a particularly helpful aid for the board chair in these matters. It is important that the board mandate at least an annual financial review, with the appointment of the auditors done by the board and directly reporting to the board.

4. Tracking the investment of restricted funds and their investment performance. Developing an investment policy would be one step towards establishing board oversight of investments. Regular reporting of investment performance would also be important. You might also ensure that the board by motion has directed how the investment income is to be used.

5. Submitting the T3010 (Canadian CRA reporting requirement) on time and correctly. Given the penalties that charities incur for failure to report annually, the board has to ensure that this form is completed and filed on time and accurately every year. Either the lead pastor or the treasurer or the chair of the finance committee should report specifically to the board that the filing for the year has been done. Other national jurisdictions will have their own particular requirements. As chair you develop the annual board agenda and should be able to pinpoint in that agenda when the board should expect a report on this filing.

6. Educating the board to be able to read financial statements and know what to look for in order to determine the financial health of the agency. This seems to be such a fundamental issue that it does not need to be mentioned. However, I would suspect that if you took a poll of your board members that some would not know what information in the financial report they should be evaluating in order to assess the financial health of the agency. One of the services that the board finance and audit committee could do once a year is to review with the board members how to read a financial statement, what are the key measures in that statement of financial health and why an annual audit or financial review is critical to the financial health and integrity of the agency.

There are other steps a chairperson can take to make sure that the board is “minding the money” carefully, prudently, and safely. However, if board chairs attend to these I have mentioned, it will help the board address its primary “worry-points” in regards to finances.

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