Treasurer’s Report, Demystified
The Treasurer’s Report is one of the most undervalued Board Meeting agenda items. You know you have to include it every meeting. But, more often than not, it’s stuck at the end or worse, buried in the consent agenda. Common reasons: Board members aren’t interested in the nitty gritty, you assume. The treasurer often holds the title because of financial skill, not storytelling - so no one seems to pay attention unless there’s a crisis. The discussion is nowhere near as engaging as the storytelling found in the program report so people tune out.
Even the fundraising report, which more often than not awkwardly calls on board members to do more, is held in higher esteem.
That’s a shame.
Why? Because the Treasurer’s Report most closely aligns with directors’ legal responsibility as fiduciary stewards of the organization. In the Nonprofit Planner 6+4 System, “Preparing the Treasurer’s Report” is one of the key ongoing tasks within the Finance Segment.
Duty of care, duty of obedience and duty of loyalty comprise the three primary LEGAL responsibilities of any board member. In laymen’s terms, they mean:
Care: you will care for the organization as if it were your own, ensuring that the resources are responsibly managed,
Obedience: you will ensure that the organization is operated consistent with federal, state and local law as well as its own by-laws, and
Duty: you personally ensure that you have no conflicts of interest when acting in your role as director that would cause you to make a decision that helps yourself at the expense of the organization.
If it were your own company, you wouldn’t ignore the financial reports. Nor would you ignore your own checkbook if you were simply managing your household. It’s the first line of defense in “duty of care.”
At the same time, the Treasurer’s Report is NOT meant to share a full accounting of every transaction within the organization. That can be reviewed in the Finance Committee, under the Treasurer’s facilitation, if necessary. Or staff prepares and manages it. Instead, the Treasurer’s Report should present a straightforward, objective SUMMARY picture of the financial health of the organization. It can be as simple or as complicated as necessary, as long as it is accessible to all board members.
Now, wait a minute, you say. Some aren’t financial types and we don’t want to overwhelm them or make them feel bad if they don't understand the reports.
Hooey, I say.
I can guarantee you, everyone on your board understands their salary, their expenses, how much money they have in the bank and their mortgage or student loans. That means they have the baseline concept of an income statement, a cash flow statement and a balance sheet. They may not immediately understand all the crazy cash flow fluctuations your organization experiences between events, pledges, grant reimbursements and payroll - but they’ll get the gist if explained clearly. And often, those with less financial training will ask really good questions when they feel welcomed into the discussion.
“My board members aren’t financiers and accountants” is NO EXCUSE for treating the Treasurer’s Report as a sideshow. Staff working with the Treasurer, and sometimes the board president, have a responsibility to create a set of reports that every board member can digest.
How do you create a good Treasurer’s Report?
Start with the financial reports. After closing the books, download the financial statements and save them in the board packet or folder or however you securely distribute information to your board members. Each board member should have the option to look at the detailed financial reports on a regular basis. It’s good practice to make them available as an appendix to the Treasurer’s Report.
I’d recommend sharing the following:
Balance Sheet compared to prior year. This is called the “Statement of Financial Position.”
Income Statement, officially called the “Statement of Activities.” Create two of these: one compared to prior year and one compared to budget.
Cash Flow Statement. We like to show a YTD report in total as well as one broken down monthly, so board members can see fluctuations month to month.
If you have significant Accounts Receivable or Accounts Payable, you might want to add those reports as well.
The financial statements are the “facts” that support the Treasurers Report, but they need a story. They need summary. This does not need to be overly detailed - unless your situation is complicated. I’d suggest a written narrative, kind of like a cover letter. Add tables or summary schedules if they are helpful, but keep them short (and be absolutely sure that they tie to the financial statements you downloaded.)
In your narrative, think like a “regular person” not a finance person. What are the key points? What do people need to walk away knowing as financial stewards of the organization? Start with:
How much money did we make? (Statement of Activities)
Was that on track for what we expected? (Stmt of Activities vs Budget)
How much are we spending regularly - what is our run rate of monthly fixed expenses? (Statement of Activities)
How much cash did we generate (or use) this period? (Cash Flow Statement)
How does that compare to how much cash we have available? (Balance Sheet)
What key ratios matter to us and how are we doing on them? Bonus if you can compare them to last year AND expectations. This could be functional expenses (program, fundraising and management) as % of total, debt-to-current asset ratio (how much you owe vs how much cash you can get your hands on quickly), or growth in revenue, expense or cash.
Once you establish the pertinent facts, now provide some context and prompts for what the Board should be thinking about. Do any of the points above suggest that financial health is poor or declining? Do you see any events on the horizon, internal or external, that will impact the organization’s ability to meet its budget and maintain a healthy cash position? Is there any action the Board should take? If you don’t think you will meet your budget, how do you propose making up the shortfall? Do any of those actions require Board input or approval?
Done well, the Treasurer’s Report will prompt discussion about the organization’s future. Instead of overwhelming the Board with schedules and tables and statements full of numbers, the concise, well-constructed Treasurer’s Report should clearly present a financial picture while directing attention to areas of concern or opportunity.
Every board member has a duty of care to ensure sound management of the organization and its resources. A good Treasurer’s Report is one of the most important tools you have for a governing board to ensure that is possible.
