Essential Financial Responsibilities for Not-for-Profit Board Members
Not-for-profit organizations depend heavily on the dedication of volunteers to advance their mission, ensure fiscal health, and navigate the complexities of legal compliance. At the helm of this governance is the ultimate volunteer: the board of directors.
If you’ve ever considered serving on a not-for-profit board but were uncertain about the financial responsibilities involved, this blog will provide clarity. Here’s a breakdown of the key financial responsibilities each board member holds:
- Fiduciary Duty: Board members must act in the organization’s best interests, demonstrating loyalty and care in their decision-making processes.
- Financial Oversight: It’s crucial to review financial statements regularly, monitor the organization’s financial performance, and suggest ways to support the mission financially. This could involve hosting fundraisers, renegotiating vendor contracts to reduce costs, or hiring staff to strengthen operations.
- Budget Approval: Board members are responsible for reviewing and approving the annual budget, which guides the organization’s programs. Most not-for-profits aim for a balanced budget, allowing them to compare actual income and expenses and ensure they are on track to meet operational needs.
- Accounting Policy Review: Ensure that the organization’s accounting policies result in accurate and reliable financial records.
- Audit and Compliance: Engage an independent accounting firm to conduct an audit of the financial records. In Minnesota, an audit is required if revenues exceed $750,000. Additionally, the board must ensure the timely completion of the annual Form 990, due on the 15th day of the 5th month after year-end, with an optional 6-month extension available.
- Investment Oversight: Review the organization’s investment strategies to ensure that investment risks are in line with the mission and goals of the organization.
- Transparency and Reporting: Facilitate access to the Form 990 and financial statements for donors and regulatory bodies to maintain transparency.
Understanding these financial responsibilities is vital for promoting financial stability and upholding the organization’s integrity. If you’re interested in joining a not-for-profit board and need more information on how these responsibilities apply to you, please contact Nicole Seaholm at Nicole_Seaholm@CopelandBuhl.com or call 952.476.7151. You can also reach us through the Contact Us form on our website.