Resources

Providing financial information and reports to your nonprofit organization's board of directors is a well known and expected best practice.  How this is done varies widely and is often poorly performed with little thought to the platform used and the ultimate absorbability factor of the information provided.

What is this so called "Absorbability Factor" all about?  Absorbability factor is a phrase I came up with that helps you to focus and consider the chances that the financial information provided to your volunteer board members will be:

Quickly and fully read by members of your board who have limited time and patience,
Will be fully understood by the average board member with limited financial aptitude,
Will meet their individual needs to monitor relevant pieces of financial information they deem important to the success of the mission of the organization,
Will allow them to quickly assess the financial health of the organization and observe if key financial components, trends, and/or activities have shifted and
Finally make a determination if they are comfortable with the results and trust the numbers.
It's all about trust, confidence and comfort level.  To gain their trust, confidence and a reasonable level of comfort, providing less information is usually better than providing voluminous amounts of information.

This is not a buffet type concept where quantity overrules quality.  Think about the limited amount of time and space you have to fill before the average board member will turn-off, shut-down and zone-out no matter how dedicated and financially astute the board member is in his or her relationship to your organization.

So less is usually better than more.  Focus on key economic indicators for your organization and reduce or filter out the extraneous noise that deflects attention.  I believe the following condensed formats work as follows:

A condensed Balance Sheet (statement of financial position) that highlights operating cash position, accounts payable and changes in total net asset position with an emphasis on unrestricted net assets.  Consolidate small and immaterial line items together into single lines where possible leaving large material line-items like investments, net fixed asset position, accounts payable, deferred revenue and operating cash position to standout and be easily recognized.
A condensed Income Statement (statement of activity) that again highlights material and critical lines of support and revenue and expenses and net surpluses and deficits (changes in net assets).  Just as with the condensed balance sheet, consolidate  small and immaterial line items together into single lines where possible leaving large material line-items like contributions, membership dues, registrations, etc. to stand out and be compared to key expense areas like labor, consultants, travel, legal and occupancy.
Most nonprofit organizations consider adding a third optional report.  A supplemental consolidated functional Income Statement that displays support and revenue and expenses by program categories, fundraising and management and general.
Condensing and consolidating these statements helps to focus board member attention and remove barriers to comprehension.  Let board members know that fully detailed financial reports are always available upon request and that staff and management have complete access to all regular detailed financial information.

Mr. Gellman is a Shareholder with Rubino & McGeehin, Chartered and he manages the Consulting Services Group (CSG), which provides specialized management and accounting consulting services to exempt organizations, organizations and companies receiving Federal Funds and government contractors.  CSG work is largely focused on management advisory services, budget systems, indirect cost rate systems and compliance, accounting systems and services support, and audit preparation assistance in coordination with client accounting departments. 

For more information about Mr. Gellman and the courses in nonprofit finance, budget and management he teaches, please visit http://www.rubino.com/about/bios/gellman.htm or contact him directly at mgellman@rubino.com.