Why is it that not for profit boards of management can sometimes miss the warning signs signalling impending financial problems?  Surely the treasurer’s report shows that something is wrong?

Yes, it probably does, but does your board understand the information or even pay attention to it?  Here are four questions that you need to ask yourself, as a volunteer treasurer or board member.

How much does your board care about the treasurer’s reports?

Sometimes, especially on the boards of small not for profit and community groups, committee members drift off as the “boring” financials are being presented.  It’s quite common to see the entire responsibility for the financial security of the organisation being left to the volunteer treasurer.

Am I presenting or receiving enough information?

If your treasurer doesn’t know how to properly prepare the various reports detailing the incomings, outgoings and general budget of the organisation, how can he or she be aware of potential problems?  If someone has willingly volunteered for this complex role, they should be given proper training.

Is the information being presented on time?

When the responsibility for the finances falls on one person it’s almost inevitable that there will be a late report occasionally, or even reports which are totally omitted.  That becomes a serious issue when there is a problem highlighted in the report, such as a loss in income.  Until the report is presented the committee probably won’t notice the loss and certainly can’t take action.  If the loss is significant and allowed to be ongoing, the organisation can be put at risk.

Are we focusing on the right reports?

For non-accounting types, the most appealing report is the budget report because it makes some kind of sense.  Long term reports and even the balance sheet are just a set of numbers which look good (because the treasurer said so) but are very difficult to interpret. The problem is that the real key to the financial wellbeing of the not for profit lies in the balance sheet. That’s where the warning signs are most likely to make their appearance.[/list]

How likely is it that your not for profit organisation will see the warning signs when they appear?