It is so important to make sure that your board is financially literate and able to do the job of overseeing the financial governance and decision making needs of your nonprofit. In this series, I’m sharing how to identify the most crucial areas of financial literacy for nonprofit boards, how to assess each board member’s needs for training, and how to train board members in these specific areas. Today we’ll look at strategies for effective training. If you missed the previous video on board assessment, you can watch it here and you can download my free sample assessment questions here. That will provide some sample questions that you should be asking your board.

     Since we covered how to assess the financial literacy of your board last week, today we’re going to move on to some training topics that would likely emerge from those assessment questions. Here are five training topics that may emerge as potential areas of need based on your board’s assessment results. 

Nonprofit Financial Reports

This training should focus on explaining the reports in detail, really slowing it down, including the following points: 

•  Each report’s name
•  What you can find on the report
•  Which specific items will be most helpful (i.e. funds available)
•   how to identify the cash flow performance of the organization
•   how to monitor restricted funds and their balances

     Basically, you need to slow down and really, teach on financial reports. I would recommend using a PowerPoint that has actual pictures of a financial report or displaying a report on screen with the ability to annotate, so you can highlight or circle items in real time with them. You’ll definitely want to use something visual to help reinforce this information. If it’s possible, be sure to  record this session. The ability to replay it will be very helpful for both current board members to review and future board members to watch as part of a training library. 

The Nonprofit Budget Cycle

     The second training need that may arise after assessing the financial literacy of your board is a greater understanding of your nonprofit’s budget. It’s important to explain the considerations behind the budget as a cycle, not just an annual task.  

•  What is our method of preparing our budget? 
•  How do we go about creating a plan?
•  Are we just looking back and using the same numbers from last year? 
•  Are we looking down the calendar for what’s coming ahead, anticipating needs, and introducing the challenges and opportunities of new programs or changes in how we operate our nonprofit?
•  What's the timing of our nonprofit’s revenues? Are we really heavy on a certain month of the year or certain season of the year? Do our grant revenues lag several months? Be sure that you're addressing and orienting them around the realities of how you manage cash flow. 

     Also, within your budget training, should be an explanation of how we measure budgets. For example, you may have a program that has a $50,000 budget and within that $50,000 program budget are several line items related to that program’s expenses. This is a great opportunity to have a conversation with the board as a whole to clarify whether they’re expected to manage the $50,000 program budget or whether you’re asking them to manage each line of that program budget. This is a great place to talk about the budget philosophy and how accountability is maintained so they know how we manage budgets and ensure that programs are fulfilled. There's not a right or wrong answer either. Sometimes the answer changes from season to season. Sometimes you need to tighten the belt buckle of finances, and other times you can be a little more flexible. At some point, you may have an inexperienced leader in a program and you may also  have a very experienced leader. All of those things may change and impact budget performance or how it is measured.

Nonprofit Compliance and Reporting

     The third potential training area would be compliance and reporting. This should be a training that 1 helps board members understand all the things that have to be reported on, such as a 990., which your nonprofit may be required to file. This informational tax return requires a split between fundraising expenses, management in general, and program costs. These reports should be shared and explained, since the board should be reviewing them anually. 

     You might also have grant management reports that require you to report on how grant funding was managed. So how are those tracked and reported on? How are expenses obtained for that report? Is that an allocation that's made just for that report or is that something that you're accounting for inside of your financials?

     I’d also recommend covering donor communications in this training as well. Even though it's not actually a compliance issue, it is definitely a reporting issue. How are we letting our donors know how we're doing? How are we thanking them? How are we continuing to engage them in the mission of our organization?

Cash Management and Investment Policy

     The next training topic that I recommend  is on cash management and investment policy. First of all, let's start by simply bring the policy out and reviewing it. Then let's develop an understanding of the policy. Is this current and is it good for the current economic conditions? Finally, let’s schedule the periodic and regular measurement of the results of our investment policy. Be forewarned, sometimes there are board members who just check out when you wade into stocks, bonds, CDs, and various account types. Some board members will just mentally check out and that's okay. In this area, you might want to hone in on a smaller group, maybe an investment committee, that meets 2-4 times a year to actually do this specific job. If you take this approach, you’ll want to make sure sure that your investment committee exists, they know what their task is, and they're staying on duty and reporting back to the full board. 

Board Fiduciary Duty

     My last recommended training topic would be a general and annual board fiduciary duty training where you go over the definition of a board having a fiduciary duty, and then cover some checklists of things that board members must know and confirm are in place. This could be in your board training manual, so you might not need to spend a lot of time on it each year. Instead, you might pull one of these categories per year to review and then refer back to the full board manual, which could be digital or printed. This training might include things like internal controls, the checks and balances that exist in your organization, how credit cards are managed, all of those procedural safeguards.

     Another category within this training topic could be compensation management. Boards should be very involved in compensation, especially executive compensation, which should be set by the board under very specific and clarifying rules. The board should already know that, but let's make sure we're talking about that as well as general compensation issues. This is the time to clarify if you have a comp scale in place. What is the philosophy for all the other staff positions that are hired and evaluated or given increases? That's a fiduciary duty. We should be talking about that! 

     This annual training is also the perfect place to review and evaluate a couple of other policies, including  the development of a gift acceptance or a contribution policy and document retention.   This also serves as a rhythm for reviewing the bylaws and the articles of incorporation or certificate of formation, which should be revisited from time to time. By scheduling these tasks in rotation as part of your annual fiduciary training, you can ensure that each one is addressed on a consistent basis. 

     As you can see, it’s incredibly important to have ongoing education and continuous learning for our board members so that they stay up to date on financial best practices. We want to see them asking good questions. We want to ensure they feel comfortable talking about your nonprofit’s finances. These are only some suggested topics on how you might be able to educate your board in financial literacy. If you’re looking for more context around this topic, you can browse my entire library of free articles and videos here. You can also download my Financial Literacy Assessment for Nonprofit Boards for FREE! I hope this series is helping you! Stay tuned for the final installment in this series, where we'll dive deeper into the specifics of financial literacy training for nonprofit boards.