Board Finance Committees
Here is a good article from Blue Avocado on how to leverage your Board of Directors to improve financial outcomes:
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What a Finance Committee Can Do for Your Board of Directors
by Ruth Seedorf on September 13, 2021
Categories: Board of Directors| FinanceTopic Tags: Financial Management| Committees & Meetings
Implementing a finance committee of the board of directors was one of the best things our organization ever did—here’s why.
Baby Bear Hugs’ mission is enhancing family strengths for happy and healthy children, families, and communities. The program provides parenting education and support through certified parenting educators in the homes of families (virtually during the pandemic) through ongoing, regularly scheduled interactions. Baby Bear Hugs is a multi-county program with a 30-year history in rural Eastern Colorado.
We have always struggled with funding, living month-to-month, usually not having any reserves. Although we developed a diverse base of funding sources over the years, we did not have any underlying, guaranteed source of funding. Our board consists of members from the counties where services are delivered and represent agencies that we refer families to and that refer families to Baby Bear Hugs. We also have board members representing the financial sector, resulting in a wonderful, involved board.
For several years, we’ve worked on increasing staff pay and reserves without much success. We were never able to focus on finances and fundraising as much as we would have liked because we were building program and evaluation. To increase funding, along with other ideas such as implementing a fundraising gala event, leadership had the idea of implementing a finance committee.
The development of this committee was board-approved. Here’s how we did it.
Forming the Finance Committee
Initiation. Our leadership staff and members of the board of directors discussed the formation of the committee. We asked questions such as, Would we need regional representation? How often should we meet? Should we meet in person?
We came to a basic understanding, deciding that at least initially we didn’t need regional representation because we had that on the board of directors. The priority here was financial expertise and the ability to benefit from ideas born from group conversations, fed by knowledge and backgrounds of committee members.
Building relationships was important so we met in person. We could modify these steps in the future if needed.
Selection of the members. After much contemplation among leadership, a slate of 5 highly qualified members of the finance committee were selected representing CPAs, bankers, insurance agents, and financial advisors. The Executive Director approached the slate of candidates, and we were very fortunate that they all said yes. If they had not, there were names of alternate candidates on the list.
Formation of the finance committee job description. The finance committee members developed, reviewed, edited, and fine-tuned a committee job description Then, the description was formally approved by the board of directors.
Monthly meetings. The committee decided to meet monthly, as that was the best way to stay connected and on top of the finances. They set a regular date, time, and location. One of the committee members offered their agencies board room for our meetings. When the pandemic broke, we switched to virtual meetings.
Learning about Baby Bear Hugs. The finance committee members came up with the idea to do a “Baby Bear Hugs 101” type of training, highlighting one program at each meeting so that members could learn about the organization. They also asked great questions about staff composition, job descriptions, and compensation.
The Committee at Work
Here’s an example of what the committee did for us:
Identify avenues for funding. Once they knew how Baby Bear Hugs carried out the work of the mission, program structure, and personnel, the committee focused on the financials.
Committee members learned about all the avenues for funding, from family foundations to contracts through the counties that Baby Bear Hugs serves. The committee used their diverse backgrounds to suggest areas we could tap into and were instrumental in helping the organization receive a PPP loan and in getting it forgiven.
Enhance the outcome. The finance committee learned that each county was responsible for carrying out one fundraising event per year. The committee made it their responsibility to review these plans and results.
When they began to review county fundraisers, the committee was able to identify ways to increase the outcomes of these fundraisers. They also caught a potential legal concern with a current fundraiser (nonprofit “selling” guidelines) and helped mitigate it.
Prepare for next year. When reviewing the budget for the following year, the finance committee helped incorporate increases in pay right into the budget so we would be prepared for it in the following year.
Prepare for the future. The finance committee recommended, and the board approved, putting a percentage of specific fundraisers (an annual raffle and the gala) into a sustainability fund to begin building program reserves.
Creating Your Own Finance Committee
Every organization’s needs and structure is different. For us, the fact that we cover 8 counties and 13,706 square miles is sometimes a challenge. So, it’s essential that we have representation from each county on the board of directors itself—but for the finance committee, experience, profession, and willingness to serve are more important.
The success of this structure is dependent on the qualities individuals bring to the committee. What the finance committee members bring individually and their willingness to discuss ideas collaboratively provide invaluable information and outcomes by not only increasing the finances of Baby Bear Hugs, but making the organization stronger as well.
