“It was like a really bad SNL skit,” Janet* told me.
Janet was a brand new board member and chair-elect of the finance committee.
They had been meeting in the conference room. “They” being the finance committee: the board chair, the board treasurer, the executive director, the bookkeeper, Janet, and a few other board members deemed numerical enough to be in attendance.
A banker and an investment advisor, both on the board, spent most of the meeting trying to out-jargon-speak each other. One would drop a term like “hedge fund,” only to be outmaneuvered by the other who wanted to talk about P/E ratios and check the room to see who was impressed by her superior knowledge.
The bookkeeper kept asking for a volunteer to reconcile the checking account. Finally, one of the board members took the bank statement from him, glanced over it, and placed his signature across the page.
Then, apparently, it was time to count the cash from an event the night before. The drawer was produced and ceremoniously unlocked by the bookkeeper. The entire committee watched as the bookkeeper counted out twenties and tens to arrive at, as expected, the same amount as he had counted last night.
Next a volunteer event chair read a report touting, “the fall luncheon had raised $25,000.” Everyone applauded. Then the bookkeeper intervened to explain that while the event had indeed brought in that much, it cost $28,000 plus a great deal of staff time and effort, realizing a net loss of $3,000. He suggested that the event may not have been worth it financially. “Of course it was worth it!” stormed someone. “Do you have any idea how much time and effort all of those volunteers put into it.”
Janet said she looked around and realized that she was the only one in the room who saw anything wrong with any of these occurrences. “What do I do?” she asked.
I explained to Janet that she had just run into a common issue with boards and board committees. Board members who don’t understand their roles and staff members who don’t understand accounting controls can make for a difficult finance committee meeting.
The recommended that Janet meet with the board chair and ED immediately and gently, but firmly, suggest these changes:
- The ED, the finance chair, or some other party should review the official bank reconciliation regularly after the bookkeeper has completed it. There is no way that someone can do that off the cuff in three minutes during a meeting. In this case, the signature just says, “I trust you Mr. Bookkeeper.” We already know that or he wouldn’t have his job. The reviewer should not only be concerned that the statement balances. Additionally, the reviewer should look at the payments, spot check new names (occasionally call one or two to see if they are legit), and see if any payments appear out of the ordinary. If an item was purchased, such as a refrigerator, ask to see it in operation on the nonprofit’s premises. If the reviewer receives vague or incomplete information, she should not stop questioning until she is 100% sure she understands what the payment is for. As a steward of the institutional resources, this is her ethical and sometime legal responsibility to perform correctly.
- This nonprofit desperately needs a cash control policy. Counting cash that has already been counted is meaningless. Supposedly, the reason it is being counted publicly at the meeting is to prove it is all there; however, any embezzlement HAS ALREADY HAPPENED. Instead, the cash should be counted during and/or right after the event that created it, by two (unrelated) people, and placed inside a locked bag in a locked office until someone is ready to deposit that cash into the proper account.
- There appears to be an educational opportunity for the staff and board about the differences between total revenue and net revenue. Nothing is inherently wrong with either the $25K total revenue figure or the $3K net loss figure; they just represent different things. Additionally, there is seldom a need to become emotional over numbers. They are just numbers. There are other reasons to hold events (education, mission-fulfilling, appreciation, etc.). I would recommend that the finance committee refer to their budget for this event to see if the event met its goal.
As for the banker and investment advisor? I told Janet to just leave that alone. Perhaps down the road they could be given a specific job such as gathering information for a rewrite of the investment policy so that they feel engaged and can use their expertise for the organization’s good. “But you can’t fix personality,” I told her. “It’s not your job.”
*Not really named Janet
