Your Nonprofit Board Shouldn’t Have to Ask the Right Questions

By Lee Podolsky

Imagine presenting perfectly accurate financial statements to a nonprofit board. Everyone reviews the numbers, a few questions are asked, and the meeting moves on.

But did the board walk away understanding the organization’s financial health? Did they recognize emerging risks? Do they know what deserves their attention?

Or did we simply deliver the numbers and leave them to figure out what matters?

That’s the difference between financial reporting and financial advisory.

As accounting professionals, our responsibility goes beyond producing accurate statements. We need to anticipate what our audience needs to know and proactively deliver meaningful insights.

Consider the different perspectives within a nonprofit.

An Executive Director manages day-to-day operations, asking: Can we meet payroll? Why are program expenses high? Can we afford another employee?

The Board is responsible for governance and oversight, asking: Are we financially sustainable? Are resources being used responsibly? What risks lie ahead?

Same financial data. Different responsibilities. Different questions.

Our job is to tell the financial story through each audience’s lens.

Five Questions Every Nonprofit Board Report Should Answer

1. Where do we stand?

Start with financial health. Are cash reserves adequate? Are we operating at a surplus or deficit? Remember, a healthy surplus doesn’t necessarily mean healthy cash flow, particularly when funding is restricted.

2. What’s driving the numbers?

Don’t just present budget variances. Explain them. If revenue is 12% below budget, why? Is it timing, a funding shortfall, or an emerging trend? Numbers tell us what happened. Insights explain why it matters.

3. What’s ahead?

Financial statements look backward. Boards need to look forward. Are we projecting a year-end surplus or deficit? Are funding changes or cash flow pressures ahead? Proactive forecasting helps boards anticipate rather than react.

4. Are we supporting the mission?

Nonprofit boards steward resources entrusted to advance a mission. Are resources aligned with strategic priorities? Are programs sustainable? Do we have the financial capacity to deliver on our commitments?

5. What needs our attention?

Perhaps most importantly, what’s going well? What concerns require attention? What’s management doing about them? What decisions or oversight does the board need to provide?

The Real Value Is in the Insight

Consider the difference:

Reporting: Cash reserves decreased by $150,000.

Insight: Delayed grant funding reduced reserves, potentially creating third-quarter liquidity pressure.

Advisory: Management is updating cash forecasts and developing contingency plans should funding delays continue.

That’s the difference between delivering financial information and delivering financial guidance.

And it doesn’t require a 20-page presentation. Often, a one-page financial narrative highlighting key insights, supported by detailed statements, is far more valuable.

Board members shouldn’t need an accounting background to understand the financial health of the organization they’re responsible for governing. Nor should they have to know which questions to ask to uncover what matters.

That’s our responsibility as financial advisors.

Our job isn’t complete when the financial statements are accurate. It’s complete when the people relying on them understand what the numbers mean and have the confidence to act.