As chief financial officer of the New Jersey Society of Certified Public Accountants, Gordon Smith knows he’ll be interacting with board members who understand numbers. But he still approaches sharing budget information with the board carefully.
“Their finance and accounting knowledge is second to none,” Smith said, “but they may not be too knowledgeable about association finance.”
Smith, like a lot of association finance pros, addresses that issue by taking a multilayered approach to preparing budget presentations. NJCPA’s finance committee—and the treasurer in particular—works with him to develop a complete budget. From there, the full board gets an executive summary with “the really high-level points that, from a leadership perspective, indicate what’s really driving the budget.”
Associations can differ, though, on what those high-level presentations look like. Kristen Merrifield, CAE, CEO of the Alliance of Arizona Nonprofits (AAN), presents her board with a two-page “budget narrative” to accompany annual budgets. This helps board members who aren’t necessarily finance professionals and want more than the numbers. But it also provides context regarding trends across multiple years, as well as orientation for new board members.
“The notes explain why we ended up where we’re at in 2021, why it looks different, and what we’re thinking about for 2022,” she said. “That’s helpful because moving quickly between late-stage growth and maturity in terms of life-cycle stage.”
Providing that kind of context is crucial, says A. Michael Gellman, CPA, founding principal partner of Fiscal Strategies 4 Nonprofits. “Looking at just one budget year, you can’t tell if an organization is healthy or not,” he said.
Solid orientation in financial terms and recent budget trends is essential—especially during the COVID-19 pandemic, as boards have been asked to make consequential decisions about budgets, staffing, and office space.
Linda Caradine-Poinsett, CEO of the American College of Prosthodontists, says she makes sure all board members are well-schooled on financial terms and the elements of a balance sheet.
“A number of board members thought that you should change the budget whenever the finances changed, so we had to help them understand that the budget doesn’t change—it’s what the board approved,” she said. That understanding made it easier for her to raise a discussion in the past year about moving ACP to a smaller office space as more employees shifted to remote work.