Money Matters…To Every Board Member

by Tracey Yan, SCSBC Director of Finance ◊

For school board members who are not accountants or businesspeople, it may be tempting to tune out when finance is on the agenda and just assume someone else will take responsibility for the discussion. However, managing the school’s resources is the job of the entire board, not just the treasurer.

Each individual board member is legally obligated to “exercise the care and diligence of a reasonably prudent person with similar knowledge and expertise” (the duty of care) and to “act honestly and in good faith in the best interests of the organization” (the duty of loyalty). The board as a whole is responsible for overseeing all aspects of the management and operations of the school and for making decisions in the best interest of the school and its stakeholders. When a board member abstains from a vote or is absent from a board meeting, they are still responsible for the decisions made by the board. It is crucial that everyone be prepared for meetings, ask questions, and voice their opinions.

This does not mean that every board member has to take an accounting course or micro-manage the school’s finances. But it does mean that they:

• ensure that proper financial policies and procedures are in place and are being followed,
• read the monthly and annual financial reports and ask questions so they understand these reports to the best of their ability,
• understand how the budget has been developed and follow up on significant variances during the year to ensure corrective actions are taken when necessary,
• ensure funds are used by the school for their intended purposes, particularly funds from donors,
• confirm that all taxes are remitted to the government in a timely manner,
• review and approve contracts or decisions that have a significant financial impact,
• manage financial risks through appropriate investment policies and insurance,
• take appropriate steps to protect financial and personal data from cyber security risks, and
• help build a long-term plan for the financial sustainability of the school.

Every board should consider whether it has the right mix of skills to fulfil its financial stewardship obligations. A board member who is a professional accountant will have a greater legal responsibility for financial management because their duty of care in this area – their “knowledge and expertise” – is higher than that of other board members. A board full of finance people is also not ideal. Having a good breadth of knowledge and expertise is a sign of a healthy board and means that everyone can contribute their skills and talents in ways that benefit the school. If certain skills are missing at the board level, an effective committee structure can help fill some of those gaps. A well-functioning finance committee can be of huge benefit to even the smallest of schools.

The board should expect complete and timely financial reports and budget analysis from management on a regular basis. The board might establish key financial ratios or benchmarks it wants the school to achieve, and these should be reported and monitored as well. Every board member has the right to request any information that it needs to fulfill its fiduciary duties. If the finance office is not providing this, then changes need to occur. This may include potentially adding staff resources, updating accounting software, or reviewing processes to gain more efficiency.

The board should also work with management and the finance committee to develop a long-term financial plan for the school. Schools are often so concerned about meeting the budget on an annual basis that they forget to plan for the future. Setting a financial plan for the next five to ten years is a part of good strategic planning. It involves looking at issues that cannot be fixed or accommodated on short notice, for example:

• forecasting enrollment and future staffing and space needs,
• developing a plan for enhancements to staff compensation to help with recruitment and retention of employees,
• establishing goals for reserve funds, and
• planning to address deferred building maintenance or to begin new capital projects.

And like the annual budget, the long-term financial plan is not a static document, approved one day, and then put on the shelf. Financial plans need to be updated regularly based on actual results, changing situations, and new priorities, so that decisions are made based on the best and most up-to-date information.

The board plays a crucial role in ensuring that the school’s strategic plan and its financial plan are always aligned. Even if they are not a “numbers person,” every board member can contribute meaningfully to these planning discussions because financial decisions are an extension of the values and mission of the school. “How does our school best serve its current and future students and families, how do we value its staff, and how do we take care of its assets?” These questions involve long-term, big-picture thinking as much as they require number crunching.

Some of these discussions will not be easy, as there is always an inherent tension between the desire for a top quality educational program and the resources available to provide that program. Board members may also need to do some personal education and learning to fully engage in these conversations. But the hard work is worth it, remembering that is every board member’s job to ensure good stewardship of resources and the long-term financial sustainability of the school, not just the job of the accountants.

You may be interested in these resources for your board that are available through the Chartered Professional Accountants of Canada:
https://www.cpacanada.ca/en/business-and-accounting-resources/strategy-risk-and-governance/not-for-profit-governance
A Guide to Financial Statements for Not-for-Profit Organizations
Not-for-Profit Governance: Summary Resource Guide (includes links to all the not-for-profit governance resources available from CPA Canada on topics such as board basics, director’s duties, human resources, and risk management)