Board Governance of School Finances

The Finance Committee leads the Board of Directors in performing its fiduciary duty to the nonprofit organization that runs the school. There are a number of key responsibilities that a Finance Committee must complete to support the school staff and the full board in their work.

Financial Reporting

(Ongoing; reviewed monthly/quarterly)

Effective Finance Committees review monthly or quarterly financial reports provided by the school to understand the school’s cash position and the year-to-date performance in comparison to the budget. This allows the committee to ask questions of school staff, present the financial reports to the full board, and answer questions of other board members.

Budgets

(March – May; approved annually)

The Finance Committee must review and approve the budget annually prior to full board approval (depending on the Organization’s bylaws). Members of the Committee should be prepared to review at least one draft of the budget model and engage the school staff with questions and feedback. 

Committees and/or committee members can also: 

• Set long-range financial goals (e.g., creating a facilities fund, building up cash reserves) in service of the school’s strategic plan

• Engage in planning meetings with staff during the budget development process to discuss staffing, enrollment, key vendors, and fixed asset spending

Audits and Tax Returns
(August – November; reviewed annually)

The Finance Committee’s first role in support of the audit is recruiting and selecting the auditor. This process is typically conducted every 3 to 5 years to ensure that the most competitive accounting firm has been hired to perform the audit. Financial audits are generally required annually and are conducted in the months following the end of the fiscal year (typically June 30).  At the close of an audit, the finance committee should review the draft audit and federal tax return (Form 990). 

Committees and/or committee members can also: 

• Present the audit report to the full board of directors (if the auditor does not do this)

• Review the management recommendation letter and ensure all issues are addressed by the school

Financial Policies

(Ongoing; reviewed annually)

The Finance Committee’s role in support of the board’s fiduciary responsibility is to ensure that policies and procedures for all financial transactions are documented and followed by staff. The Finance Committee shares the responsibility of updating financial policies and procedures with the school staff, and the policies should be reviewed at least annually.

Committees and/or committee members can also: 

• Develop personnel policies and procedures (in the absence of a separate human resources committee)

• Set executive compensation policies and packages (in the absence of a separate human resources committee)

• Develop investment policy (in the absence of a separate Investment Committee) 

[This post contributed by Steven Sheffield, Senior Finance Specialist / Regional Manager (CA).]