Financial Management Responsibilities for Nonprofit Boards and Officers

Financial Management Responsibilities for Nonprofit Boards and Officers

By Dr. Mark Smutny, President, Civic Reinventions, Inc.

Introduction

Effective financial management is essential for the sustainability and accountability of nonprofits. This handout outlines the roles and responsibilities of nonprofit board members and officers in financial oversight, ensuring legal compliance and fiduciary diligence.

Legal & Fiduciary Responsibilities

Board of Directors

The board of directors has overarching responsibility for financial oversight and fiduciary duty, ensuring the organization remains solvent and mission-alligned. Their key duties include:

  • Acting in good faith, with care and loyalty, avoiding conflicts of interest.
  • Approving and monitoring the annual budget and financial statements.
  • Ensuring the organization complies with federal and state legal requirements, including IRS filings.
  • Overseeing internal controls to prevent financial mismanagement or fraud.
  • Reviewing annual financial reports, audits, and risk assessments.
  • Ensuring funds are used in accordance with donor restrictions and program objectives.

Executive Director

The executive director manages daily financial operations, ensuring compliance with board policies. Their financial responsibilities include:

  • Implementing board-approved financial policies and internal controls.
  • Maintaining an accurate general ledger and financial records.
  • Overseeing fundraising and revenue generation aligned with budgeted expectations.
  • Ensuring timely filing of annual reports, IRS Form 990, and state registrations.
  • Reporting to the board regularly with cash flow statements, balance sheets, and income/expense reports.

Board Officers & Financial Roles

Treasurer

The treasurer serves as the primary liaison between the board and financial operations. Responsibilities include:

  • Leading financial strategy discussions with the board.
  • Reviewing and presenting financial statements at board meetings.
  • Ensuring compliance with tax filings, audits, and financial transparency requirements.
  • Overseeing the annual budget process and financial projections.
  • Chairing the finance committee, if applicable.

Finance Committee

This committee (if applicable) supports the board in financial oversight. Responsibilities include:

  • Conducting regular financial performance reviews.
  • Recommending budget adjustments and financial policies.
  • Reviewing and assessing internal financial controls.
  • Monitoring investments and financial reserves, if applicable.
  • Assisting in financial audits and compliance matters.

Bookkeeper & Accountant

The bookkeeper or accountant manages day-to-day financial tracking and reporting:

  • Maintaining an accurate general ledger and tracking transactions.
  • Preparing cash flow statements, income and expense reports, and balance sheets.
  • Ensuring compliance with payroll taxes, vendor payments, and reimbursements.
  • Assisting the treasurer and executive director with financial documentation.

Financial Review Responsibilities

All financial stakeholders should routinely review the following documents to ensure fiscal health:

  • General Ledger: A detailed transaction record to detect errors or irregularities.
  • Cash Flow Statements: Tracks liquidity and financial stability.
  • Income & Expense Reports: Ensures alignment with budget projections.
  • Balance Sheet: Shows organizational assets, liabilities, and net equity.
  • Annual Filings: IRS Form 990, state nonprofit renewals, and any required financial disclosures.

Conclusion

By fulfilling their financial responsibilities, nonprofit leaders safeguard organizational integrity, ensure compliance, and build trust with stakeholders. Strong financial oversight promotes sustainable operations, allowing the King County Search and Rescue Association to continue its vital mission.

Contact:

For further assistance, please contact Dr. Mark Smutny, Civic Reinventions, Inc.

Email: mark.smutny@civicreinventions.com

Website: https://civicreinventions.com

Phone: 626-676-0287

LinkedIn: (33) Mark Smutny | LinkedIn

Book: Thrive: The Facilitator’s Guide to Radically Inclusive Meetings, 2nd edition

Tags: ,