This week I was reminded once again of the need to help Board members with their financial literacy. Despite our lessons from Centro, my observation is that many people are joining Boards – especially Not for Profit ones – without having had the benefit, and/or possibly not recognising the need for, strong financial acumen skills. Yet the law does not distinguish between NFP and Commercial directors in terms of their fiduciary responsibilities.
I think there is still a view that if you do not have a financial background or qualification, it is OK just to rely on the accountants around the table. The Centro confirmed that this was not good enough! I have attended many a Board meeting when I am only the one who has tabled questions about the financial reports. I am left wondering if my fellow Board members have read the reports or they do not raise questions since they are happy with them – or do not feel confident enough to ask questions? I suspect the latter is the case most of the time!
Another area which seems to surprise some directors is the Directors Declaration in the annual financial report. This typically reads:
Board members declare that the financial statements set out on pages x-xx:
- Present a true and fair view of the financial position of ABC as at 30th June 20xx and its performance for the year then ended on that date in accordance with Australian Accounting Standards, mandatory professional reporting requirements and other authoritative pronouncements of the Australian Accounting Standards Board.
- At the date of this statement, there are reasonable grounds to believe that ABC will be able to pay its debts as and when they fall due.
Whilst the Chairperson and Chair of the Finance Committee (or similar) may sign it – they do so on behalf of all directors. So, do other Board members know how to go about gaining confidence around the solvency of the organisation for the next 12 months?
With the AICD 5 day course costing over $11,000, it is not surprising that NFP directors may have not completed that. There are alternatives, one of which is our series of Boardroom Excellence workshops. The dates for the next series in Melbourne will be released very soon, and I will be spending one session on reading financial reports. There is also as part of our offer, a chance to catch up one on one with me to go through your own financial reports.
With only 12 places available, following the success of the first series, it is likely they will book out fast! Stay tuned for details on how to secure your spot.
I look forward to welcoming you.
