Good governance is about asking the right questions
The most effective boards we see are those that don’t need to know every transaction. They need confidence that appropriate systems, controls and reporting are in place. They ask the right questions, which tend to be strategic rather than operational. For example:
Are we tracking against our approved budget?
Rather than: Why did we spend $100 more on printing this month?
What financial risks should the board be aware of?
Rather than: Things have been going well this year: we’re achieving our budget targets, we have more than enough cash to pay the bills and meet our grant milestones. There’s nothing to discuss at this meeting
How is our cash flow forecast looking over the next 12 months?
Rather than: We have plenty of cash in the bank this month; we should be right and don’t have anything to worry about.
Are our reserves sufficient to manage unexpected events?
Rather than: We don’t need to set minimum reserve thresholds because we’ve always been profitable and are very attractive to funders. We always get large, unexpected donations each year.
Are there any emerging funding risks?
Rather than: We’ve had the same funder for the last 10 years, they like what we do, so we’ll definitely have our contract renewed for another 5 years.
Are we investing appropriately to achieve our strategic plan?
Rather than: Approving significant expenditure and activity simply because the organisation can afford it. Does it align with the organisation’s mission, strategy, and goals?
These conversations allow management to remain accountable while providing the board with the information it needs to make informed decisions.
