Board members are required to exercise reasonable care in the management of a corporation’s business affairs, and that includes staying on top of an organization’s finances. They do this using reports from the organization’s treasurer, receiving reports on a schedule that depends on the organization’s bylaws or instructions from the current board.
A board of directors is the official body that oversees the affairs of a for-profit or nonprofit business. A board might hire a management firm or business executives to run its operations, but the board still sets the overall goals and mission for the organization. Boards must stay abreast of the financial performance, membership numbers and activities of the organization as part of their duties. They appoint a treasurer to oversee the organization’s finances, either by keeping the books directly or by managing a contractor or employee.
The treasurer of a board is the person who monitors the organization’s finances. At smaller organizations, especially nonprofits, the treasurer might keep the books, make deposits, write checks and work with a tax preparer to do the organization’s taxes. At larger organizations, the treasurer might only review the work of a paid bookkeeper, accountant, executive director or chief financial officer. Some treasurers head a finance committee consisting of several board members or board appointees.
Treasurers present regular financial reports to their boards. This often occurs at official board meetings, which take place monthly or quarterly. The treasurer’s report is usually one of the first orders of business at a board meeting, with the board taking time to discuss the report if it’s detailed or accepting a summary from the treasurer if it’s not. The treasurer annually presents the board with the upcoming year’s budget, a year-end performance report and the organization’s tax filings. If it’s a publicly traded company, the treasurer presents the information that will go into the corporation’s annual report.
Treasurer’s reports can be simple or complex, depending on the desires of the board and the board's need for meeting its fiduciary responsibility to manage the organization’s affairs. Small organizations might only ask the treasurer to read the bank balance as of the last meeting and the current bank balance, allowing board members to ask about any significant differences. Larger organizations might ask for detailed financial reports, explanations of large transactions and projections for the upcoming quarter. The more control a board has over its finances, the less information it might need at board meetings. For example, if the board appoints a treasurer, has a finance committee and hires an executive director responsible for managing an accountant, the full board might not need to review the organization’s finances in depth at each meeting.
- Photo Credit Visage/Stockbyte/Getty Images