Best of Boards, 2nd Edition

Chapter 5 Understanding the Financial Statements of Nonprofit Organizations

Lauren Gibbs put down the phone and smiled. After her retirement, one of her goals was to become involved with a nonprofit organization whose mission was preserving the environment. And this call gave her a golden opportunity. A nonprofit with such a mission asked her to be the chair of its audit committee. Lauren looked at this as an opportunity to contribute to her favorite cause, and the nonprofit looked at her as the ideal board member. Lauren had an MBA and until her retirement was an executive in a consulting firm. In addition, she had a depth of knowledge about the environment and a passion for excellence.

The problem was that it had been several years since she had worked with nonprofits and she knew things were bound to have changed. She knew she was not up to date on the legal, regulatory, and other issues facing nonprofits in 2018. Lauren thought for a few minutes about the responsibility she had taken on. Just because she wasn’t current in these areas didn’t mean she couldn’t get up to speed. She picked up the phone again and called a friend to ask for help and she was very glad she did. She learned that not only had the environment and the legal and regulatory requirements significantly changed, the financial statement presentation for nonprofits was about to change as well.

A nonprofit organization needs focused expertise in its executives and on its board of directors. Frequently, ...