Who understands your school's finances? The answer should not be "just the CFO." Or even just the CFO, the president, and the finance committee chair. Ideally all board members and senior administrators should have a solid understanding of a school's finances -- and perhaps the faculty and staff as well.
Why? Because people who are on boards or hold leadership positions in a school are governance stakeholders, even if they don't serve on the finance committee. And governance stakeholders need to understand how all kinds of decisions have an impact on institutional finances.
For example, say you're thinking of adding a new course or program. How will the new program affect enrollment, donations, and foundation support? What about facilities -- is deferred maintenance saving money in the short run but creating expensive problems down the line? And the endowment -- do you know what your school's annual draw is? These are questions that governance partners should be able to consider and answer.
Many stakeholders who do not have a financial background feel uncomfortable exposing their lack of knowledge in a larger group of peers. So consider ways to offer educational opportunities so that board members, administrators, staff, and faculty without a financial background can learn and grow in knowledge together.
“Welcome to Your Key Financial Statements,” a resource from BoardSource, may help. This primer can be used as an introduction to the key financial statements -- the income statement and the balance sheet -- and important financial terms. It also provides a sample balance sheet and a sample income statement with explanatory notes so that users can analyze and understand data. This downloadable resource is free for BoardSource members and only $12 for non-members.
Who on your team could benefit from this resource? Consider sharing this with your finance committee to be used in an upcoming board meeting during the committee’s report. Or consider using it in a faculty meeting as part of an education session.
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