“The board has to insist on financial sustainability.” Lee Merritt, retired vice president for finance at Fuller Theological Seminary, sees this obligation as one of the most essential responsibilities of any school’s governing board. Merritt spoke to In Trust for an interview in the New Year 2014 issue.
Merritt knows that financial responsibility is difficult. First, the school must establish a break-even point for financial stability for each program or department. Once the board has the data, they must work with the school’s governance to monitor programs year by year, and sometimes they have to make hard decisions about where to invest resources – and where to cut.
“In order to survive and have a sustainable operation, you have to invest in those programs that the strategic plan defines as your future and identify those revenue-producing programs that have the highest margins, because they help sustain the institution,” says Merritt.
There will always be programs that are not financially successful, but which are deemed important because they “define the character and mission of the institution,” Merritt says. He argues that it’s fine to continue such programs – but only if the board does so with an awareness of the risks this decision poses to the welfare of the entire school.
Information about three resources Merritt recommends for every school’s CFO, and for board members who want to put their institution on the road to financial well-being, is here (scroll down to "For the CFO's Bookshelf").
Merritt sees the board’s role in financial matters as both practical and visionary. They need to ensure that the financial and strategic plans are integrated. “Boards have to encourage the administration to have the courage to move ahead,” he says.