DGMT NGO Commons - A Resource for Enhancing Good Governance and Accountability

A Resource for Enhancing Good Governance and Accountability

Monitoring Financial Resources – Role of the Board

Monitoring of Financial Resources is one of the main responsibilities of the organisation’s governing body (e.g. Board) and needs to be taken seriously as a pre-requisite for achieving financial sustainability of the organisation.

Some very specific and practical tasks that Board members can become involved in, include:

  • identifying funding sources and building and maintaining relationships with donors, including beneficiaries. Donors generally make grants to organisaitons that they have confidence in. This means that they need to be clear about how you plan to use the funds, that they are satisfied that you have proper controls in place to manage funds accurately and that you will provide accurate and honest reports on your work and how you’ve used resources.  Board members have the advantage that they have broad oversight of the organisation and its systems, but at the same time, they maintain an independence that allows them to critically review performance and progress.  Donors often rely on the credibility of Board members in their assessment of risk before investing in an organisation.
  • Board members also hold the responsibility of understanding the range of the types of funding that an organisation receives, as well as, setting clear guidelines for – and monitoring – how funds are used. This is a hugely important responsibility and critical for ensuring that the organisation actually does what it was set up to do in terms of meeting the needs of the community that it serves.
  • Building financial reserves must be seen as a strategy for ensuring financial sustainability of the organisation.  Many Boards develop a clear policy around this. This policy will be based on a clear understanding of what the organisation hopes to achieve, what risks need to be considered (these often include an assessment of the organisation’s capacity to deliver the service) and what opportunities may be exploited to raise ‘unrestricted’ funds (i.e. funds not restricted for the use of specific porgramme or organisational costs) that can contribute to the building of financial reserves.
  • One of the most onerus tasks of Boards is to strategically finance and manage the core or operating costs of the organisation.  Many organisations struggle to raise funds for things like office rent, staff training etc.  It is critical, therefore, Board members draw up and regularly review a budget of core costs so that they know exactly how much funding is required and so that strategies to keep these to a minimum might be put in place. It is often very useful to be able to show these core – or indirect – costs to funders along with your direct programme costs, as many donors will consider covering some (or all) of these costs to ensure the effective delivery of services.