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The Board has ultimate responsibility for the organisation's finances

Approving financial statements

Board or committee members have responsibility for overseeing the way managers and staff conduct the operational side of your organisation – this means monitoring financial affairs and reviewing and approving financial statements.

As a board member, you should

  • Listen carefully when management reports to the board — ask questions if anything is unclear or seems unusual.
  • Inform yourself about your organisation's business.
  • Read financial statements carefully —
    • do they make sense?
    • do they present a realistic view of cash flow?
    • do they comply with legal regulations and accounting standards?
    • are extraordinary items or significant expenses explained adequately?
    • does anything extra need to be disclosed in Notes?
    • question anything that appears irregular and seek outside advice if necessary.
  • Has the external auditor raised any issues?
  • Remember that even if your board has an audit committee, the whole board is responsible and accountable for signing off on financial statements.

For a checklist on what to consider before approving financial statements, see the AICD's Qld Director magazine June 2008 (www.companydirectors.com.au)

As a board member, you must —

  • Know your legal obligations;
  • Know what your organisation's managers are doing. Question managers and staff about how the operation is going;
  • See that your organisation keeps proper financial records;
  • Ensure that financial statements are an accurate represention of your organisation's financial affairs;
  • Take extra care if your organisation is operating a business because you may be exposed to increased liability;
  • Make sure that your organisation can pay its debts on time;
  • Act in your organisation's best interests, even if this may not be in your own interests;
  • Find out and assess for yourself how any proposed action will affect your organisation's financial health, especially if it involves a lot of money;
  • Get outside professional advice when you need more details to make an informed decision;
  • Take an active part in board meetings;
  • Remember – even if there is an audit committee, the board is ultimately responsible.
    In short
    Being a board or committee member requires time and consideration. Only take it on if you have the time and are not only willing but also able to put in the effort required.
Other resources
  • Guide for Community Board Members – a clear guide to reading and understanding financial statements for nonprofit board and management committee members, compiled by OurCommunity and Westpac.
  • Australian Securities and Investment Commission Your Company and the Law website outlines the financial reporting and other legal obligations of company directors including nonprofit companies.
  • Australian Tax Office nonprofit organisations' webpage. Resources include information on assessing whether your organisation is income tax exempt; fundraising and income; volunteers and employees; administration; record-keeping.
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