During the COVID-19 pandemic, information is changing daily, even hourly. While management is managing the day-to-day activities, the Board of Directors also has a key role in oversight, and its fiduciary duties do not stop. In its oversight, the Board must monitor management activities, make assessments as to whether management actions are appropriate, and provide any additional direction or guidance necessary. To be effective, a Board must stay well informed. Not only is there a direct impact on your organization to be considered, but there is also the potential impact on the beneficiaries of your program services, employees, volunteers, programs, fundraising, events, meetings, investments, etc. Below are three key questions for nonprofit governance to assist in properly planning for the future of the nonprofit.
Communication – What message are we sending?
Frequent communication must occur internally with staff and externally with donors and recipients of your services. Your message should be transparent and consistent. Management should provide the Board with any decisions or policy changes that have occurred. As a Board member, you should understand the basis for those decisions and the projected impact. Be in the know of what services are continuing, what has temporarily ceased, and what services function differently (virtually, phone calls, etc). As a Board member, you are an advocate and voice in the community for your organization – know and share your message.
Cash Flow – How are we managing and projecting cash flow?
Understanding your monthly cash flow projections is critical. Your budget is likely no longer a good guide for your operations in the short term or the remainder of the year. Your cash flow projections should not be based on the best guess or best hope scenario, but instead based on actual known cash inflows and required outflows. You should have a clear understanding of any assumptions and have open discussions about what happens if these are incorrect. You will need both a near-term and longer-term projection (as far as 12 months out). Projection revisions will need to occur regularly.
Consider what liquid assets or reserves you have available. Consider if the Board needs to release restrictions on Board-designated assets and take action. Are their donors that you can discuss releasing restrictions on net assets or allowing funds to be redirected to other programs or operations during this timeframe? Consideration and prioritizing outflows of resources also need to be understood and the impact that will have on employees, programs, and lenders.
Internal Controls – Are we protected?
Understand what systems are under revision out of necessity. Understand what is in place and what has changed or may still need to change. Segregation of duties still needs to exist to protect the organization’s assets but recognize that how that occurs may need revision. Processing of cash receipts, payments to vendors, and performing payroll are all critical to every organization but don’t forget about your facilities and ensuring the security of physical assets. Finally, how will financial reporting occur to management, the Board, and donors, and will critical information for management decisions be readily available?
In this rapidly changing environment, there are many questions for nonprofit governance to ask, with some responses coming easier and quicker than others. Governance must continue to ask questions to ensure you are making the best decisions for your organization in this challenging time. Contact your local CRI advisor for guidance on the next steps to ensure your nonprofit entity is prepared for the ramifications of the COVID-19 pandemic.