leadership and financial literacy
DESCRIPTION
TRANSCRIPT
![Page 1: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/1.jpg)
State Street on Board Leadership and Financial Literacy
Prepared by Lauricella and AssociatesFebruary 2013
![Page 2: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/2.jpg)
Two Key Points
Basic financial literacy is a critical tool for nonprofit leadership
Financial literacy requires understanding:1. Nonprofit boards
• Modes of operation/Types of decisions
2. A variety of financial tools-more than budgets!
3. How different financial tools fit the different board roles
![Page 3: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/3.jpg)
EFFECTIVE BOARD LEADERSHIP
STRATEGIC
•Establish organizational priorities
•Develop approaches and tactics
•Deploy resources
•Review performance
FROM OrgA to OrgA+
GENERATIVE
•Focus on purpose
•Discern problems
•Rethink and reframe work of the organization
CREATING a new Orgz
FIDUCIARY
•Faithful to mission
•Accountable for performance
•Compliant with relevant laws and regulations
STEWARDSHIP of OrgA
Governance as Leadership by Richard Chait, William P. Ryan and Barbara E. Taylor
FIDUCIARY
•Faithful to mission
•Accountable for performance
•Compliant with relevant laws and regulations
STEWARDSHIP of OrgA
Balances three modes of governance
![Page 4: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/4.jpg)
Questions and Governance Modes
STRATEGIC
•Does our spending reflect our goals?
•Are we spending money efficiently?
•Did the organization do what it planned?
GENERATIVE
•Are we sustainable
•Do we have the money we need?
•Could we retool if we need to?
FIDUCIARY
•How did we do this year?
•Did we fulfill our obligations?
•Are we compliant with relevant laws
“Other questions that you have encountered?”
![Page 5: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/5.jpg)
FINANCIAL TOOLS
Audit or ReviewStatement of PositionStatement of ActivitiesOperating BudgetYTD BudgetCash FlowTax Form- ‘the 990s”
![Page 6: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/6.jpg)
CONTENTSINDEPENDENT AUDITORS’ REPORT 1
FINANCIAL STATEMENTS
Statement of Financial Position 2
Statement of Activities 3
Statement of Functional Expense 4
Statement of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6 -10
1. Reviews and verifies the financial books of organization
2. Demonstrates that funds were used appropriately
3. Transparency4. Over $500,000 audit (U.S)
Annual Audit or Review
Sample Audit table of contents
FINANCIAL TOOLS
![Page 7: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/7.jpg)
1. Snap shot2. Assets=Liabilities + Net
Assets3. Status of your
accumulated profits at a fixed point in time
FINANCIAL TOOLS
“How well has the organization done?”
Statement of Financial PositionBalance Sheet
![Page 8: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/8.jpg)
![Page 9: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/9.jpg)
1- “Is there cash?”
![Page 10: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/10.jpg)
2- “Can I use it? Is it unrestricted and
available?”
![Page 11: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/11.jpg)
3- “What is my debt position?”
![Page 12: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/12.jpg)
FINANCIAL TOOLS
1. Income-Expense = Profit (Loss)
2. Income earned over a period of time3. The costs (expenses) of earning the
revenue during that period
“How well is the organization performing?”
Statement of ActivitiesProfit & Loss
![Page 13: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/13.jpg)
![Page 14: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/14.jpg)
1- “Did I make money?”
![Page 15: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/15.jpg)
2- “Where did it come from?”
![Page 16: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/16.jpg)
3- “How did I do compared with last year?”
![Page 17: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/17.jpg)
Operating Budget
1. Planning tool2. Forecast revenue and expense3. Reflect mission and priorities
FINANCIAL TOOLS
“What is organization’s plan for the year?”
![Page 18: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/18.jpg)
![Page 19: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/19.jpg)
Is this magical thinking?
![Page 20: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/20.jpg)
YTD to Budget
1. Project or Organization2. Developed before and
during a project/period3. Measure performance4. Management tool
“How is it working out?”
FINANCIAL TOOLS
![Page 21: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/21.jpg)
![Page 22: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/22.jpg)
Cash Flow
1. Developed after budget2. Forecast activity3. Various timeframes4. Adjusted depending on
need
“When is our money coming?” or “When do I have to pay this bill?
FINANCIAL TOOLS
![Page 23: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/23.jpg)
![Page 24: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/24.jpg)
Wrap up and Questions
Different roles, decisions, and questions
Require different tools
![Page 25: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/25.jpg)
FIDUCIARY
STEWARDSHIP
Financial tools
1. Yearly audit (or review)1. Notes2. Management letter
2. Statement of Functional expense3. P&L4. Operating budget
Faithful to mission
Accountable for performance
Compliant with relevant laws and regulations
![Page 26: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/26.jpg)
STRATEGIC
Tactics Financial tools
1. Operating budget
2. Budget to actual
3. Profit and Loss
4. Sources and Uses
Establish organizational priorities
Develop approaches and tactics
Deploy resources
Review performance
![Page 27: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/27.jpg)
Out of the box Financial tools
1. Balance sheet
2. Cash flow
Focus on purpose
Discern problems
Rethink and reframe work of the organization
GENERATIVE
![Page 28: Leadership and financial literacy](https://reader035.vdocuments.mx/reader035/viewer/2022081413/546c4488af7959ba0e8b4e4e/html5/thumbnails/28.jpg)
Thank you