I was teaching a class about financial statements to nonprofit board members this week and one of the participants raised this question: “We are having our annual meeting this week. How much information should we give to our members about our finances?” What a great question!
Legally, nonprofit financial reports are available to anyone who asks. Form 990′s can easily be found online and anyone can request reports from the Secretary of State’s office. The challenge with these types of reports is that they generally give much more information than your members are likely to want – or understand. Similarly, I have attended annual meetings where so much financial information was given that most people had no idea of the financial status of the organization.
In my experience, there are three questions that most members want to know about nonprofits that they support:
- Did their income exceed their expenses in the past year?
- Does the nonprofit have a reserve account to meet unexpected situations?
- How much of the income is used for program support (as compared to administration and fundraising)?
You may have a culture of distributing your audit and current financial reports at the annual meeting, and that is fine. Just make sure you let your members know where in those reports they can find answers to the above three questions and you will have done a good job of helping your members truly understand the financial status of your nonprofit.
Join us for our next Networking for Non-Profit Event October 13th!