What to look for in a financial report when you’re an arts graduate

I've been on some board or committee or another for most of my adult life (= most of my Christian life).

And for a decent chunk of time I just kind of tapped out of the financial report bit. I just didn't know what I was supposed to do with it. Was I meant to go through line by line and check the maths? I felt like Wayne looking at a contract in that scene from Wayne's World:

But my role on a committee or board is to be one of the eyes, minds and hearts that helps the ministry or organisation do what is smart, wise and good. I'm failing to fulfill that responsibility if I just give up at this point. 

So what should I look for? Four big things:

  1. Witnessing that the basics are done: on one level, I don't need to be self-conscious about not doing much when the financial reports come. Like a lot of formal things, like witnessing a contract, we are just making sure the bare minimum is done. So just be looking and seeing that our treasurer is keeping records and getting audits, I am protecting our ministry from basic incompetence and possible dishonesty.
  2. Checking we have more assets than liabilities: That's the balance sheet. I want to make sure we are not committed to paying more money (in debts and leave owing and things) than we have. In small ministries, we can get in particularly big trouble if our staff don't take their leave regularly for a long time. If they then left at short notice, the ministry could be crippled by a large leave payout, for example.
  3. Checking disproportionate expenses or income: This is what to look for in the Budget and the Profit and Loss sheets. Are we getting ridiculously less than your intuititon and experience says we should for certain activities or from certain supporters (like a campus ministry receiving little support from its graduates)? Are we spending more than we should on certain things (waterslides and chartered helicopters)? A board member can ask for more detail on these things to help the organisation be diligent with support raising and efficient and frugal with expenses.
  4. Making sure we can pay our bills for a few months: the normal rule of thumb is that we need to be able to pay our bills for 3 months, if we ran out of income tomorrow. This should probably be higher still if the organisation is dependent on only a couple of major donors.

That's what I've learned the hard way and from picking up bits and pieces of advice. Any other suggestions? If you are trained in finance, make sure you talk slowly and clearly for us arts grads :-P 

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