Navigating risk with clarity for nonprofit boards

More about the podcast

Dr. Froswa' Booker-Drew is the CEO of Soulstice Consultancy, an organization dedicated to helping leaders with executive coaching, community engagement and culture development, as well as assisting nonprofits with board governance and capacity building.

Dr. Booker-Drew shares her insights on financial and risk oversight for nonprofit boards. From her perspective, this means being proactive rather than reactive, asking questions about financial management, ensuring the board has members with financial expertise, and integrating finances and risk into strategic planning.

She also shares real-life anecdotes and practical advice on fostering a culture of financial responsibility and risk awareness. We discussed the importance of intentional conversations about finances and risk, the right committee structure, and why finances and risk need to be part of board member orientation.

Stick around to the end to find out what advice Dr. Booker-Drew gives for using tools and resources to improve financial and risk oversight.

Resources on financial oversight and risk management for nonprofit boards

Financial oversight & risk management: A 5-step guide for nonprofit boards

Master financial oversight: A cheat sheet for nonprofit leaders

Managing financial oversight: An infographic and guide for leaders

Please see below for a transcript from this episode:

Jill Holtz: Hello, so today I'm joined by Froswa Booker Drew. Welcome, Froswa. Will you tell us a bit about yourself, your organization and your role there to kick us off?

Dr. Froswa' Booker-Drew: Thank you for having me Jill. I am CEO of Solstice Consultancy. It is a small firm, but a mighty team of amazing people. And we do a couple of things. We help leaders with executive coaching. And that actually started out of, we were doing community engagement work and helping organizations think about how they connect in community. And realized that a lot of organizations had an internal community engagement problem and started helping leaders think about culture.

And if they want to connect to others, how are they showing up? And so we do a couple of things, but that's a quick overview of the work that we do. And some of that means capacity building for nonprofits around board governance.

Jill Holtz: Excellent. So the reason I wanted to talk to you today is I'm interested in the topic of how boards of mission driven organizations, nonprofits, charities, etc, can approach financial and risk oversight. So that's the kind of topic. So if you don't mind starting with the definition, what do you think is meant by financial and risk oversight by boards? What does that term mean to you?

Dr. Froswa' Booker-Drew: I think it means that boards cannot be asleep at the wheel when it comes to a nonprofit organization. It's not just coming in and having lunch and discussing all the great status and the updates of what a board does, it really is about making sure that the organization is not placing itself in a position of liability, that the organization is aware of all the risks that may exist and how they can put in protocols to ensure that the organization is able to continue its mission.

Jill Holtz: So I feel that maybe some non-profit board members might think that those terms financial oversight or risk management are really more of a corporate board responsibility. So how should volunteer board members for non-profits think about these things in relation to their own governance?

Dr. Froswa' Booker-Drew: I can tell a quick story. I'm working with a client now who is a part of an organization's board and they came to meetings and didn't ask anything about financials. And they recognized when leadership moved on that the organization was in a lot of challenge. They're in debt, had no idea that they were barely making payroll. And my question was, well, where was the board in this? And they said, well, we just listened to what the executive director said. We didn't ask any questions about how are we financially, what is going on. And so my concern became for them, what's the liability for the board as it relates to the debtors of that organization? And having to think through the risk of what does it mean legally for them now that they have this debt? What does it mean in terms of raising additional funds? And I think that story exemplifies what happens for a lot of boards.

If it's good, we're happy, we see impact, we see lives being changed and we're excited about that. But then when the crisis comes, one of two things happen. People want to leave the board, we got to get out of this, or they don't have the tools to figure out how to move and pivot. And it can be fixed. Even in this situation, we've been talking through what are some scenarios that can happen and beginning to do some scenario planning. So boards have to pay attention to that because situations happen where donors aren't giving to the degree that they were giving. You may have a situation where there's a contract and a grant that's coming up that has requirements that you may not be able to fulfill. So what does it mean for boards to be proactive instead of reactive to solve for these issues?

Jill Holtz: I love that and you've touched on some really good points there like asking questions. You have to not be afraid to ask those questions about how are those financial things? What are the risks there? And also the responsibility. There's a fiduciary duty, isn't there? And actually a legal obligation that you as a non-profit board member have. know, it's really important that you as the board member understand that.

Dr. Froswa' Booker-Drew: Yes. Yes.

Jill Holtz: What are some of those consequences? You mentioned salary not being paid for your staff, but what are other consequences of that poor financial and risk management?

Dr. Froswa' Booker-Drew: Losing your 501(c)(3). I've been on a board that that has occurred as well. And by not paying attention and looking at 990s, and the board is responsible for approving those, by not having a strong finance committee. And what I find is that for a lot of organizations, part of it starts with committee structure. When you don't have finance committees who are there looking at 990s who are looking at the reports, profit-loss statements. If you don't have a finance committee that can check, you know, whether you've got a CFO or a fractional CFO, you've got to have people that are there that are checks and balances to make sure things are happening. And I remember a funder coming to me going, well, Froswa’, you know all this governance stuff. How did this happen to this organization? And I said, well, some of that was compliance. We didn't have a group at the time established to help with compliance.

But also we weren't asking the right questions. And I think it's important for board members to ask questions about what are the legal implications? What are the financial implications? You know, if worst case scenario, what could happen? And I think it's important for us to begin to start mitigating the risk, but it's being intentional about discussing that in our board meetings and not ignoring those possibilities or waiting for crisis to happen to then say we've to put in protocols and processes to solve for it.

Jill Holtz: I think that's excellent advice. So you know how can nonprofit boards if they're not already doing this how can they get what advice do you have to them to get started with effectively identifying and assessing both financial and operational risks?

Dr. Froswa' Booker-Drew: I think number one, it's who's on your board. I think it's very important to make sure that you have people on your board who understand how to read financial statements. That's critical because although I've managed large budgets, I am very honest about that's not always my strong suit, but I bring people around me that that is their strong suit and that they can provide support. So how do you make sure you have people on the board who have that financial background, who understand that, who may have the legal background, who understand some of the challenges. It starts with the board.

And then I think it's also having conversations around governance. So part of governance is managing the risk. And so how do you make sure that you have tasked your governance committee to ensure that these kinds of topics are being a part of the conversation? That you have a finance committee that is now asking those questions and doing the oversight. That you may have, you know, people that are parts of your committees. They may not be on the board, but folks who are community members who have expertise, who can serve on committees and give that kind of insight. So it's important at the board level to begin to ensure that these conversations are held and not just wait till, uh-oh, we're running out of money. Now we got to do something.

Jill Holtz: Yeah, so I think what I'm hearing as a lot is get the committee structure in place, make sure you've got the expertise either on the board or at least at committee level that can help advise the board. And how else can the board foster a culture of that financial responsibility and risk awareness? Is that up to the board chair or does the board itself have a role? Have those conversations that you've talked about?

Dr. Froswa' Booker-Drew: I think it's both. think the board chair has to initiate that because our job is to make sure the organization fulfills its mission. And part of that is making sure that it's healthy. So could you use tools like the McKinsey assessment to be able to help you think about where we may have holes that we can then shore up and go, this is an area for us. How do we use tools like BoardSource? You know, there's the nonprofit risk management institute. How do we use these kinds of resources that can give

us assessments and tools to begin to know what to look for. Because many of us may not be in that space. on the board because we love this mission. We love the cause. It's something we're passionate about, but we're not thinking about that. So how do we make sure even on our agendas that we are having conversations about finances, that we're talking about risk and how to mitigate those things. It has to be intentional and be a part of the conversation, the agenda. It has to be when we're doing strategic planning. We can't just talk about the programming piece and how to raise money, even as a part of our strategic planning and visioning, what does it mean to have space to deal with those potential challenges that come, you know, as a result of trying to raise money, of getting contracts and dealing with, you know, MOUs that you need to make sure that that's at the top of mind. It can't be something that's an afterthought.

Jill Holtz: And just to take that step further, when you get new board members joining new trustees, is that a time where you could, you know, send check with them how confident they are, look how financially literate they are and if they're not arrange for some kind of support and training on that front?

Dr. Froswa' Booker-Drew: Agreed. I think, and this is a challenge, a lot of boards don't do orientation well. They get into the business. And so how do you make sure that the onboarding process is including that kind of conversation around your financial obligation. It's not just to get on the board to give, get, or get off and just go, we need your money. It's stewardship. And I don't think we recognize that a part of being on a board is stewarding this organization. And that includes making sure that the behind the scenes office work is together. So even with onboarding, how do we make sure that we're even pairing people together who do this informal mentoring, who may not understand the financials, but there's someone that can guide them through to be able to ask those hard questions when necessary.

Jill Holtz: And also talk to the history of what the recent decisions have been made and why they were made. Because again, try to bring someone up to speed on that is really important. Can I talk to you a little bit more about transparency because you were talking about kind of internal engagement, but what's your view on transparency about financial management and risk management externally? You know, how should that take place? Should not-for-profit boards involve stakeholders in that oversight process? And what are the best ways to communicate all that?

Dr. Froswa' Booker-Drew: I think it's important to recognize timing. I think if you're still going through a challenge, and to inform your entire database of, we're going through this, may not be the best use of your time. Yeah, that may not be the time. You may want to get a better handle on it, but what does it mean for those people that are intimately involved that you could tap into their brilliance and their resources? this group that I mentioned, one of the things that they are doing is, and we've talked about how do you start pulling in alumni who have been a part of the work because they work with kids. What does it mean to pull in alumni and help them understand what's going on and they become ambassadors and advocates to help you in this time of transition. What does it mean to bring donors in and especially your institutional donors who are giving funds, I think it's important for them to be aware. So often we want to hide from funders because we think it's going to hurt our funding later. The reality is I think the earlier that you can bring them in, the sooner that they can help you course correct.

And so often we want to hide and not talk about mistakes. When I was a funder at State Fair Texas some years ago, I always wanted grantees to tell me what was wrong. I would even put it in our reports, tell me what's wrong because I can't help you if I'm not aware of it. And I know not all funders were like that, but I wanted to make sure that people were telling me so I could get them the resources because their mission was important. And so I think it's critical to include your stakeholders at levels to be able to help you move through a challenge.

Jill Holtz: Maybe that's a of a judgment basis of who's the donor, what level of transparency do they seek, where are we in the journey of whatever it is that we're looking at and then being. But I also think just more generally, not in a, a crisis situation, do you think it's a good idea to kind of showcase how you manage the financial oversight, how you manage your risks as board? Is that a good thing to talk about?

Dr. Froswa' Booker-Drew: I think it depends and others may disagree, but I just really think it depends on your environment that you're in. I think it depends upon, you know, your stakeholders. Sometimes you can offer a lot of information that people didn't ask for. And then if you're not able to control the narrative of that, can actually end up being a problem for you. So I think you have to use discernment and discretion.

It's not that you hide things. I think it's being aware of it's like going on a date. On your first date, you're probably not going to start talking about, you know, what toilet paper you use. You might wait before you have that conversation. And I think you have to use that kind of discretion as you choose to share information with stakeholders. Transparency is important. Accountability is important. But I think it's also using the discretion of what is the narrative and what's the goal that you're trying to accomplish and sharing it. If it's just to share it for the sake of sharing it and you haven't thought about the consequences of that, it could possibly harm you. So I think you have to be very deliberate about what is the outcome that we want to accomplish in sharing this information. And then you can be strategic in how you choose to share it and what you share.

Jill Holtz: Let's move on to the topic of technology because we sell board effect, we're very passionate about how that helps non-profit and charity boards. What role does technology like board management software really help in improving financial and risk oversight for boards do you think?

Dr. Froswa' Booker-Drew: I think the challenge is a lot of nonprofits don't use that type of technology. And I think it's important. I remember being on an international board and we used board software. It was a great place to capture information, to be able to have context for what was happening in the organization. That I didn't have to rely upon the executive director of the chair to call them at one o'clock in the morning when I had a bright idea about now what happened then? That kind of resource really helped us be able to understand context better of what was going on. I think a lot of smaller organizations don't have access to that type of technology. And I think that could really be the catalyst for their growth. It's thinking about how do they not just have the software for their accounting or the software to capture outcomes, but what does it mean to really make sure that you're capturing the history of this organization, the minutes, and from the standpoint of the board. So I think this kind of software helps to, one, help you know other board members, because they are in there and you get an opportunity to read up on them and learn more about them, but it also helps you with understanding the board and the decisions that have been made around, know, why are we doing X? We've got this place that has all of this information for us to use to better understand why. So I wish more organizations used it.

Jill Holtz: Yeah, and I think having that single source of truth, that one place that has that history, that has the context, that also has the documents to kind of bring people, new board members up to date. There's a lot of kind of benefits to it. mean, again, we're passionate, we're talking from a positive perspective. But I think another area that's interesting is that we talk a lot about sensitive data. And nonprofits deal in very sensitive data, either they deal in donor data or client data. Cyber risk isn't going anywhere. Cost of breaches and ransomware are rocketing. So is the fact that your board management software keeps that board information secure, know, should that be a factor now as part of your overall risk management?

Dr. Froswa' Booker-Drew: Definitely. And I don't think that nonprofits see that as a risk quite often until it happens. And so this is part of risk management, is being able to have that type of software in place that if something happens, I'll never forget years ago, I worked for a nonprofit and there was the storm in Galveston and all of these organizations lost all their data because it was paper files.

And the idea that they hadn't even considered how do we use technology to save our resources, that's been years ago. And I still see nonprofits who are not thinking about technology in a way to protect their records. And from a board standpoint, being able to even have those decisions encapsulated in one place, they just don't think about that.

Jill Holtz: Yeah, and we even have a case of one of our clients who they had a cyber attack, but they were actually able to keep using board effect because it was kind of not taken down by the cyber attack. It was secure. Exactly. So we were like thrilled to hear about that case study. So I'm kind of interested in hearing maybe your perspective on how go back to the idea of strategic planning, which you touched on earlier and decision making. How do you integrate your financial and risk management into that strategic planning process? How do you tackle that?

Dr. Froswa' Booker-Drew: It has to be called out. When I'm working with groups to do strategic visioning, one of things that I've discovered is they never think about budget implications. So they have all these dreams of we want to build a new building and I'm going capital campaign. How much is that going to cost? The cost of construction is going to go up. Are you thinking about this? I think the same thing has to go on when you talk about financials. So I think part of strategic planning process has to include discussions on technology. So if we're going to do all these things, are there resources that can help us go faster, be more effective, more efficient? And looking at every area of the organization, including board governance.

So I think that has to be a part of it, you've got to call it out in the strategic planning. And too often strategic plans focus so much on the programming side of it and the fundraising that I don't think it looks at the back office of the IT, the HR, the governance piece. And those are the pillars of an organization's success. So yeah, we want you to make impact and have outcomes and do great programs, but if you don't have those other pillars in place and they're not strong, it's going to impact your ability to serve.

Jill Holtz: Absolutely. So, Froswa’, just to finish, I've got three quickfire questions to end. just, you know, answer off the top of your head in a minute or less. So are you ready for this? This is my quiz question. Okay. What's the number one thing that volunteer boards should be doing to manage their financial and risk oversight?

Dr. Froswa' Booker-Drew: The number one thing that they should be doing is asking questions about financial management and oversight. What are we doing?

Jill Holtz: What advice do you have for leaders and board members of mission-driven organisations for managing risk?

Dr. Froswa' Booker-Drew: Find out what you're doing and get resources. Identify tools and solutions that can help you solve before it becomes an issue.

Jill Holtz: And finally, what should a board do if they realise they don't have a good handle on financial and other risks?

Dr. Froswa' Booker-Drew: If a board realizes they don't have good financials and graphs on it, get help. You don't have to do it alone. There are resources that are available to you, but you gotta start asking questions and you gotta get people in that can help you solve for it. And they exist.

Jill Holtz: I love it. Thank you so much. That's excellent advice, Roswa. Been such a pleasure talking to you today. Thank you for joining me.

Dr. Froswa' Booker-Drew: Thank you for having me Jill, I appreciate it.