Empowering trustees with financial and oversight know-how

Heather Rich, Executive Director of the American Board of Genetic Counseling, the national certifying body that sets and upholds professional standards for genetic counselors across the United States.

Heather shares her insights on the critical role of the board in ensuring financial transparency, proactive management and strategic oversight. She also emphasizes the importance of a robust onboarding process for new board members, which should include financial training to cover the basics as well as the organization's financial philosophy.

We also discuss the importance of a strong, supportive relationship between the board and the CEO, where the board has ultimate responsibility for financial and risk oversight, while the CEO and staff handle day-to-day operations and provide necessary information and training. Heather shares real-life anecdotes, including how the American Board of Genetic Counseling manages its financial review process.

We discuss effective financial and risk oversight, and how board members can make informed decisions based on past data and trends for good oversight.

Stick around to the end to find out what advice Heather gives for maintaining financial integrity and oversight, including scenario planning to assess risks and opportunities.

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: Hi everyone, today I'm joined by Heather Rich. Welcome Heather.

Heather Rich: Thank you.

Jill Holtz: Can you start by telling me a little bit about yourself, your role and your organization?

Heather Rich: My name is Heather Rich. I am the executive director for the American Board of Genetic Counseling. We are a certification organization that board certifies genetic counselors. Most of them are new grads coming from their master's program. We do have licensure components. So over 36 of the states mandate that genetic counselors do have to be certified with the CGC credential. So we take that responsibility very seriously.

Jill Holtz: So how many are on your board, Heather?

Heather Rich: We have eight board members. just did a bylaw update to add an additional board member. So next year we'll be having nine board members.

Jill Holtz: Very good. So the reason I was interested in talking to you today is I'm talking to different leaders about how boards manage financial oversight and risk for mission driven organizations. So if I can ask you to start with what with the definition, what do you think is meant by financial and risk oversight? What does that mean to you?

Heather Rich: The financial risk and oversight means making sure that the organization and the board of directors is managing the money responsibly and identifying any risks that could threaten the ability for the organization to achieve its strategic plan and its mission. And really what that means to me, those terms mean to me is that the board has a key role in reviewing financial documents, budgeting, monitoring the financial health of the organization, and ensuring that they are very active in making plans to handle when we face challenges or uncertainties. And of course, your staff team is going to be a large factor in that as well but it is the fiduciary responsibility of a board to make sure that they have a understanding and the oversight of both their financials and any risks that they may incur.

Jill Holtz: And this might be a bit of an obvious question, but why is that oversight important for the board to do for the organization? I know you mentioned producer responsibility, so they do have a responsibility there, but why do the oversight?

Heather Rich: Well, yeah, so to many, you know, that's an obvious that they absolutely have to. So a board cannot operate blindly. So a board should never trust 100 percent everything from a financial perspective that say one particular board member is doing or staff should be doing. That's where boards can really get themselves in trouble. And, you know, hopefully it doesn't happen, but there could be missing money, missing funds, things that are not happening that they should. organizations, specifically nonprofit organizations, that is your constituents, your stakeholders, your members. That's their money that's coming in to help you run this organization. So you're also responsible to your certificates, your recertificants, your stakeholders.

Anybody who is making a transaction with your organization, the board needs to have the responsibility to understand where that money is going and what's coming in and how it's allocated. So it is one of the primary responsibilities, if not the most important responsibility of the board, is to make sure that they understand their finances and that they're working with the right teams to do that.

Jill Holtz: So, you know, many non-profit board members might stand for the board because they're passionate about the cause or they've have some kind of personal connection with, if it's say a health related, you know, non-profit. They may think of these terms financial oversight or risk management as more of a corporate board responsibility. How do you think they should be thinking about those things in relation to their own oversight?

Heather Rich: So I can understand where a board member feels that way, specific in the not-for-profit sector, because majority of your board members, if not all of them, are going to be ones that currently practice in that field. So for my instance, genetic counselors. Our board, it's mandated, other than the public member, that everyone is a genetic counselor in order to serve. So they have the knowledge of the field and who they're helping and why they're doing this. But for a nonprofit has normally limited resources. the stakeholders rely heavily on the trust of the board that the board's gonna make the right decision strategically and financially to help move the organization forward. So it is a big part of their duty of care to ensure that the organization's integrity is intact, meaning their financial standing, that everything is done according to how it should be legally. And also the biggest part is making sure that you planning for a sustainable future. So the specifically the certification industry, while we are licensure and that comes with great responsibility.

Jill Holtz: Yeah.

Heather Rich: Especially for those certification entities that are non-licensure, there are lot of ups and downs. And so you have to make sure that you're always staying financially stable and that you can sustain your operations year over year. So that can always change, especially with certification, depending on the laws that are placed in different governmental changes. So that's something that the board has to always take into consideration.

Jill Holtz: So obviously you've mentioned already one of the key risks for a non-profit is the money, know, having the money to carry out the mission. How does your board go about managing financial oversight and is risk a perspective as part of that financial oversight?

Heather Rich: Well, first of all, we have a board treasurer. So number one, we have a specific board member that works directly with staff on a monthly basis to audit our financial statements. That treasurer is also heavily involved in approving budgets and then also monitoring the performance of that budget month over month. The board itself also receives monthly financial statements along with executive summaries and dashboards of product lines and what our expectation is month to month. So number one, that gives the board the transparency of money in, money out, and what's going on. The risk is a definite part of that perspective. So we look when doing budgeting and looking at new product lines, I specifically look at three-year trends, evaluating revenue and expenses. And then have those discussions with the board about any potential areas of concern that can impact revenue or expenses. If we're looking to release new product lines, we start talking about, you know, what's going on. are the risk factors out there? Is this a good investment or is this not? So that usually has a lot to do with what our reserves look like. Do we have the reserves in the bank to put forth additional dollars for innovation? Knowing that it could take a couple of years to make that money back. So a lot of scenario planning has to go into effect if we're going to make some large changing or some sweeping innovations.

Jill Holtz: So just to kind of recap, you've talked there about making sure that somebody is on top of the financials that really has that role and responsibility, but also that board members get the right information at the right time, presumably in a format that they can understand as well, and that you're looking at trends and you're also doing scenario planning so that you're really making very informed decisions about the risk, depending on what the appetite is to take on a risk, for example. Are there any other kind of operational risks that you kind of assess as part of not just like a product service launch, but just generally wider? Is cyber an issue still that you talk about? Where are other risks that you're maybe discussing at the board level?

Heather Rich: Correct, yes. So currently for, for my organization, we do identify, you know, and we try to assess financial, assess financial and operational risks. use a combination between, you know, brainstorming discussions, strategic discussions and input from staff and leadership, you know, staff are the boots on the ground, managing the organization.

We're working with our volunteers and we're talking with our board members and just the stakeholders at large. Also staff, since we are a certification organization, we are heavily involved with other professional associations for certification where we keep abreast of changing things in the landscape of certification. However, when we approach operational risk, it's always discussed as a board. mean, currently right now,

The cyber risk for us is not something that we're heavily looking into when the operational risks that we tend to talk about more are based on a programmatic levels, staffing levels, technology needs. Also our strategic plan plays a big part into looking at financial and operational risk, depending on funding that's needed for particular deliverables.

Jill Holtz: And how is the, how are you managing compliance? Do you have a committee that reports to the board on that? How does that work in your organization?

Heather Rich: Yeah, we do have a separate committee. It is chaired by the treasurer. It has outside perspective of stakeholders along with a couple board members that sit on it. They're independent of the actual treasurer position and the board oversight, so they will dig down a little deeper if they need to and bring thoughts or ideas back to the board based on the current financial statements, our reserves, things like that.

Jill Holtz: Well, and then I wanted to actually touch on another aspect, which you mentioned there is about other stakeholders. Do you does your board involve or how does your organization involve stakeholders? How do they communicate? Drill into that a little bit for me if you don't mind, because you're very much a membership organization and that's kind of important because that's where your revenue comes from. And as you say, have products that you sell, et cetera, services. So how do you build in stakeholder feedback and then going the other way as well?

Heather Rich: So from a direct financial perspective, we don't actively seek stakeholder feedback on how our budget is prepared, how, what our philosophy is in that nature. We don't necessarily involve stakeholders in that. What we do is we provide public facing documents through our annual business meeting about what the end of year financials are, the health of the organization, and a high level of the operating and non-operating expenses.

Jill Holtz: Yeah, I think that's one thing is being very transparent about this is how we've run the financials. This is what the financials are. This is what the sustainability is. I suppose. You are not donor led at all? Do you get donations or is that more than that? Yeah. Be more of a question if it was like a donor led organization.

Heather Rich: No, don't have, yeah, no.

Jill Holtz: How are you managing your risks so that they are comfortable and confident in the board and the oversight, but because you're a member organization. But presumably you have forums where the members can find out what's been happening and see those accounts and see those decisions at some point. So talk to me a little bit about, when you mentioned you're going to have a new member joining, how do you ensure that that new member has the necessary expertise to be able to look at the budgets and the finances and understand that and talk about risk?

Heather Rich: Sure, yeah, and probably similar to all membership societies, know, new board members go through a substantial training process when they're onboarding with us. And one module of that process is financial training. So we go over the basic tenets, the philosophy of the board, how we budget, why we budget, what is the time frame and then what is what can they expect from staff meaning what kind of financial documents are they going to be looking at. I also do as my role as executive director I check in with those new board members as well and then offer them any kind of guidance in helping to interpret them. The treasurer also is the third set of eyes pretty much on our financials before they ever go to the board so while the board does receive an extensive training. I do understand they don't look at financials on a daily basis, such as I do.

So I believe that with the executive summaries that we created, which is basically a one-pager written out document to help them digest this large financial statement they're looking at, and then the dashboard, which is a nice quick peak look at what they're looking at, along with the treasurer going with staff line by line monthly looking at the budget.

I think the board usually has a pretty confident oversight that through all these measures that the finances are where they are. So I think they feel pretty comfortable with that. I do think their first year as a board member is probably the toughest, just getting to know the culture and then getting to know like the documents and things like that. So we do do some check-ins. I will also say too, I do have an entire accounting department. So it's not just me running the finances. It's an accounting department. Then it comes to me and then it goes to the treasurer. And then after that, it then goes to the board. So there is a substantial review that takes place. And we also do a independent audit by a different auditing firm every year based on our previous year's financials. So there is a complete unbiased outside of our organization set of eyes also looking at our financial statements. And so that's another part of the risk management process too. That's really important for organizations to have someone outside of their company, you know, taking a look at your financials and making sure that everything's on the up and up and money is where it's supposed to be.

Jill Holtz: That's a really good point, because I think when you're in an organization, you're so entrenched in it. It's like the old saying, can't see the wood for the trees. you know, having that external set of eyes come in without bias and looking at, you know, how things are being run is really important. But I also love that that you do those executive summaries because, you know, board packets are so dense. There's so much material in them that, you know, again to do something that just helps board members say okay these are things I really need to look at and pay attention to. Obviously we sell BoardEffect here at Diligent, we're passionate about how it helps nonprofit boards. You know what role do you think technology such as board effect has in helping boards with financial and risk oversight?

Heather Rich: So I think for me, I think that one of the best uses for us with Board Effect is that we have this secure platform. So it can only be accessible by those we give access to. Certain documents can only be printed if we give them access to do this. So for our board, I love the ability for me to just upload the documents into Board Effect and they're not being shared via email. So some organizations, which there's nothing wrong with that, but for us, I like the fact that, you know, I'm not sharing them via email. They're, you know, being kept within the Board Effect folder. And then also they're there for historical prosperity too. So Board Effect is also a huge document repository for us. So while we have things on our shared files here in the office, we also have board members have access to see historical documents. So, so many times you're getting in a conversation like, well, that was three years ago, you know, where you can go, they can go and search board minutes from three years ago and board rosters from three years ago, committee work from three years ago, budgets from three to five years ago. So it's really important for them to know just for their own transparency per se, that they can go and look at other historical documents and know that what the staff is telling them and previous board members and current board members are telling them are actually the truth. And those are the processes that you're following. So that's very helpful. And so from also a risk standpoint, you know, for someone to not see like full-fledged financials that don't need to see it, the ability to put them into a more secure platform is really helpful. So.

Jill Holtz: I think that's really interesting. being able to kind of have access to the archive, the past history, even like say you mentioned your external audit report, being able to load that up and everyone can view that, being able to set permissions. And I know you were saying, you know, cyber isn't top of mind, but in a way that's because you know, you have this secure encrypted place that everyone can access and that things aren't getting shared on email.

De facto that is helping against cyber risk as well. I suppose as well that the fact that board members, because they can access information prior to board meetings, they're coming better prepared, aren't they, to have those important discussions when you need to. Yeah.

Heather Rich: Yeah, that's certainly the goal. That's certainly the goal for them to have all this information. And then yes, like past board books are in there. Yes, so certainly if they're not looking at the documents before the board meeting, they have them during, but the board meeting is going to roll, you know, whether they're ready for it or not. So yeah.

Jill Holtz: Yeah. Do you ever use work rooms for committees work? So say you mentioned the compliance committee or those are you using the work rooms feature for them for them?

Heather Rich: Yeah, we sure are. I think we have like 13 workrooms in our board effect platform right now. Yeah, we do. I make sure for historical purposes based on what they're working on that all documents that they're working on are housed in there, you know, and specifically the final documents so that we can always have that. I mean, obviously staff, we put everything on a shared file, but organizations tend to work, committees sometimes tend to work in really siloed areas. And there's a lot of like, this is saved on my desktop and it's someone outside of the organization. So that's a bit of a culture that I have tried to change a lot because, you know, 14 years from now, it being on someone's desktop and I have no idea what historically was done is not so super helpful. This platform has been very helpful for that because there will be questions on something that happened many years ago that you've forgotten about, but now you have a way to go back quickly and grab that document and figure out why that decision was made.

Jill Holtz: Yeah, so I'm conscious of taking up your time here, Heather. So to finish it with, just have three quick fire questions, if that's OK to end. OK, so what's the number one thing volunteer boards should be doing to manage their financial and risk oversight?

Heather Rich: Well, number one, they definitely have to take their fiduciary responsibility seriously. So any lawyer, any organizational lawyer will tell them the same thing. It's oftentimes, I feel like board members sometimes don't want to know the data, meaning they're like, staff can do that. Staff does that for us. But what they have to do is remember that while staff is doing the work, the board is ultimately responsible. So the stakeholders that you're serving have placed you in a position of leadership.

And with that leadership, you need to own that financial oversight and understanding where it's at. Because if anything happens and it happens on your watch, it's never a good feeling. it's just something I think the boards need to take very seriously.

Jill Holtz: Great advice. Heather, what advice do you have for leaders and board members of mission-driven organizations for managing risk?

Heather Rich: I think that always have, you know, always discuss and have open discussions about big projects and investments, whether it's staff, whether it's technology, whether it's, I can't even think, anything else that's a part of potentially your strategic plan, you know, and when is the right time to make that change is very important because the risk might, the financial risk, as weird as it sounds, the financial risk might not be an issue, but it is about timing, when you take that financial leap to getting back your ROI on something. Also, unfortunately, we now have to make a lot of our financial decisions based on the state of the world. So sometimes, depending on what our socio-political environment is, is that we are feeling a lot less risky or we want to say, you know what, we're going to wait a little while on that.

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

Heather Rich: So this is kind of a conversation I've had with previous boards before. And I think sometimes if you feel like, if they feel like they don't have a good handle, then I think it's simply time to slow down. Slow down, review the work that you've done, review the understanding of financials and in providing them a little bit more guidance. Again, it's the job of the staff to help us guide the board through these. Certainly, we are going to be more experts unless perhaps you're dealing with an accounting board or someone who's really in the financial industry, so it's a little less. But so many industries are individuals that are so good. Our board members are so good at being genetic counselors and educators and mentors that they're not reading line-by-line budgets or they don't even handle budgets in their daily lives of being in the genetic counseling industry. So it's for us to mentor them and to provide them the guidance and then to seek their feedback when they need help. But a lot of times it's, sometimes everyone just needs to slow down a little bit and start processing and expanding the role that they do play on the board.

Jill Holtz: Excellent advice. Thank you, Heather. Thank you so much for your time today and for coming to talk to me about this topic. I really, really appreciate it.

Heather Rich: I'm glad to be here, thank you.

Jill Holtz: Thank you.