The economic landscape has changed. With flat or declining state support, lower investment returns, shifts in federal support, and pressure to control tuition costs, many institutions have found more efficient and effective ways to operate without compromising quality. How then can board members ensure their institution survives - and thrives - during difficult financial times?
According to Natalie Krawitz, author of AGB’s latest installment in the Board Essentials Series entitled, The Board's Role in Financial Oversight, all board members have a responsibility to understand their institution’s finances. This includes understanding how board and management decisions affect finances and, in turn, how the institution’s finances affect those decisions.
The Board's Role in Financial Oversight provides five principles to help guide fiduciary leadership:
- A clearly stated institutional mission – accompanied by statements of vision, goals, and priorities - creates the foundation for exercising financial responsibility.
- All board members should have a basic understanding of the financial condition of their institution to effectively exercise their fiduciary responsibilities.
- The financial condition of an institution should not be the exclusive knowledge of a handful of board members and senior administrators. Full disclosure leads to broad-based support when addressing financial issues.
- The board is responsible for ensuring that financial decision-making align with strategic options.
- “Noses in; fingers out.” Board and senior administrators must work as partners on a foundation of trust, mutual understanding, and appreciation of each other’s responsibilities for institutional governance.