A Simple Approach to Quickly Improving Board Financial Literacy

By Peter Farstad

This is the fourth in a series of articles responding to the 2025 turbulence in the nonprofit financial revenue landscape.

EXCLUSIVE TO THE NONPROFIT FINANCIAL COMMONS — MAY 2025

Editor’s Note: Most nonprofit boards have members with varying levels of experience with finance in general and nonprofit finance in particular. This disparity of understanding is often breached to some extent by a financial leader or leadership team, but that may prove inconsistent and still leave some members at the fringes of conversations their contributions would add value to. Peter Farstad proposes a way to use the executive summary and annotations to keep board members focused and informed on the metrics that matter. His simple example is easy to adapt and replicate. Have fun! 

Executive Summary

As a long-time nonprofit financial practitioner, my experience tells me that board members are often hard to engage in financial conversations at board meetings. Members often are unfamiliar with reading and interpreting the information found on the financial statements and, instead, defer to the board treasurer, their sentiment being, “If the treasurer is okay with the financial statements, then so am I.”

However, each board member has a fiduciary responsibility to the organization, and we, as leaders, are called to figure out ways to communicate financial information in such a way all board members can understand and thus participate in and contribute to financial conversations in a meaningful way.

How can we achieve the goal of increased financial engagement on the part of board members?

1. Recognition and acceptance that there are differing levels of preparedness Board members possess when attending meetings
2. Integrate an executive summary into each financial presentation
3. Format statements in a way that clearly communicates the most important information
4. Present financial information in a consistent style and cadence
5. Provide financial literacy training for board members

1. Recognition and acceptance that there are differing levels of preparedness board members possess when attending meetings

As nonprofit leaders, we seek to impart knowledge and drive engagement among our members. The leader sits at the juxtaposition of the mission and team members who fulfill it, and the members of the board, who are responsible for the overall direction of the organization. Part of our role is to provide the board with adequate information to effectively fulfill their roles and responsibilities and this includes financial information. That said, our volunteer leaders may be busy individuals with all the concerns of work and family life and may not always be fully prepared when arriving for a board meeting. Their arrival at the meeting may be the first time they reviewed the meeting materials you provided in advance.

2. Integrate an executive summary into each financial presentation

For the next several steps, refer to this sample report from a fictional nonprofit organization. Turn to page 3 now.

An executive summary is a powerful tool. It has multiple applications and can be used well beyond presenting financial information.

An executive summary is a summarized version of the information you wish to convey to your Board member. As a nonprofit leader, you are familiar with telling the story of the organization and its accomplishments, challenges, and potential. The executive summary is simply another opportunity to do what you may already be familiar with — storytelling.

The organization where I spent most of my career had a board made up largely of transplant surgeons. The first time I prepared a budget narrative, it was nearly twenty pages long, and told the story of service, reaching its conclusion on the twentieth page. When I presented the draft to my CEO, she paged through it, put it down on her desk and said, “They are never going to get there,” referring to my overall budget recommendations. You might imagine a transplant surgeon arriving at the board meeting, following hours of intense surgery, not being fully prepared for the meeting.

That was the moment I learned the power of the executive summary, and I never forgot that lesson.

Lead the financial presentation with a summarized narrative version of the WHOLE of the story. A succinct narrative — a paragraph or two — will provide the board member with enough information to know the most important points. Are things good from a financial perspective? Are there risks that need to be addressed? Tell the story.

3. Format statements in a way that clearly communicates the most important information

Have a look at the financial statements on pages 1 and 2. The income statement is found on page 1 and the balance sheet on page 2. This may be the normal format you use when presenting financial statements to board members. While accurate and complete, the board member may not really know which statement is which, and if you are speaking to the information contained on one or both, may not even be aware of what line item you are referring to. In my experience, Board members may gravitate toward some line item they are familiar with, such as office supplies, as a way to demonstrate participation. And “office supplies” is not likely where the financial story is located.

Instead, what if you formatted your financial statements more like (the very same) statements on pages 3 and 4? On page 3 you see an executive summary, followed by the income statement with labeled columns and rows. Imagine saying to the board members, “Let’s look at the results of fundraising events, found on Row 4, Column C, of the income statement….” Using headings for columns and row numbers is a simple way to direct the attention of the reader. On the far-right hand side of the statement, you will see several line items that indicate a note will follow (on page 5) where the reader can locate further information. The notes on page 5 refer to specific line items from the income statement and balance sheet and make observations about the results achieved. The notes will help board members gain clarity about the financial life of the organization — before, during, or after the meeting.

4. Present financial information in a consistent style and cadence

When presenting financial information to the board members, be consistent with content and style from meeting to meeting. Speaking from a higher level, while ensuring all key points are made, will increase member engagement. Let the notes to the financial statements tell the more in-depth story. Making this a repeatable process and experience will enhance comprehension and learning for the member. If the board treasurer normally presents the information, provide a script for them to speak from to ensure they are reporting on the key data points you want to make.

5. Provide financial literacy training for board members

Financial literacy training is the “long game” for increasing engagement and understanding of financial information for board members. Once the board members are trained, include the financial literacy training into the board orientation process to ensure all members have received it. There are many resources available to provide succinct financial training for board members.