Non-profit boards tend to include members with a variety of skills and interests. However, while many of these skill sets are valuable for organizational oversight, non-profit organizations (NPOs) aren't always able to equip board members to review financial information with ease.
To give your board of directors the financial understanding they need to carry out its roles successfully, it’s important to recognize what effective non-profit board reporting looks like.
The Non-Profit Board’s Role
NPO board members don many hats while fulfilling their obligations as company trustees – including making sure their organization is:
- Financially healthy
- Operationally sound
- In possession of adequate resources to satisfy its mission
From a fiduciary perspective, NPO boards are also integral to proper financial oversight. Not only do they ensure there are financial controls in place to help prevent fraud, but NPO boards also ensure that company funds are being spent per donor and funder requirements.
15 Must-Track Metrics & KPIs for Nonprofit Success
What information does the NPO board need to see?
While internal staff is responsible for the day-to-day management of company funds, it’s the board’s job to review information related to those activities to help keep the organization in good financial shape.
There are seven key pieces of information NPO board directors will want to see:
- Statement of financial position (aka your “balance sheet”)
- Statement of operations (aka your “income statement”)
- Statement of cash flow
- Monthly financial statements that report actual results compared to your budget
- Cash flow forecasts that can flag potential issues in advance
- Budget statements that must be reviewed for the coming year
- Audited financial statements that should be reviewed from the previous year
To provide additional context, streamline board discussions, and make any decisions that need to happen as efficiently as possible, you should also include an interpretation of the financial data you report to the board (you’ll probably want to work with an accountant or controller for this).
Ideally, that will include:
- Focusing on exceptions and important outliers
- Pointing out any financial problems and providing thoughtful solutions
- Not spending too much time speaking to “business as usual” outcomes or emphasizing data around “status quo” events
Ultimately, your executive director board will want a clear line of sight on whether and how funds are being spent in keeping with your NPO’s mission.
Core KPIs for NPOs
Speaking of mission, your board will also seek input on how well your organization meets its goals.
Key performance indicators (KPIs) give executive directors a standardized way to examine trends and compare data across different locations or periods of time. KPIs help them focus on the big picture rather than getting bogged down with the details.
Some of the non-profit KPIs your board may find valuable include metrics related to:
- Program efficiency measures how effectively an organization uses resources to achieve its mission. It is often calculated by dividing program expenses by total expenses, expressing the proportion of funds spent directly on mission-related activities versus administrative and fundraising costs. A higher program efficiency ratio indicates that more of the organization's resources are being directed toward its core programs, enhancing credibility with donors and stakeholders. Monitoring this KPI helps non-profits optimize resource allocation, improve operational effectiveness, and demonstrate accountability.
- Donor retention rates measure the percentage of donors who continue to give over a specific period, usually year over year. High retention rates indicate strong donor loyalty and effective engagement strategies, leading to more reliable funding streams. Focusing on donor retention is often more cost-effective than acquiring new donors, as it enhances long-term relationships and can increase the lifetime value of each supporter. Monitoring this KPI helps non-profits assess and improve their donor outreach and communication efforts.
- Donation growth year-over-year measures the increase or decrease in donations from one year to the next. This metric reflects the organization's effectiveness in fundraising, donor retention, and outreach efforts. A consistent upward trend indicates successful engagement strategies and financial sustainability, enabling the non-profit to expand its programs and impact. Conversely, stagnant or declining donation growth may signal the need to reassess fundraising approaches and strengthen donor relationships.
- Cash runway shows how long a non-profit can sustain its operations with existing cash reserves, given its current expenditure rate. Monitoring cash runway helps non-profits anticipate funding gaps, make informed budgeting decisions, and plan fundraising activities proactively to ensure continuous support for their mission-driven programs.
- Gross receipts period-over-period tracks the total revenue a non-profit organization receives over successive periods, such as monthly or annually. By comparing these figures, non-profits can assess trends in fundraising effectiveness, donor engagement, and overall financial health. This KPI helps organizations adjust strategies for fundraising, budgeting, and resource allocation to achieve their mission better.
- Budget variances are measures of the difference between planned budgets and actual financial outcomes. Tracking budget variances helps non-profits identify discrepancies in income and expenses, allowing them to adjust their financial strategies accordingly. This practice enhances financial accountability, ensures efficient resource allocation toward mission-critical activities, and builds trust with donors by demonstrating prudent fiscal management.
Not every KPI will benefit every NPO. However, the right metrics will make tracking and monitoring business objectives easier for your board.
Best Practices for Briefing a Non-profit Board on NPO Financials
When it comes to effective non-profit board briefing, how you report your data is just as important as what information you share. Here are three best practices that will improve the quality of your briefing to the board.
1. Prepare the necessary financial statements ahead of time
Not only should NPOs allow every board member to review your financials in advance (so they can ask well-informed questions during board meetings), but it’s critical to keep your bookkeeping up to date so reports are accurate, timely, and primed to generate thoughtful decisions.
Not all nonprofit board members can read, understand, or apply complicated financials. So, you may want to familiarize them with how to navigate statements and other reports and what to look for in terms of impactful factors.
2. Use the right reporting tools
Using a centralized dashboard to display KPIs and other financial reports is a great way to help your board work through the information you’re sharing – especially if you pair it with meaningful commentary on important details like variances in estimates vs actuals.
The nonprofit accounting specialists at Enkel can also help you use your accounting software to design a board report template that will make the presentation of your financial information seamless.
3. Know which reports are relevant to your board
Not every nonprofit board wants or needs to see the same information. So, instead of bombarding board members with unnecessary or irrelevant details, be selective about the data you present. The KPIs discussed above are a great place to start.
Summarizing income and expense amounts (as opposed to presenting masses of day-to-day transactional details) will make it easier for your directors to stay focused on high-level strategic planning and thinking.
4. Be prepared to follow up on your nonprofit board briefing
Once you’ve reported your data, make sure you’re ready to address any follow-up questions by arming yourself with backup details - like information related to specific program expenses.
For example, if you’re reviewing an externally restricted fund, your board might want to know more about the expense restrictions in place and whether your organization is spending funds in accordance with those constraints.
At Enkel, we help dozens of nonprofits and charities manage their books so they can pull together the board reports they need when they need them. Find out how we can improve your processes for monthly and quarterly financial reporting.
