Here's an interesting list of financial-specific "red flags" that I believe to be helpful for nonprofit board members to keep at their fingers - could even be put in the board manual. The list is part of an article published in the Tallahassee Democrat.
Finally, watch for these red flags that indicate possible financial problems:
- Continued losses year after year
- Late payroll or sales tax deposits
- Management saying things are better than what financial statements reflect
- Concentrations from one grantor/contributor
- High turnover in the accounting department
- Board is unable to speak to the CFO and all conversations must go through the executive director
- Accounts payables grow each month
- Financial statements from an Excel spreadsheet and not the accounting software package
- Delayed audit reports
- Last-minute financial information provided the day of a board meeting
- Line(s) of credit tapped out
- Continual debt restructuring
- Credit cards not paid off each month
- Board asks questions and responses are vague (or none are given)
- Board members assume the treasurer has everything under control
- CPA has the same findings year after year and issues never seem to get corrected
- Bank statement shows a negative balance
- Lack of working capital
- Receivables show as 90 days past due