A professional Black woman with a sideshave and braids on the phone. Behind her are a computer and printouts displaying financial charts.
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Every nonprofit organization needs responsible financial stewards. But how are leaders of color, especially women, being prepared to understand the money challenges their organizations face?

Successfully serving as a leader of a nonprofit organization and meeting mission goals requires a range of high-level skills in a number of management areas, but too little attention is given to ensuring leaders are knowledgeable about organizational finances and confident about making strategic decisions based on accurate financial reports.

The lack of financial literacy, especially at the level required to lead an organization with complex finances, is widespread, which should not come as a surprise. It has been reported that as many as 80 percent of adults in the United States have never learned about personal finances. Leaders of color may be more likely to come from backgrounds of limited access to financial literacy education, and increasing diversity among nonprofit leadership may require more investment in financial literacy among would-be leaders.

Successfully serving as a leader of a nonprofit organization and meeting mission goals requires a range of high-level skills in a number of management areas.

Because of the widespread lack of financial literacy in the United States, especially among people of color, organizations like the Financial Education Initiative at the University of Chicago are joining other groups to teach finance and money management classes to high school students. Programs like Heels and Higher Achievement focus on teaching financial literary skills to girls and women of color to prepare them for economic success.

Too often, boards overlook the importance of their own financial literacy or that of the CEO. They accept financial reports without the scrutiny they deserve.

Budgets, balance sheets, profit and loss statements, the annual 990 tax return, and audits provide an integrated and comprehensive story that should guide important decisions. Financial data, from budget fundamentals to key fundraising metrics, give a picture of the health of the organization and enables the CEO to make informed strategic decisions. Good fiscal stewardship is a critical part of being able to achieve important goals—like wage equality.

Conversely, a lack of financial understanding hampers leaders’ ability to accomplish important organizational goals. In other words, fiscal matters cannot be separated from the organization’s ability to fulfill its mission, and the ability of leaders to see their organizations succeed.

What can the nonprofit sector do to support leaders to become financially literate?

First, boards need to appreciate that their fiduciary responsibility means they and the CEO must understand and be comfortable with budgets and financial data. Second, there must be recognition that money (or the lack of it) underlies the mission and successful delivery of services of every nonprofit organization. Finally, organizations must understand that the CEO’s success is directly related to the organization’s financial health and performance.

How can nonprofit boards and CEOs achieve financial literacy?

    1. Boards and CEOs should implement financial educational programs, and board and staff should participate in programs offered by funding agencies, area business schools, or groups like the local chamber of commerce.
    2. Board members and CEOs should be required to be familiar with a glossary of standard financial terms and definitions.
    3. Financial literacy should be a requirement when hiring a new CEO. If the new CEO lacks previous financial training, it should be included throughout the transition and beyond.
    4. Foundations and philanthropic organizations should consider requiring financial training or proof of completed training when considering funding proposals.

CEOs of color, especially women—who are already likely to face more distrust and skepticism than their White peers—will be successful, more confident, and more likely to be respected when they are knowledgeable and confident about organizational finances.

With better financial literacy, women CEOs will be equipped to make informed and strategic decisions that contribute to wage equality, strong delivery of services, and the long-term health and sustainability of the organization. To be successful in their roles as CEOs of nonprofit organizations, financial literacy is critical for women of color.