Best Practices for Presenting Financial Data to the Board of Directors

A health center’s Board of Directors have a fiduciary responsibility over the health center program. Presenting financial data to the BOD is a crucial task as it leads to informed decision-making, ensures accountability, and builds trust. At times, presenting financial information to a diverse group of board members can be challenging. In this post, we’ll explore best practices for presenting financial data to a health center board in ways which will encourage transparency, engagement, and informed decision-making. The following approaches may prove helpful when presenting final fiscal data:

1. Understanding the Background of the Board. It is essential to understand the board members’ backgrounds and financial literacy levels. Health center boards are made up of individuals from various backgrounds, which may include (but not limited to) healthcare, business, social services, marketing etc. It is vital that financial data is tailored to board member expertise, while providing adequate context for those less familiar with financial terminology.  For example, a best practice is to ask the board whether the data they are receiving is easy to understand, or if there is another method of providing data which would be easier for board members to complete their fiduciary oversight.
2. Ensure Clear and Concise Reporting. At times, financial information and reports provided to the board can be quite lengthy. Keep financial reports clear, concise, and easy to understand. Use plain language, avoid jargon, and present data in a logical and organized manner. Visual aids such as charts, graphs, and tables can help simplify information and make it more digestible. An example of a best practice would be to utilize color within dashboards. For example, the color “red” may mean not meeting the goal, and the color “green” may mean meeting the goal the health center set.
3. Focus on Key Metrics. Health centers have a variety of financial metrics which provide an overall picture of how financially healthy an organization is. For federally funded health centers, HRSA requires the following fiscal measures to be tracked:
   1. Grant Cost per Total Patient: How much federal funding was used per patient
   2. Total Cost per Total Patient: The cost to serve one patient
   3. Medical Cost per Medical Visit: The cost to see one patient for a medical visit

Health centers should also track additional financial measures which may include, but are not limited to, revenues and expenses, days in account receivables, days in account payables, days cash on hand, debt to equity ratios, etc. Regardless of the number of financial measures tracked, it’s important that the board receive metrics on a consistent basis and develop baselines in order to compare them to national and state data. Some health centers choose to find other health centers that are similar in size and complexity to compare financial metrics. 

1. Budget vs. Actual Analysis. It is vital the board of directors receive a budget vs. actual analysis to evaluate the financial position. Explain any significant variances and the impact they may have on a health center’s operations. The CFO (or whomever is reporting out the financial position) should provide insights into any variances, the cause of the variance, and if there any adjustments to the budget that must be made. 
2. Encourage Questions and Discussion. The culture of a health center board should foster an open and collaborative atmosphere which encourages open and active discussions with questions. It is important to provide explanations and any concerns as they arise. Board members who feel their input is valued are more likely to engage in meaningful financial discussions.

Effectively presenting financial data is essential for the financial health and sustainability of a health center. By tailoring the presentation of financial data, focusing on key metrics, and encouraging open dialogue, the culture of the board will foster transparency, engagement, and informed decision-making. Ultimately, these best practices will empower the board to make sound financial decisions that support the mission and vision of a health center.